Question

Identify and describe the stages in the product life cycle. Provide an example of a product at each stage of the life cycle.

Answer 1

As consumers, we buy millions of products every year. And just like us, these products have a life cycle. Older, long-established products eventually become less popular, while in contrast, the demand for new, more modern goods usually increases quite rapidly after they are launched.

Because most companies understand the different product life cycle stages, and that the products they sell all have a limited lifespan, the majority of them will invest heavily in new product development in order to make sure that their businesses continue to grow.

The five stages of the PLC are:

Product development

investment is made, sales have not begun, new product ideas are generated, and operationalized, and tested

Market introduction: This stage of the cycle could be the most expensive for a company launching a new product. The size of the market for the product is small, which means sales are low, although they will be increasing. On the other hand, the cost of things like research and development, consumer testing, and the marketing needed to launch the product can be very high, especially if it’s a competitive sector.

or

costs are very high
slow sales volumes to start
little or no competition
demand has to be created
customers have to be prompted to try the product
makes little money at this stage

Growth: The growth stage is typically characterized by a strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for businesses to invest more money in the promotional activity to maximize the potential of this growth stage.

or

costs reduced due to economies of scale
sales volume increases significantly
profitability begins to rise
public awareness increases
competition begins to increase with a few new players in establishing market
increased competition leads to price decreases

Maturity: During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.

or

costs are lowered as a result of increasing production volumes and experience curve effects
sales volume peaks and market saturation is reached
new competitors enter the market
prices tend to drop due to the proliferation of competing products
brand differentiation and feature diversification is emphasized to maintain or increase market share
profits decline

Decline: Eventually, the market for a product will start to shrink, and this is what’s known as the decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who will buy the product have already purchased it), or because the consumers are switching to a different type of product. While this decline may be inevitable, it may still be possible for companies to make some profit by switching to less-expensive production methods and cheaper markets.

or

costs increase due to some loss of economies of scale
sales volume declines
prices and profitability diminish
profit becomes more a challenge of production/distribution efficiency than increased sales

Examples

Holographic Projection: Only recently introduced into the market, holographic projection technology allows consumers to turn any flat surface into a touchscreen interface. With a huge investment in research and development, and high prices that will only appeal to early adopters, this is another good example of the first stage of the cycle.

Tablet PCs: There are a growing number of tablet PCs for consumers to choose from, as this product passes through the Growth stage of the cycle and more competitors start to come into a market that really developed after the launch of Apple’s iPad.

Laptops: Laptop computers have been around for a number of years, but more advanced components, as well as diverse features that appeal to different segments of the market, will help to sustain this product as it passes through the Maturity stage.
Typewriters: Typewriters, and even electronic word processors, have very limited functionality. With consumers demanding a lot more from the electronic equipment they buy, typewriters are a product that is passing through the final stage of the product life cycle.