Question

What is the purpose of the Product Life Cycle? Identify and explain the four stages of the product life cycle. In your response, be sure to include an indication of how sales, profits, product, price, promotion and place change with each stage. Explain what marketers can do to extend the length of the product life cycle? Provide examples to showcase your ideas.

Answer 1

Product life cycle is a process or cycle which shows the progress of a product in the market from the time when the product or a service is introduced in the market to the time when the sales of the product decline and it moves out of the market. The main purpose of product life cycle is that it gives companies an idea to develop sales and marketing strategies that can be used at different stages of the product life in the market. This helps the companies to position their products effectively, increase market share, reduce losses by maximizing profit, improve sales and have a long life of their products and services in the market.

The 4 stages of the product life cycle have been mentioned below:

(a) Introduction stage : This is the very first stage of product life cycle and as the name states, it is the stage when the product is introduced in the market for the first time. The promotions and marketing of the product is at its peak so as to reach a wider audience. Therefore, companies invest largely on the marketing of the product. It is a make or break stage for the product. This stage gives companies an idea of the response of the customers towards the new product. Since there is very little competition, the price of the products is generally high and the sales are low. One of the examples of a product in this stage are electric cars.

(b) Growth Stage : As the sales of the product increases, the product or the service enters the growth stage as a large number of customers now consume this product. The competition at this stage is generally high and therefore, companies reduce the price of the product. In order to have an upper edge over the competitors, companies still invest heavily on advertisements and marketing of their services and products. The market share of the companies increases as the sales of the product rise. The price of the products is rather competitive because of the increased competition. One of the examples of a product in this stage is smart watches.

(c) Maturity Stage : As the sales of a product starts slowing down, it enters the maturity stage. The sales of the product at this stage become saturated. The profit margins start to shrink and therefore, the pricing becomes more competitive. The companies are forced to reduced the price of the product because of lower demand and high competition. Marketing is focused in such a way that it defends the products against the competitors. At this stage, the volume of sales has already maxed out. In order to maintain the market share, companies try to bring innovation into their products and mostly, less successful competitors move out of the competition. One of the examples of the product in this stage is laptops.

(d) Decline Stage : The sales of the product or the service drops immensely and there is almost negligible demand for the products or services that fall in this stage. Companies lose their market share slowly and the competition also fades away. Therefore, the price of the product is low and marketing is only focused towards loyal customers. Eventually products fall out of the cycle. One of the examples that fall under this category is typewriters.

A few strategies that companies use to extend the life cycle of the product are:

(a) Bringing differentiation: When the sales of the product starts to go down, companies try to add new features and try to bring differentiation into the product in order to get hold of new customers and increase their market share. For example, if a company is selling an electric cycle with two gears, companies may add new speed options to make it more attractive.

(b) Changing packaging of the product: Smart packaging of products is one of the ways to increase loyalty of customers. Most of the product buying decisions are based on the packaging of the product. If the sales of a product starts to decrease, comapnies may want to change the packaging of the product in order to make the product more appealing.

(c) Identifying new markets: Companies now have access to global market and reach a wider audience anytime they want. Companies sometimes move out of their current market when the sales of the product starts decreasing and when the companies start to lose their market share. This is done so that companies can look to enter into new markets with potential customers.