4.4 Product Life Cycle

The introduction stage begins when a new product is launched and becomes available to consumers for the first time. At this point, consumer awareness is low, and there is little to no prior experience with the product. Companies typically invest heavily in marketing and promotional activities to create awareness and stimulate interest. Distribution is often limited, and sales grow slowly as the market learns about the product.

Key characteristics of the introduction stage include:

• Significant investment in advertising and promotion to build product awareness.
• High costs related to development, production, and marketing, often resulting in losses or minimal profits.
• Limited competition, as few firms have entered the market.
• Low sales volume, with gradual growth as consumers begin to adopt the product.
• Pricing strategies may vary; some firms set higher prices to recover development costs, while others may use penetration pricing to attract customers.
• Technical and production challenges may arise and require attention.

During the growth stage, the product gains market acceptance, and sales increase rapidly. Consumer awareness and demand rise, leading to higher profits. As the product’s success becomes evident, competitors are attracted to the market, intensifying competition.

Key characteristics of the growth stage include:

• Rapid increase in sales and profitability due to growing consumer acceptance.
• Entry of new competitors, resulting in heightened competition.
• Expansion of distribution networks to reach more customers.
• Potential price reductions to attract price-sensitive buyers and defend market share.
• Ongoing promotional efforts to differentiate the product and maintain momentum.
• Product improvements and the introduction of new features to address customer feedback.
• Entry into new market segments and distribution channels.

The maturity stage is marked by a slowdown in sales growth as the product reaches widespread market acceptance. The market becomes saturated, and competition is intense. Profits begin to decline due to price competition and increased marketing expenses.

Key characteristics of the maturity stage include:

• Sales continue to grow but at a decreasing rate, eventually stabilizing.
• Profits decline as competition intensifies and price wars emerge.
• Marginal competitors may exit the market.
• Emphasis shifts to customer retention and loyalty.
• Companies often modify the product, explore new markets, or adjust the marketing mix to sustain sales.
• The maturity stage can be further divided into phases: growth maturity (sales growth slows), stable maturity (sales plateau), and decline maturity (sales begin to fall).

In the decline stage, sales and profits decrease as the product loses relevance or is replaced by newer innovations. Consumer preferences shift, and the market contracts. Companies must decide whether to withdraw the product, reduce costs, or attempt to revitalize it.

Key characteristics of the decline stage include:

• Rapid decline in sales and sharper decline in profits.
• Firms may discontinue the product, reduce promotional expenses, or focus on profitable segments.
• Remaining competitors may exit the market, while some firms continue with minor product modifications.
• Resources are often shifted to newer, more promising products.
• Cost control becomes a priority to maintain any remaining profitability.