All products go through a life cycle. Starting with the product first being introduced into a market, to the point when the product is removed from the market, it is said to go through various stages. These stages refer to its popularity and sales. First, there is the introduction stage, followed by a stage when the product grows in sales. After this stage, the product reaches a point when its sales are at a maximum, and this is known as the mature phase.
As time goes on, however, consumer patterns change and product sales begin to decline. At this point a manufacturer has to decide whether or not to let the product die remove it from the market , or to invest in further promotion. Stage 4. Market Decline The product begins to lose consumer appeal and sales drift downward, such as when buggy whips lost out with the advent of automobiles and when silk lost out to nylon.
Three operating questions will quickly occur to the alert executive: Given a proposed new product or service, how and to what extent can the shape and duration of each stage be predicted? Given an existing product, how can one determine what stage it is in? Given all this knowledge, how can it be effectively used?
A brief further elaboration of each stage will be useful before dealing with these questions in detail. Development Stage Bringing a new product to market is fraught with unknowns, uncertainties, and frequently unknowable risks. A proved cancer cure would require virtually no market development; it would get immediate massive support.
An alleged superior substitute for the lost-wax process of sculpture casting would take lots longer. While it has been demonstrated time after time that properly customer-oriented new product development is one of the primary conditions of sales and profit growth, what have been demonstrated even more conclusively are the ravaging costs and frequent fatalities associated with launching new products.
Nothing seems to take more time, cost more money, involve more pitfalls, cause more anguish, or break more careers than do sincere and well-conceived new product programs. They have instead from the very outset an infinitely descending curve. They let others take the first bite of the supposedly juicy apple that tantalizes them. They let others do the pioneering. If the idea works, they quickly follow suit. The second one is good enough. Growth Stage The usual characteristic of a successful new product is a gradual rise in its sales curve during the market development stage.
At some point in this rise a marked increase in consumer demand occurs and sales take off. The boom is on. This is the beginning of Stage 2—the market growth stage. At this point potential competitors who have been watching developments during Stage I jump into the fray. Others make functional and design improvements. And at this point product and brand differentiation begin to develop.
Instead of seeking ways of getting consumers to try the product, the originator now faces the more compelling problem of getting them to prefer his brand.
This generally requires important changes in marketing strategies and methods. But the policies and tactics now adopted will be neither freely the sole choice of the originating producer, nor as experimental as they might have been during Stage I. The presence of competitors both dictates and limits what can easily be tried—such as, for example, testing what is the best price level or the best channel of distribution. As the rate of consumer acceptance accelerates, it generally becomes increasingly easy to open new distribution channels and retail outlets.
This creates an exaggerated impression of profit opportunity which, in turn, attracts more competitors. Some of these will begin to charge lower prices because of later advances in technology, production shortcuts, the need to take lower margins in order to get distribution, and the like.
All this in time inescapably moves the industry to the threshold of a new stage of competition. Maturity Stage This new stage is the market maturity stage. The first sign of its advent is evidence of market saturation. This means that most consumer companies or households that are sales prospects will be owning or using the product.
Sales now grow about on a par with population. No more distribution pipelines need be filled. Price competition now becomes intense.
Competitive attempts to achieve and hold brand preference now involve making finer and finer differentiations in the product, in customer services, and in the promotional practices and claims made for the product.
Typically, the market maturity stage forces the producer to concentrate on holding his distribution outlets, retaining his shelf space, and, in the end, trying to secure even more intensive distribution. Whereas during the market development stage the originator depended heavily on the positive efforts of his retailers and distributors to help sell his product, retailers and distributors will now frequently have been reduced largely to being merchandise-displayers and order-takers.
In the case of branded products in particular, the originator must now, more than ever, communicate directly with the consumer. The market maturity stage typically calls for a new kind of emphasis on competing more effectively.
The originator is increasingly forced to appeal to the consumer on the basis of price, marginal product differences, or both. Depending on the product, services and deals offered in connection with it are often the clearest and most effective forms of differentiation.
Beyond these, there will be attempts to create and promote fine product distinctions through packaging and advertising, and to appeal to special market segments. Or maturity can persist, but in a state of gradual but steady per capita decline, as in the case of beer and steel.
Decline Stage When market maturity tapers off and consequently comes to an end, the product enters Stage 4—market decline. In all cases of maturity and decline the industry is transformed.
Few companies are able to weather the competitive storm. As demand declines, the overcapacity that was already apparent during the period of maturity now becomes endemic. Some producers see the handwriting implacably on the wall but feel that with proper management and cunning they will be one of the survivors after the industry-wide deluge they so clearly foresee. A few companies do indeed weather the storm, sustaining life through the constant descent that now clearly characterizes the industry.
Production gets concentrated into fewer hands. Prices and margins get depressed. Consumers get bored. The only cases where there is any relief from this boredom and gradual euthanasia are where styling and fashion play some constantly revivifying role.
Preplanning Importance Knowing that the lives of successful products and services are generally characterized by something like the pattern illustrated in Exhibit I can become the basis for important life-giving policies and practices. One of the greatest values of the life cycle concept is for managers about to launch a new product. Indeed, it is precisely because so little specific day-to-day guidance is possible in anything, and because no checklist has ever by itself been very useful to anybody for very long, that business management will probably never be a science—always an art—and will pay exceptional rewards to managers with rare talent, enormous energy, iron nerve, great capacity for assuming responsibility and bearing accountability.
Time spent in attempting this kind of foresight not only helps assure that a more rational approach is brought to product planning and merchandising; also, as will be shown later, it can help create valuable lead time for important strategic and tactical moves after the product is brought to market. Specifically, it can be a great help in developing an orderly series of competitive moves, in expanding or stretching out the life of a product, in maintaining a clean product line, and in purposely phasing out dying and costly old products.
The more unique or distinctive the newness of the product, the longer it generally takes to get it successfully off the ground. The world does not automatically beat a path to the man with the better mousetrap. This makes life particularly difficult for the innovator.
He will have more than the usual difficulties of identifying those characteristics of his product and those supporting communications themes or devices which imply value to the consumer.
As a consequence, the more distinctive the newness, the greater the risk of failure resulting either from insufficient working capital to sustain a long and frustrating period of creating enough solvent customers to make the proposition pay, or from the inability to convince investors and bankers that they should put up more money.
In any particular situation the more people who will be involved in making a single purchasing decision for a new product, the more drawn out Stage I will be. Thus in the highly fragmented construction materials industry, for example, success takes an exceptionally long time to catch hold; and having once caught hold, it tends to hold tenaciously for a long time—often too long. On the other hand, fashion items clearly catch on fastest and last shortest. But because fashion is so powerful, recently some companies in what often seem the least fashion influenced of industries machine tools, for example have shortened the market development stage by introducing elements of design and packaging fashion to their products.
What factors tend to prolong the market development stage and therefore raise the risk of failure? Success Chances But problems also create opportunities to control the forces arrayed against new product success. For example, the newer the product, the more important it becomes for the customers to have a favorable first experience with it.
Newness creates a certain special visibility for the product, with a certain number of people standing on the sidelines to see how the first customers get on with it. But a favorable first experience or application will, for the same reason, get a lot of disproportionately favorable publicity. The possibility of exaggerated disillusionment with a poor first experience can raise vital questions regarding the appropriate channels of distribution for a new product.
On the other hand, channels that provide this kind of help such as small neighborhood appliance stores in the case of washing machines during the market development stage may not be the ones best able to merchandise the product most successfully later when help in creating and personally reassuring customers is less important than wide product distribution. In entering the market development stage, pricing decisions are often particularly hard for the producer to make.
Should he set an initially high price to recoup his investment quickly—i. The decision that is finally made may affect not just the rate at which the product catches on at the beginning, but even the duration of its total life. Thus some products that are priced too low at the outset particularly fashion goods, such as the chemise, or sack, a few years ago may catch on so quickly that they become short-lived fads.
A slower rate of consumer acceptance might often extend their life cycles and raise the total profits they yield. The actual slope, or rate of the growth stage, depends on some of the same things as does success or failure in Stage I.
But the extent to which patent exclusiveness can play a critical role is sometimes inexplicably forgotten. Generally speaking, the more producers there are of a new product, the more effort goes into developing a market for it. The net result is very likely to be more rapid and steeper growth of the total market. Moreover, the life cycle of a given product may be different for different companies in the same industry at the same point in time, and it certainly affects different companies in the same industry differently.
This company generally bears most of the costs, the tribulations, and certainly the risks of developing both the product and the market. Competitive Pressure Once the innovator demonstrates during the market development stage that a solid demand exists, armies of imitators rush in to capitalize on and help create the boom that becomes the market growth, or takeoff, stage.
It has to share the boom with new competitors. This occurs not only because there are so many competitors, but, as we noted earlier, also because competitors often come in with product improvements and lower prices.
All this can be illustrated by comparing the curve in Exhibit II with that in Exhibit I, which shows the life cycle for a product. During Stage I in Exhibit I there is generally only one company—the originator—even though the whole exhibit represents the entire industry. In Stage I the originator is the entire industry. But by Stage 2 he shares the industry with many competitors. He is now sharing the boom with a great many competitors, some of whom are much better positioned now than he is.
Profit Squeeze In the process the originator may begin to encounter a serious squeeze on his profit margins. During the market development stage his per-unit profits are negative.
Sales volume is too low at existing prices. However, during the market growth stage unit profits boom as output rises and unit production costs fall. Total profits rise enormously. It is the presence of such lush profits that both attracts and ultimately destroys competitors. Indeed, they will often have done so long before the sales curve flattened. At this point more competitors are in the industry, the rate of industry demand growth has slowed somewhat, and competitors are cutting prices.
Some of them do this in order to get business, and others do it because their costs are lower owing to the fact that their equipment is more modern and productive. Maturity can last for a long time, or it can actually never be attained. Fashion goods and fad items sometimes surge to sudden heights, hesitate momentarily at an uneasy peak, and then quickly drop off into total obscurity. Stage Recognition The various characteristics of the stages described above will help one to recognize the stage a particular product occupies at any given time.
But hindsight will always be more accurate than current sight. This approach has several virtues: It forces one to look ahead, constantly to try to reforesee his future and competitive environment. This will have its own rewards. As Charles F. Looking ahead gives more perspective to the present than looking at the present alone. Most people know more about the present than is good for them.
It is neither healthy nor helpful to know the present too well, for our perception of the present is too often too heavily distorted by the urgent pressures of day-to-day events. To know where the present is in the continuum of competitive time and events, it often makes more sense to try to know what the future will bring, and when it will bring it, than to try to know what the present itself actually contains. Finally, the value of knowing what stage a product occupies at any given time resides only in the way that fact is used.
But its use is always in the future. Hence a prediction of the future environment in which the information will be used is often more functional for the effective capitalization on knowledge about the present than knowledge about the present itself. Sequential Actions The life cycle concept can be effectively employed in the strategy of both existing and new products.
For purposes of continuity and clarity, the remainder of this article will describe some of the uses of the concept from the early stages of new product planning through the later stages of keeping the product profitably alive.
In other words, advance planning should be directed at extending, or stretching out, the life of the product. It is this idea of planning in advance of the actual launching of a new product to take specific actions later in its life cycle—actions designed to sustain its growth and profitability—which appears to have great potential as an instrument of long-term product strategy.Beyond these, there will be attempts to create and promote fine product distinctions through packaging and advertising, and to appeal to special market segments. At this point potential competitors who have been watching developments during Stage I jump into the fray. To know where the present is in the continuum of competitive time and events, it often makes more sense to try to know what the future will bring, and when it will bring it, than to try to know what the present itself actually contains. Given an existing product, how can one determine what stage it is in? Hence during the Metrecal boom Jell-O employed an advertising theme that successfully affixed to the product a fashion-oriented weight control appeal. This approach has several virtues: It forces one to look ahead, constantly to try to reforesee his future and competitive environment. Theodore Levitta longtime professor of marketing at fastest and last shortest.
Careful advance planning, long before the need for such activity arises, can help assure that the timing, the care, and the efforts are appropriate to the situation. This company generally bears most of the costs, the tribulations, and certainly the risks of developing both the product and the market. Specifically, it can be a great help in developing an orderly series of competitive moves, in expanding or stretching out the life of a product, in maintaining a clean product line, and in purposely phasing out dying and costly old products. After this stage, the product reaches a point when its sales are at a maximum, and this is known as the mature phase. Most alert and thoughtful senior marketing executives are by now familiar with the concept of the product life cycle.
Once it became easy for women to have fashionable hair styles, the resulting fashion consciousness helped open the door for hair colors and tints. A few companies do indeed weather the storm, sustaining life through the constant descent that now clearly characterizes the industry.
As the sales of YBS grow the future success of the product will help finance further research and development. Portakabin has invested heavily in promoting this product to increase awareness in the market and help make the launch successful. But after some years these curves predictably began to flatten out. If the idea works, they quickly follow suit. Or maturity can persist, but in a state of gradual but steady per capita decline, as in the case of beer and steel.