Product Life Cycle

What is a product life cycle?

A product life cycle describes the stages a product goes through from when it was first thought of until it finally is removed from the market.

What does a product life cycle represent?

The different stages in the life of a product and the sales that are achieved at each stage.

What are the 5 main stages of a product life cycle?

1. Introduction

2. Growth

3. Maturity

4. Saturation

5. Decline

Diagram showing a product life cycle diagram.

Describe the introduction stage.

• The product is new to the market and few potential consumers know of its existence.

• Price can be high and sales may be restricted to early adopters (those that must have new technology, gadgets or fashions first).

• Profits are often low as development costs have to be repaid and advertising expenditure can often be high.

Describe the growth stage.

• The product is becoming more widely known and consumed.

• Advertising tries to establish or strengthen the brand and develop an image for the product.

• Profits may start to be earned but advertising expenditure is still high. Prices may fall.

Describe the maturity stage.

• The product range may be extended.

• Competition will likely increase.

• Sales are at their peak, profits should be high.

Describe the saturation stage.

• Very few new customers are gained, replacement purchases are the trend.

• Profits may start to decline.

Describe the decline stage.

• Sales fall fast.

• Product range may be reduced, with the business

  concentrating on core products.

• Advertising costs will be reduced.

• Profits will fall.

• Price is likely to fall.

Analyse the graph showing profit plotted against a product life cycle.

• Initially losses are made as research and development costs have to be recouped and advertising costs are likely to be high.

• As the life cycle moves through growth into maturity, profits are made.

• Profits are likely to continue to be made through to the end of the cycle, though at a lower level.

What are extension strategies?

These are methods a business may use in order to prolong / lengthen the life cycle of a product before it goes into decline.

Give some examples of extension strategies.

• New packaging

• Advertising – try to gain a new audience or remind the current audience.

• Price reduction

• Updating the product- include new features, flavours etc.

• Relaunching the product, aiming at a different segment