The Product Life Cycle

• The term product life cycle is used to describe the phases through which a product passes from its introduction to decline
• It is a basic fact in business that all products introduced go through a number of phases from their introduction to their eventual elimination
• Generally a product goes through following stages:
• Product Development phase
• Launch or Introduction phase
• The growth phase
• Maturity phase
• Saturation
• Decline
• Extension or Elimination
• The four stages: introduction, growth, maturity, decline are deemed the most important at Ordinary level

Introduction

• Is characterized by:
• Low sales volumes
• High costs due to for example high promotional costs
• Heavy promotional spending
• High risks of the product failing
• Promotions aim mainly to create awareness e.g. informing the potential market that the product exists
• During this stage only innovators are buying the product
• The product is unlikely to be profitable at this stage
• high production cost due to limited volumes being made

Growth

• Higher sales volume
• A rise in profits and sales volume
• A fall in costs due to economies of scale resulting in increased profits
• The product is bought by early adopters
• Promotions are still aimed at creating awareness
• Product penetrates the market

Maturity

• Sales continue to rise but at a reduced rate when compared to the growth phase
• The product is now being purchased by the majority
• The business’s promotional strategy are aimed at creating brand preference
• The business is also concerned with retaining its market share
• Promotion is mainly persuasive and comparative

Saturation

• Sales have leveled off rather than rise at rising at a slow rate as in the maturity phase
• Most people in the potential market have already bought the product if its a one off product or if not people are buying it at a steady unchanging rate

Decline

• Sales and profits decline
• Substitutes appear and the product becomes obsolete
• The firm can either eliminate the product or employ extension strategies

Extension

• This where strategies meant to rejuvenate the product are employed
• Popular extension strategies include:
• Changes in the product itself e.g. add more Memory to a smartphone
• Changing it’s packaging
• Changing the way it is promoted
• Changing the channels of distribution

Importance of the product life cycle

• Enables the business to map out the performance of the product
• Allows the business to anticipate and craft marketing strategy at each stage
• Helps with creating promotional strategies
• Helps the production department to determine the necessary production volumes

To access more topics go to the O Level Business Notes