Product Life Cycle
The product life cycle concept suggests that a product passes through four stages of evolution from its initial introduction in the market through to its withdrawal. These stages are introduction, growth, maturity and decline. As a product evolves and passes through the four product life cycle stages, profit levels change and different strategies have to be employed to ensure continued product success.
Below we have drawn a diagram plotting out each of the stages of the product life cycle
The introductory stage is the first stage of the product life cycle and occurs as soon as the product is available for sale. During this stage profits are low or non-existent because the firm will need to spend money creating product awareness: marketing campaigns can be expensive. The firm may also need to spend money publicising the product to distributors and retailers. Read our article about how manufacturers persuade retailers to stock their products.
If the introductory stage of the product life cycle is successful, the product will move into the growth stage. At this point retailers are stocking the product and consumers have begun buying it. During the growth stage there is a big increase in sales so that the product will enjoy a period of rapid sales growth. At this point profit will also increase as the manufacturing and promotion costs per unit sold decreases. The challenge for the business is to make the growth stage of the product life cycle, last as long as possible. This may involve product enhancements or entering new markets.