Product life cycle management
The conditions a product
is sold under will change over time. The Product Life Cycle
refers to the succession of stages a product goes through. Product Life Cycle Management
is the succession of strategies used by management as a product goes through it's life cycle.
Products tend to go through five stages:
A Typical Product Life Cycle
- 1 New product development stage
- very expensive
- no sales revenue
- 2 Market introduction stage
- cost high
- sales volume low
- 3 Growth stage
- costs reduced due to economies of scale
- sales volume increases significantly
- 4 Mature stage
- costs are very low
- sales volume peaks
- prices tend to drop due to the proliferation of competing products
- very profitable
- 5 Decline stage
- sales decline
- prices drop
- profits decline
Management of the Cycle
The progession of a product through these stages is by no means certain. Some products seem to stay in the mature stage forever (eg.: milk). Marketers
have various techniques designed to prevent the process of falling into the decline stage. In most cases however, the life expectancy of a product category can be estimated.
A marketer's marketing mix strategies will change as their product goes through its life cycle. Advertising , for example, should be informative in the introduction stage, persuasive in the growth and maturity stages, and be reminder oriented in the decline stage. Promotional budgets tend to be highest in the early stages and gradually taper off as the product matures and declines. Pricing, distribution, and product characteristics also tend to change.
Market Evolution is a process that parallels the product life cycle. As a product category matures, the industry goes through stages that mirror the five stages of a product life cycle:
- 1 Market Crystalization - latent demand for a product category is awakened with the introduction of the new product
- 2 Market Expansion - additional companies enter the market and more consumers become aware of the product category
- 3 Market Fragmentaion - the industry is subdivided into numerous well populated competitive groupings as too many firms enter
- 4 Market Consolidation - firms start to leave the industry due to stiff competition, falling prices, and falling profits
- 5 Market Termination - consumers no longer demand the product and companies stop producing it
Technology life cycle
The underlying technology subsummed within a product or product category can go though similar stages. This is typically referred to as the Technology lifecycle.
Finding related topics
- Box, J. (1983) Extending product lifetime: Prospects and opportunities, European Journal of Marketing, vol 17, 1983, pp 34-49.
- Day, G. (1981) The product life cycle: Analysis and applications issues, Journal of Marketing, vol 41, April 1981, pp 60-67.
- Levitt, T. (1965) Exploit the product life cycle, Harvard Business Review, vol 43, November-December 1965, pp 81-94.