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Products tend to go through different stages, each stage being affected by different competitive conditions. These stages require different marketing strategies at different times if sales and profits are to be efficiently realized. The length of a product’s life cycle is in no way a fixed period of time. It can last from weeks to years, depending on the type of product. In most texts, the discussion of the product life cycle portrays the sales history of a typical product as following an Sshaped curve. The curve is divided into four stages: introduction, growth, maturity, and decline. (Some authors include a fifth stage, saturation.) However, not all products follow an S-shaped curve

. Marketing scholars have identified varying product life-cycle patterns.

Introduction is the period during which initial market acceptance is in doubt; thus, it is a period of slow growth. Profits are almost nonexistent because of high marketing and other expenses. Setbacks in the product’s development, manufacture, and market introduction exact a heavy toll. Marketing strategy during this stage is based on different combinations of product, price, promotion, and distribution. For example, price and promotion variables may be combined to generate the following strategy alternatives: (a) high price/high promotion, (b) high price/low promotion, (c) low price/heavy promotion, and (d) low price/low promotion. Survivors of the introduction stage enjoy a period of rapid growth. During this growth period, there is substantial profit improvement. Strategy in this stage takes the following shape: (a) product improvement, addition of new features and models; (b) development of new market segments; (c) addition of new channels; (d) selective demand stimulation; and (e) price reductions to vie for new customers.

During the next stage, maturity, there is intense rivalry for a mature market. Efforts may be limited to attracting a new population, leading to a proliferation of sizes, colors, attachments, and other product variants. Battling to retain the company’s share, each marketer steps up persuasive advertising, opens new channels of distribution, and grants price concessions. Unless new competitors are obstructed by patents or other barriers, entry is easy. Thus, maturity is a period when sales growth slows down and profits peak and then start to decline. Strategy in the maturity stage comprises the following steps: (a) search for new markets and new and varied uses for the product, (b) improvement of product quality through changes in features and style, and (c) new marketing mix perspectives. For the leader firm, Step c may mean introducing an innovative product, fortifying the market through multibrand strategy, or engaging in a price-promotion war against the weaker members of the industry; the nonleader may seek a differential advantage, finding a niche in the market through either product or promotional variables. Finally, there is the decline period. Though sales and profits continue their downward trend, the declining product is not necessarily unprofitable. Some of the competition may have left the market by this stage.

Customers who remain committed to the product may be willing to use standard models, pay higher prices, and buy at selected outlets. Promotional expenses can also be reduced. An important consideration in strategy determination in the decline stage is exit barrier. Even when it appears appropriate to leave the industry, there may be one or more barriers to prevent easy exit. For example, there may be durable and specialized assets peculiar to the business that have little value outside the business; the cost of exit may be prohibitive because of labor settlement costs or contingent liabilities for land use; there may be managerial resistance; the business may be important in gaining access to financial markets; quitting the business may have a negative impact on other businesses in the company; or there may be government pressure to continue in the business, a situation that a multinational corporation may face, particularly in developing countries. Overall, in the decline stage, the choice of a specific alternative strategy is based on the business’s strengths and weaknesses and the attractiveness of the industry to the company. The following alternative strategies appear appropriate:

1. Increasing the firm’s investment (to dominate or get a good competitive position).

2. Holding the firm’s investment level until the uncertainties about the industry are resolved.

3. Decreasing the firm’s investment posture selectively by sloughing off unpromising customer groups, while simultaneously strengthening the firm’s investment posture within the lucrative niches of enduring customer demand.

4. Harvesting (or milking) the firm’s investment to recover cash quickly, regardless of the resulting investment posture.

5. Divesting the business quickly by disposing of its assets as advantageously as possible.

In summary, in the introduction stage, the choices are primarily with what force to enter the market and whether to target a relatively narrow segment of customers or a broader customer group. In the growth stage, the choices appear to be to fortify and consolidate previously established market positions or to develop new primary demand. Developing new primary demand may be accomplished by a variety of means, including developing new applications, extending geographic coverage, trading down to previously untapped consumer groups, or adding related products. In the late growth and early maturity stages, the choices lie among various alternatives for achieving a larger share of the existing market. This may involve product improvement, product line extension, finer positioning of the product line, a shift from breadth of offering to in-depth focus, invading the market of a competitor that has invaded one’s own market, or cutting out some of the “frills” associated with the product to appeal better to certain classes of customers. In the maturity stage, market positions have become established and the primary emphasis is on nose-to-nose competition in various segments of the market. This type of close competition may take the form of price competition, minor feature competition, or promotional competition. In the decline stage, the choices are to continue current product/market perspectives as is, to continue selectively, or to divest. The characteristics help locate products on the curve.

The objectives and strategies indicate what marketing perspective is relevant in each stage. Actual choice of strategies rests on the objective set for the product, the nature of the product, and environmental influences operating at the time. For example, in the introductory stage, if a new product is launched without any competition and the firm has spent huge amounts of money on research and development, the firm may pursue a high price/low promotion strategy (i.e., skim the cream off the top of the market). As the product becomes established and enters the growth stage, the price may be cut to bring new segments into the fold the strategic perspective Texas Instruments used for its calculators. On the other hand, if a product is introduced into a market where there is already a well-established brand, the firm may follow a high price/high promotion strategy. Seiko, for example, introduced its digital watch among well-to-do buyers with a high price and heavy promotion without any intention of competing against Texas Instruments head on. Of the four stages, the maturity stage of the life cycle offers the greatest opportunity to shape the duration of a product’s life cycle. These critical questions must be answered: Why have sales tapered off? Has the product approached obsolescence because of a superior substitute or because of a fundamental change in consumer needs? Can obsolescence be attributed to management’s failure to identify and reach the right consumer needs or has a competitor done a better marketing job?

Answers to these questions are crucial if an appropriate strategy is to be employed to strengthen the product’s position. For example, the product may be redirected on a growth path through repackaging, physical modification, repricing, appeals to new users, the addition of new distribution channels, or the use of some combination of marketing strategy changes. The choice of a right strategy at the maturity stage can be extremely beneficial, since a successfully revitalized product offers a higher return on management time and funds invested than does a new product. This point may be illustrated with reference to a Du Pont product, Lycra, a superstretching polymer invented in its labs in 1959. A little more than 30 years after its humble start as an ingredient for girdles, demand for Lycra is exploding so fast that the company must allocate sales of the fiber. The product’s success may be directly attributed to a shrewd marketing strategy, initiated during the maturity stage, that allowed Lycra’s use to expand steadily, from bathing suits in the 1970s to cycling pants and aerobic outfits in the 1980s. Teenagers were lured to it and use it in their everyday fashion wardrobes. Avant-garde designers picked up on the trend, using Lycra in new, body-hugging designs. Now, this distinctly unnatural fiber is part of the fashion mainstream. Du Pont’s marketing strategy has paid off well. A recent study showed that consumers would pay 20 percent more for a wool-Lycra skirt than for an all-wool version.

Product Life-Cycle Controversy

The product life cycle is a useful concept that may be an important aid in marketing planning and strategy. A concept familiar to most marketers, it is given a prominent place in every marketing textbook. Its use in practice remains limited, however, partly because of the lack of normative models available for its application and partly because of the vast amount of data needed for and the level of subjectivity involved in its use. One caution that is in order when using the product life cycle is to keep in mind that not all products follow the typical life-cycle pattern. The same product may be viewed in different ways: as a brand (Pepsi Light), as a product form (diet cola), and as a product category (cola drink), for example. Among these, the product life-cycle concept is most relevant for product forms.

Locating Product in Their Life-Cycle

The easiest way to locate a product in its life cycle is to study its past performance, competitive history, and current position and to match this information with the characteristics of a particular stage of the life cycle. Analysis of past performance of the product includes examination of the following:

    1.  Sales growth progression since introduction.
    2.  Any design problems and technical bugs that need to be sorted out.
    3.  Sales and profit history of allied products (those similar in general character  or
    function as well as products  directly competitive).
    4.  Number of years the product has been on the market.
    5.  Casualty history of similar products in the past.

The review of competition focuses on:

    1.  Profit history.
    2.  Ease with which other firms can get into the business.
    3.  Extent of initial investment needed to enter the business.
    4.  Number of competitors and their strength.
    5.  Number of competitors that have left the industry.
    6.  Life cycle of the industry.
    7.  Critical factors for success in the business.

In addition, current perspectives may be reviewed to gauge whether sales are on the upswing, have leveled out for the last couple of years, or are heading down; whether any competitive products are moving up to replace the product under consideration; whether customers are becoming more demanding vis-à-vis price, service, or special features; whether additional sales efforts are necessary to keep the sales going up; and whether it is becoming harder to sign up dealers and distributors. This information on the product may be related to the characteristics of different stages of the product life cycle as discussed above; the product perspectives that match the product life cycle indicate the position of the product in its life cycle. Needless to say, the whole process is highly qualitative in nature, and managerial intuition and judgment bear heavily on the final placement of the product in its life cycle. As a matter of fact, making the appropriate assumptions about the types of information described here can be used to construct a model to predict the industry volume of a newly introduced product through each stage of the product life cycle. A slightly different approach for locating a product in its life cycle is to use past accounting information for the purpose. Listed below are the steps that may be followed to position a product in its life cycle:

1. Develop historical trend information for a period of three to five years (longer for some products). Data included should be unit and dollar sales, profit margins, total profit contribution, return on invested capital, market share, and prices.

2. Check recent trends in the number and nature of competitors, number and market share rankings of competing products and their quality and performance advantages, shifts in distribution channels, and relative advantages enjoyed by products in each channel.

3. Analyze developments in short-term competitive tactics, such as competitors’ recent announcements of new products or plans for expanding production capacity.

4. Obtain (or update) historical information on the life cycle of similar or related products.

5. Project sales for the product over the next three to five years, based on all information gathered, and estimate an incremental profit ratio for the product during each of these years (the ratio of total direct costs manufacturing, advertising, product development, sales, distribution, etc. to pretax profits). Expressed as a ratio (e.g., 4.8 to 1 or 6.3 to 1), this measure indicates the number of dollars required to generate each additional dollar of profit. The ratio typically improves (becomes lower) as the product enters its growth period, begins to deteriorate (rise) as the product approaches maturity, and climbs more sharply as it reaches decline.

6. Estimate the number of profitable years remaining in the product’s life cycle and, based on all information at hand, fix the product’s position on its life-cycle curve: (a) introduction, (b) early or late growth, (c) early or late maturity, or (d) early or late decline.

Developing a Product Life-Cycle Portfolio The current positions of different products in the product life cycle may be determined by following the procedure described above, and the net results (i.e., the cash flow and profitability) of these positions may be computed. Similar analyses may be performed for a future period. The difference between current and future positions indicates what results management may expect if no strategic changes are made. These results may be compared with corporate expectations to determine the gap. The gap can be filled either by making strategic changes to extend the life cycle of a product or by bringing in new products through research and development or acquisition. This procedure may be put into operation by following these steps:

1. Determine what percentage of the company’s sales and profits fall within each phase of the product life cycle. These percentages indicate the present life-cycle (sales) profile and the present profit profile of the company’s current line.

2. Calculate changes in life-cycle and profit profiles over the past five years and project these profiles over the next five years.

3. Develop a target life-cycle profile for the company and measure the company’s present life-cycle profile against it. The target profile, established by marketing management, specifies the desirable share of company sales that should fall within each phase of the product life cycle. It can be determined by industry obsolescence trends, the pace of new product introductions in the field, the average length of product life cycles in the company’s line, and top management’s objectives for growth and profitability. As a rule, the target profile for growthminded companies whose life cycles tend to be short calls for a high proportion of sales in introductory and growth phases.

With these steps completed, management can assign priorities to such functions as new product development, acquisition, and product line pruning, based on the discrepancies between the company’s target profile and its present lifecycle profile. Once corporate effort has been broadly allocated in this way among products at various stages of their life cycles, marketing plans can be detailed for individual product lines.