B3 Product Life Cycle

Jan 1

The product life cycle refers to the stages a product goes through from its development and launch to withdrawal from the market. It is measured by the level of sales. Marketing activities change according to the stage of the life cycle a product is in.

Exam tip: When using the product life cycle as a situation analysis tool; first, identify which stage in the life cycle the case study business in and use evidence from the case study to justify why, secondly, explain the actions the case study should take based on its stage in the product life cycle.

Development Stage

Development is the stage before the launch. This is the stage where the product is being designed, prototyped and tested before a final product is decided upon.

Characteristics of Development:

High investment costs with no sales revenue.
Development of prototypes and testing.

Marketing Recommendations in Development:

High levels of market research to predict potential demand.
Prepare a marketing strategy for the upcoming introduction (launch) phase.

Introduction Stage

Introduction is the initial stage when the product is launched. Promotional activities are high at this stage as customers need to be informed of the existence and benefits of the products. Examples include launch events and a large, omni-channel advertising campaigns.

Characteristics of Introduction:

Low or negative profit margins due to high marketing and production costs.
Initial sales figures are low as consumers are unfamiliar with the product/brand.

Marketing Recommendations for Introduction:

Invest in advertising to educate consumers about the product (build brand awareness).
Offer promotions or introductory pricing to encourage trials.
Build distribution channels to ensure product availability.

Growth Stage

Growth is the stage where sales begin to increase more rapidly as people become aware/familiar with the product. There may be reviews and feedback available from the early adopters of the product.

Characteristics of Growth:

Rapidly increasing sales and profit margins.
Growing customer base and brand recognition.
Entry of competitors into the market.

Marketing Recommendations for Growth:

Enhance marketing efforts to solidify brand loyalty.
Reduce or increase the price depending on whether penetration or skimming was used at launch.
Consider product improvements or variations based on customer feedback.
Expand distribution channels to reach more customers.
Refocus promotional activities from informative to reminder.

Maturity Stage

Maturity is the stage when sales are at their highest and growth slows down. This is the most profitable stage of the product life cycle. Pricing is very competitive at this stage and businesses will be finding ways to tweak features to stand out from competitors.

Characteristics:

Sales reach their peak and stabilise.
The market becomes saturated with competitors.
Increased competition leads to price wars.

Marketing Recommendations for Maturity:

Differentiate the product through unique features or branding.
Implement competitive pricing strategies to retain customers.
Focus on customer retention through loyalty programs and targeted marketing campaigns.

Decline Stage

Decline is the stage in which sales begin to fall as consumers lose interest in the product. This may be because new alternatives have entered the market, tastes and preferences change or everybody who wants the product has bought it already.

Characteristics of Decline:

Decreasing sales and profit margins and eventually losses.
The exit of competitors or reduction in market activity.
Consumers shift towards newer products or technologies.

Marketing Recommendations for Decline:

Evaluate whether to discontinue the product or implement extension strategies.
Reduce marketing costs while focusing on loyal customer segments.
Consider repositioning the product for niche markets if applicable.

Extension Strategies

Extension strategies are the techniques employed by firms to prevent the decline of sales. They aim to keep a product in the maturity stage for as long as is profitable to do so.

Examples of Extension Strategies include;