In marketing, products move through various stages called the product life cycle. The defining characteristic of each stage is the amount of revenue that can be generated during the cycle. Though the stages move progressively from development to decline, an individual company can enter their product into the cycle at any stage. For example, an inventor of a new type of television follows the cycle beginning at development, while a competitor copies the design and enters at a later stage. Every stage in the product life cycle has different strategy objectives.
This is the invention and creation stage of the product life cycle. During development, marketers may use research to determine what types of people their product might appeal to. This group of potential customers is called the product’s “target market.” The target market is the basis for the products movement throughout the rest of the cycle because the size of the target market determines how much revenue the product can generate.
Marketers' objectives in the introduction stage include distributing the product and communicating the existence of the new product to the target market. Until awareness of the product is spread, initial sales will be low. There is little to no competition in the introduction stage, so markets are free to set their own objectives regarding the price of the product. “Price skimming” sets a high price to cover the cost of development and to make the product seem exclusive.
As awareness of the brand increases, so do sales of the product, making the growth stage a profitable part of the cycle. Competitors begin to enter the market during the growth stage, so objectives include maintaining the appeal of the product and encouraging brand loyalty. Marketers may choose to research and target other markets during this stage.
Out of all the stages, maturity is the most profitable part of the cycle because product awareness is high and advertising expenses are low. The primary objective of the maturity stage is to extend this portion of the cycle for as long as possible. Marketers may make minor adjustments to the product to make it seem different from competing products and to encourage renewed interest.
As the title suggests, sales take a downturn during this stage. The target market becomes “saturated,” meaning that everybody who wanted the product has it, or consumers taste change; in ether case there is no longer any interest in the product. Decline-stage objectives vary depending on what the business wants to do with the product. Minimizing revenue loss becomes a main goal. Marketers may fight to extend the life of the product, let sales dwindle to nothing or drop the product line entirely.
- Butterfly life cycle image by Matthew Cole from Fotolia.com