Four stages exist to the product life cycle after a product is introduced to the market. Some marketing experts speak of a fifth state, which is more developmental in nature. Nevertheless, different dynamics occur during each of the four product life cycle stages, which affects a company's advertising, pricing and product strategies. Managers and business owners must be cognizant of the four stages of the product's life cycle, as failure to monitor it can drastically hinder sales and profits.
The introduction stage of the product life cycle is when people start finding out about it. Product quality is important during this state, as companies want to build repeat business. Additionally, a company may either choose to price its products relatively high or lower than average. Companies can quickly recoup production costs with higher prices. However, a company many use a lower pricing strategy to build market share or a loyal customer base.
If the demand for the product is high, sales will soar in the growth stage. Companies may also add product variety to appeal to more customers. Companies will usually keep their prices stable during the growth stage, according to QuickMBA.com, an online business reference site. Companies are using the higher profit margins for advertising or gaining additional business from repeat customers. Companies will usually need to hire more people during the growth stage to better service customers. Advertising departments may increase their expenditures to appeal to a broader audience.
During the maturity stage, the market becomes more saturated. It becomes more difficult to add customers. Some companies will add new features to their products to draw customers away from competitors. Companies may also try to find new uses for products or markets for their products to extend the lives of their products. For example, a consumer product company may start selling its soaps to factories and plants. Therefore, companies will usually stress their differences from competitors in their advertisements and promotions. Companies may also lower prices when more competitors enter the market. Some competitors will likely lower prices, so other companies will do likewise to avoid losing customers.
Products inevitably become outmoded or obsolete. The black and white television is an example. During the decline stage, companies may make final attempts to differentiate their products or find new markets for them. However, some companies will introduce new products, especially if technology is changing. Their existing products may be sold or discontinued.