PRODUCT LIFE CYCLE
A business model to determine long term strategy
In the early 1900s sociologists began to apply the biological concepts of the lifecycle to products of industry. Economists took up the theme in the 1920s and 30s noting that products such as automobiles had lifecycle growth curves.
In 1933 Otto Kleppner, the founder of a New York advertising agency, recognised different phases of a products growth that required appropriate types of advertising; pioneering, competitive, and retentive
Nearly all products have a life cycle. They are born, have a youthful phase, and move through maturity into old age. An old product may die or be rejuvenated. The problem with life cycles is knowing where they are on the axis of “time”.
If you know where your product lies on the life-cycle you can take certain actions and be prepared for its future.
The stages of the product lifecyle are:
Pre-birth: At some stage an idea for a product is conceived. This is a delicate time for the embryo as a significant number of new ideas fail to make it. They may fail because they do not fulfil the needs of potential customers, the competition is too fierce, the costs of manufacturing are too high, or the penetration of the marketplace is too difficult. Pre-birth is not an easy time for a new concept.
Youth: As stated above, the launch period of a new product can be difficult. The new product needs to acquire a high level of awareness and this in turn must be supported with an appropriate promotional budget. Distributors and retailers must be persuaded that it is worth their while listing the new product. If the new product is to win a significant number of customers, it must appeal to the innovators who will be happy to trial and experiment but it must also jump the chasm and become of interest to the early adopters and early majority.
Growth: After a time, the awareness of the product will increase and sales will grow significantly. The early adopters will begin to buy the product in earnest and the early majority will be showing a strong interest. Other companies will see the strong growth and competitors will be lured into the market. This is not necessarily a bad thing as the extra competition will also help bring the product to a wider audience.
Maturity: Eventually the new product becomes mainstream. It will be widely known and widely used within the market. The late majority will now buy the product and its penetration will be moving quickly towards saturation point. At this point, the many competitors that entered the market during the growth phase will begin to rationalise.
Old age: In the end the applications for the product will decline or new products will come onto the market which can better serve customers’ needs. As a result, sales volumes decline. Inevitably there will be still further rationalisation of suppliers. Declining sales volumes and continuing price pressures will put a squeeze on profits. This is a stage at which you need to decide whether rejuvenation is possible.
The product lifecycle is conceptual and as such it is difficult to know exactly where a product sits. This is further complicated by the timeline of the lifecycle. Some toys have a lifecycle of less than 12 months from launch to decline. Electronic products can have a lifecycle of three or four years. A car’s lifecycle is around seven years. However, products such as steel, cement, bricks and basic materials have lifecycles that stretch to many years.
It is also difficult to judge when maturity moves into old age in the lifecycle. In the later years of the 20th century glass appeared to be entering a period of maturity or old age. A resurgence of interest amongst architects and designers has resulted in glass finding new applications in construction. Some products such as wheels, hammers and nails are likely to survive for many years and will probably never follow the predicted course of decline.
Despite the limitations of being able to state exactly where a product sits in the timeline of the product lifecycle, it has proved useful to marketers in explaining how and why sales of the product change over time and the strategies that are needed during the different phases.