Product Life Cycle

A company’s positioning and differentiation strategy must change as the product, market, and competitors change over the product life cycle. Product life cycle is significant because consumer behavior is influenced by it. It is important to understand that products have a limited life; product sales pass through distinct stages with different challenges, opportunities, and problems for the seller; profits rise and fall at different stages of the product life cycle; and products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each stage.

Advertising, sales, promotion, and competitors experience changes through the different stages of the product life cycle. During the introductory stage sales growth tends to be slow, promotional and advertising expenditures are at their highest ratio to sales, and there is an advantage to being a pioneer rather than entering a highly competitive market. The growth stage is marked by a rapid climb in sales and new competitors enter with new product features and expanded distribution. Companies maintain or increase their promotional expenditures to meet competition and to continue to educate the market, but sales rise much faster than promotional expenditures. When the rate of sales growth slows, the product enters a stage of relative maturity. During this stage a company might use market modification, expanding the market for its mature brand by expanding the number of brand users. By doing so, the customers of the competitors can be won. Sales are stimulated by modifying other marketing-mix elements such as prices, distribution, advertising, sales promotion, personal selling, and services. Last, during the decline stage, sales decrease, competition increases, and promotions and advertising budgets are cut.

Terrell L
TerrellL@MIPromotions.com
M/I Promotions
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