The product life cycle is a term used in marketing and economics used to investigate the marketing strategies at one time can be best applied to a particular product. The English term was first used by Theodore Levitt.
Every product that is put on the market goes through four different phases that are described in the product life cycle. The speed at which each product passes through this cycle depends on, among other things, the market demand and the marketing tools used. The duration of each phase can vary from a few weeks to many decades. Depending on the phase in which a certain product is located, there are some combinations from this marketing mix that generally have the best result.
The product life cycle, moreover, is not about the product of an individual company, but mainly about the life cycle of a certain product that may be produced / issued by several companies.
Not every product goes through every phase; some products never go beyond the introduction phase, while other products (eg bread) have been in the maturity stage for centuries. It is also possible that the fallback phase is followed after a shorter or longer period by a new revival, for example in fashion-sensitive products that are once again ‘in’.
Phases of product life cycle
Over time, various models have appeared that deviate from each other in terms of the number of phases. A recent model by Perreault et al. describes the four most important phases that can be found in all models.
A product that has successfully passed through product development will have to be put on the market. In this phase, relatively few copies are sold and no profit is yet made on the product to be sold. Competition is not or hardly at all in this phase because it concerns a new product.
In this phase the marketing will mainly focus on the announcement of the product to the consumer. In general, a lot of money is spent on marketing in this phase in order to bring the product to the attention. As more consumers buy the product, the product enters the next phase.
In this phase, the sales of the product increases considerably, as does the profit for the company that put the product on the market. During this phase, competitors will often place their own version of the product on the market in order to be part of the success of the product. It is mainly during this phase that the most profit is achieved (high sales figures and low unit production costs).
At the end of this phase, it is mainly the price-conscious consumers who have not yet bought the product, who will therefore be tempted more quickly by competitors who offer the product more cheaply than the original producer.
In this phase too, substantial expenses are made by the marketing department to reach as many potential consumers as possible. If almost all consumers in the chosen market are reached, the next phase in the cycle occurs.
If most consumers have purchased the product, the competition will become increasingly intense. By competing with prizes or other offers, the last consumers will be pulled over or existing consumers will be invited to purchase an extra (or replacement) copy.
This phase can be extended, or even partially delayed, by renewing the product (additional services, new functions, etc.) or by investing in new markets. The costs for marketing are increasing significantly at this stage, because both existing consumers must be advertised in order not to choose the competition, but also to reach new markets with an appropriate marketing mix.
Eventually one will have arrived in the fourth and final phase of the product. Virtually no new purchases are made in this area and most competitors will have withdrawn by the ever decreasing profits and increasing competition. Although this phase can occur as a result of natural development, it can also be set in motion more quickly by introducing new products.
Companies usually decide to offer their product at this stage too, so as not to stumble upon loyal customers (and thus to shed a negative image). In addition, there will still be a certain run-off as a result of statutory and granted guarantees. Ultimately, the product will still be completely removed from the market, in favor of other products with more preferred properties.