Product lifecycle

Product lifecycle

Introduction and Background

Product Life Cycle (PLC) has been a compelling theory and commonly accepted in marketing for its widespread applications in marketing strategic planning. It is a simple model based on the biological concept of human life, which starts with infancy and develops through growth, maturity, and decline (Day, 1981).

Although the literature does not confirm the paternity of the theory, marketing researchers agree that it was coined in 1950 to explain the life phases of a new product (Edward, 1992; E.K. Hiltstorm and L. C. Hilstorm, 2002). On one end, Hilstorm et al. (2002) stipulate that the concept came from Carole Headden’s observation that the life cycle of a product may be represented by four distinct phases: introduction to the market, market growth, market maturity, and market decline.  On the other end, Edward (1992) attributes the paternity of the Product Life Cycle theory to Joel Dean (1950) who describes the dynamism, the constant changes and the adjustment requirements of a new product in his article “Pricing Policy for a New Product”.

What is Product Life Cycle?

Product Life Cycle is a theoretical model that describes the evolution of a product from its inception to the time when it is withdrawn from the market (Edward, 1992). It describes the relationship between a product’s sales revenue operationalized as the dependent variable and the product’s life span, as the independent variable (Brokhoff, 1986). It has four distinctive phases: 1) market introduction, which is also referred to as market development, 2) market growth, 3) market maturity, and 4) market decline.

While the model is affirmative about the delineation of the different phases of the PLC, it is important to realize that the duration of any given phase varies in different industries or even in different geographic areas for the same product. A product may develop faster in one geographical region and slower in another.

The product life cycle is dynamic and the changes in the phases are greatly correlated to internal and external contingencies of the industry. These turbulences include market competition, technological changes, and government regulations.

The consistency of the theory has been challenged by critics who argue that the PLC concept is very simplistic and has many exceptions. The theory is not reliable because the extent of a phase in the life cycle is variable and unpredictable. They also hold that the first down turn in product sale could be interpreted as a decline (Holstrom et al. 2002).

Why is Product Life Cycle Important?

When a new product is launched, business managers’ expectation is to prolong its life span and collect the maximum sales profit from the product. PLC has been used as a predictive and strategic tool among marketing strategists. The advance knowledge about the different phases and their characteristics will help formulate the right strategy to enhance sales, abridge the introduction phase, accelerate growth, and lengthen the maturity phase of the product. Product life cycle can also help determine the current phase of an existing product or service and help make informed decisions concerning the course of actions that will prevent a premature market decline.

Analysis of the Phases of the Product Life Cycle

The product life cycle, as stated in previous sections, encompass four phases.

Market Development – Introduction

Description and Characteristics

The market development phase starts from a mere conceptual idea of the product, to its physical existence, then to its introduction to the market. In the marketing literature, some authors include the product development in the introduction phase, while others start it the time when the product is first introduced to market.  Holstrom et al. (2002) suggest that this phase has five different components: 1) the idea validation, 2) the conceptual design, 3) product specification, 4) prototyping and testing, and 5) manufacturing ramp up and market development.

During the idea validation, the product is germinating and the organization conducts a market research to unveil customer needs and opportunities. After this initial inception phase, the organization will discover commercial use of the product. Then, it will move to the next step, which is the conceptual design phase. During the conceptual design phase, the firm conducts a feasibility study. Engineers assess the company’s current technology in order to determine the next technology strategic move. Once the feasibility study is positively concluded, detail product specifications come next in the process. The marketing department must determine the pricing style that will fit the current market exigencies and begin a sales estimation.  At this early point, the sales estimation will determine whether the product will be profitable in a long run.  After a favorable sales prediction, the product is prototyped, tested, manufactured, and introduced to the market for the first time.

During this introductory phase, sales are very slow and profit is negative (Kotler and Armstrong, 1999). The organization must set up distribution channels and invest in promotions. In this phase, as customer feedbacks are collected, the product needs some refinements to meet quality requirements. In the market development phase or introduction phase, the strategic objective is to create product awareness and increase the consumer demand (Levitt, 1965).

Strategic Implications in market development phase

This initial phase is very critical to the survival of the product in the marketplace. Because of inherent uncertainties and unpredictable risks, which characterize the new market, the product runs the risk of failing if not handled properly (Levitt, 1965). The market development phase is also characterized by a considerable amount of development cost. Most organizations will, therefore adopt what Levitt refers to as the “used apple policy”. In other words, they will let the pioneer take the lead and support the cost of building the emerging market. The pioneers in the developing market are the trailblazers and pave the way for others to follow. A strategic move in this phase is to limit product development cost and allow others the share the risks involved in the market development. Levitt suggests that introducing elements of fashion will shorten the length of the market development phase. It is also wise to start with a basic product, use a cost-plus pricing policy, build a selective distribution and have a heavy sales promotion to increase product awareness.

Market Growth

Description and Characteristics

            The market growth is the second step in the product life cycle. At this point, the market has favorably accepted the new product and sales revenues are rising. The slope of the representing curve is positive and increasing.  This is the opportunity for companies who have been observing the market development to enter the market, thus, creating a rise in competition (Kotler, 1999; Levitt, 1965). New entrants usually come into the market with copycats or improved versions of the product. The rise in competition will contribute to increasing the number of distribution outlets as production increases. One of the noticeable characteristics of this phase is the increase of profit. As the market development cost is shared among multiple organizations and companies enter a mass production phase, the unit cost of manufacturing drops, thus allowing vendors to lower product prices and augment their profit.

 Strategic Implications in Market Growth Phase

In this phase, given the growing competition, the strategic objective of the company shifts from creating product awareness to creating product preference and maximizing market share.  Given the high acceptance of the product, companies need to increase production in order to decrease product unit cost.  The quality of the product must now be improved to promote product preference. This is the point where the company must select whether to invest more on product improvement in order to acquire a dominant market position or to balance investment and product quality to increase profitability. During this phase strategic moves must include: a) offering product extensions, service and warranties, b) adopting a market penetration pricing policies, and c) building intensive distribution channels.

Market Maturity

Description and Characteristics

             The maturity phase is the stage of market saturation. During the time of market maturity, sales are slowly becoming constant. The representing curve hits an inflection point and its slope decreases until it nears zero; the curve becomes flat. At this point, the competition is at a culminating point and weaker companies are dropping out of the race. This phase is the longest and may take decades in some cases. The length of this phase is dependent on the industry and the usefulness of the product. During this phase, organizations must come up with innovative ideas to sell the excess products. Some will utilize a low cost approach, which will result in reducing the market profit. According to Day (1981) “Over the long run, as products approach a familiar commodity status, buyers become more price sensitive and less responsive to advertising and promotion effort either by the industry or by individual competitors“ (p. 63).

Strategic Implications in Market Maturity Phase

At this level of the PLC, the strategic objective has changed from maximizing market share, which was the focus of the previous phase, to maximizing profit and defending the acquired market share.  The company may revisit its four Ps policies: product, price, place, and promotion. The winning companies will be the ones with a strong and diversified brand and the best prices.  They must practice a best price policy to compete in this phase because consumers have become price sensitive and less responsive to advertising (Day, 1981; Kotler et al. 1999; Levitt, 1965). Within reasonable limits, the company must intensify distribution effort and stress on brand differentiation.

Market Decline

Description and Characteristics

            For several reasons, the demand for a product may drop or diminish near or to zero. Usually the market demand drops because the product becomes obsolete. A more up to date product may replace it. The rapid changes in technology combined with the change in customers’ habit may also contribute the decline of a product. For example, the proliferation of cellular phones caused the dramatic fall in street telephone booths.

When the market demand for a product drops from its maturity level, the product is said to have entered its decline phase of the product life cycle. Sometimes the product may be discontinued. Other products may linger around. The decline phase of some products is slow while other products may decline very rapidly. In this phase of the PLC most companies withdraw from the market to avoid supporting the cost of a week product with little or no profit.

Strategic Implications in Market Decline Phase

            In this phase, the strategic objective is no longer about defending a market share. Two scenarios may be explored. The first would consist of limiting expenditures by cutting cost, phasing out non-profitable subsets and reducing production to the minimal level in order to squeeze some profit out of the product (Kotler at al., 1999). The second would be to revamp the product by creating new uses and finding new users of the product (Levitt, 1965).

Evaluation of the role of Technology in the Product Life Cycle

The last two decades have been characterized by a rapid growth in technology. Advances in technology have greatly impacted human lives as well as the way business is conducted. It has enabled the globalization.  Recent researches have proved that technology is enabler of competitive advantages (Ness, 2005; Peak, D. and Guyness, C.S., 2003). Moreover, it has supplied human needs to the point where it has also become a need on its own. Technology has shortened distances between businesses across continents. It has brought people together through new telecommunication improvements. Business is today, conducted without the need for travel, and new products are developed and distributed at low cost. This section evaluates the role of technology in the different stages of the life cycle of a product.

Technology in the Introduction Phase

Technology plays an important role in the development of a product from its embryonic stage to the point of introduction to the market. Today, computer aided design (CAD) has replaced the manual process of designing a product. The flexibility and transparency brought by CAD allows engineers to run rapid prototypes, electronically simulate and test the functions of a product before the actual physical prototype. During this phase, reducing design time is one of management‘s major objectives.  That objective can easily be attained using product life cycle management software (Michel, 2009; Neal, 2009).

With the aid of technology, market introduction phase of the product life cycle phase has become easier. Customer access is facilitated by the use of television and Internet advertisings and emails solicitations. Advances in technology have enabled the marketing personnel to get closer and personal with the customers through blogs, podcasts, and social networks.

Technology in the Growth Phase

The growth phase of the product is one of the most critical phases in the process. As the sales pick up, competitors enter the market with new product features. Keeping track of customers data and collecting competitive intelligence (CI) (Bose, 2008) is vital to the survival of the pioneer company. Customer data collection and CI collection are made easy with technology.  According to Bose “CI is a vital component of a company’s strategic planning process. It pulls together data and information from a very large and strategic view, allowing accompany to predict or forecast what is going to happen in a competitive environment” (Bose, 2008).  This phase also requires an intensive distribution, a low price policy, and a potential for mass production to respond to customer demand. Web base distribution allows companies to reach customers quicker, without large inventory overhead. This leads to a lower cost of product distribution and competitive prices.

Technology in the Maturity Phase

In the maturity phase, the market is stable; the competition is known. At this point, the main strategic focus is to defend the market share. Customer data is required to monitor the demand versus the supply. Again, technology support is available through online surveys to determine customer’s intension to purchase. Historical data is now available through business databases. Data mining technology allows companies to monitor specific customers. Hair Jr. holds that “Using customer data from their databases, organizations can help their marketing and sales divisions to better understand customer behavior and predict future purchasing patterns (Hair Jr., 2007)”

Technology in the Decline Phase

With information technology, the decline phase of a product may be predicted and consequently prepared for. It may also be intentionally provoked.  Some technology products have short life because of rapid changes in technology. For example, every two or three years, Microsoft releases a new operating system, which comes as a substitute product for the previous one. Technology can help prevent the decline phase by creating a new growth phase; it may help revamp the product by creating new uses, new design for new type of customers (Levitt, 1965).

Evaluation of the role of Government Regulation in Product Life Cycle

In many countries, government regulations affect products of first necessity and those with high safety issues. The pharmaceutical, transportation, health, and education are a few of those industries under constant scrutiny by lawmakers. Nevertheless, like in any other form of regulatory actions, even with the best intent, the effect could be twofold. It may work either for the benefit or against the pioneer. The question is, what impact do regulations have on new product in the market? The literature shows that regulations affect product life cycle in different ways within different industries and different countries and the effect is related to the nature of the regulation:

Policies related to national health insurance, inclusion or exclusion of drugs, research development (R&D) incentives, use of clinical tests, patent protection, compulsory out-license, and generic substitution are regulatory structuring methods used by most developed nations to help achieve their objectives (Popper and Nason, 1994 p 290).

For that matter, Popper and Nason (1994) analyzed the impact of government regulations on pharmaceutical product introductions in six different countries. They took a special look at the introduction timing. The result stipulates that regulations slightly affected the introduction timing. They came to the conclusion that while product introduction timing is different from one country to the other, some regulatory measures seem not to have affected the introduction time at all in all six countries. However, policies had a considerable correlation between subsequent product introductions.

In the same vein, Plambeck and Wang (2007) conducted an evaluative study of the effect of e-waste (electronic waste) regulation on new electronic product introduction.

In this highly electronic-dominated economy, electronic manufacturers tend to have control over the life cycle of every product they introduce to the market. In the face of rising competition, they frequently introduce a new product with new features in replacement to a previous one that is automatically sent to waste. By so doing, they control the life span of the product. However, e-waste is very difficult to dispose of and sometime becomes toxic when incinerated, leading many countries to devise e-waste regulations. Two types of regulations are in play here. First, the “fee-upon-sale” is beneficial to both the manufacturer and the consumer in a sense that it balances the rate of new product release. Second, the “fee-upon-disposal” forces the manufacturer to design the product with recycling in mind.

In the first case, the life of the product depends on the competitive capabilities of the electronic firm.  The company would have to build product awareness and use heavy sales and promotion tactics at introduction time. The growth phase depend on how the product is adopted by the consumer; the company must deal with heavy competition. In the maturity phase while the product is still selling, the firm must prepare for the substitute product or create new uses for the product.

The second type of regulation puts pressure on the manufacturer to prepare for the declining phase. In other words, it must build a product that can easily be recycled. Strategically, while the introduction phase may take longer and be more expensive to the manufacturer, the policy does not make any difference since all competitors are under the same pressure.

Most Government regulations fall in two categories: The regulation may provide incentives or it can be restrictive.  When it provides incentive it instills high competition, which put enormous pressure on the pioneer in the growth phase of the product. On the other hand, when the regulations are restrictive, the market entry barrier is high and the incumbents may enjoy a high profit in the life cycle of their products.

Synthesis on how the shape of the product life cycle changes

Effect of Increase in Technological Advancement

Advances in technology have, without doubt been characterized as a plus in strategic planning management and business value creation. However, the relationship between the need of technology in marketing and market development can be perceived as the dilemma of the “chiken and egg”. Does technology drive market growth? Or does market need pull new technology? And how can the answer affect the shape of the life cycle s-curve? The answer is that sometimes, technology may be pulled by market needs and other times, new and enabling technology would generate new markets. Thus, in terms of product life cycle one can distinguish two types of products: the technology product, which includes market pulled technology product and invention-based product and the non-technology product.

Technology product may encompass electrical, electronic, telecommunication products and so forth. And non-technology product would be clothing product, and food product.

As any other product, the technology product will traverse the four stages of the PLC (Oliver, 1999).  An invention-based technology product usally takes a lot of time in the introduction phase. Customers do not trust and are reluctant to embrace a new technology product (Krasnoff and Mel, 1989). They need to know who has already used it and how it has been performing.  At the introduction phase, the product must go through performance tuning periods. Most often the product never gets out of that stage before a substitute comes along. If the consumer ever embraces it, the market growth phase is rapid. The maturity phase is prolonged until a substitute product comes along.

A technology product may be driven by a market pull. In other words, the product is developed to meet a market demand. In this case, the product easily connects with the consumer. In that case, the introduction phase is very short, and the growth is fast; the curve will then rise steeply to maturity. Very often market-pulled technology product stays strong in the maturity stage. The product goes in constant improvement. If the acquisition cost of the product is high, consumers tend to hold the product for a long time, which extends the span of the maturity phase. Most software products enter this category of product. (Krasnoff et al., 1989).  Technology products with fashion characteristics have a short life span. In this case, the s-curve shrinks.

Non-technology products on the other hand, also have an s-curve shape life cycle. Although technology may not directly affect the use of the product, it may be intensively used for the promotion and the distribution of the product. If used adequately it may help shorten the introduction phase and help increase sales in the growth phase. The length of the maturity phase depends on the usefulness of the product.

Effect of Government Regulations on New Entrants to the Market

One of the five competitive forces that shape strategic formulation is the threat of new entrants (Porter, 2008).  New market entrants come to the market with new energy and an ardent will to conquer a share of the market. The threat of the new entrant puts the burden on the incumbent to lower prices in order to stay competitive.

Barrier to market entry acts as deterrent to new entrants. According to Porter (2008), there are seven sources of barriers to entry which may work to the advantage of the incumbent: supply-side economy of scale, demand-side economy of scale, capital requirements, customers switching cost, incumbent advantage, unequal access to distribution channels, and restrictive government policy. Government restriction may prevent entries in certain countries.  It includes licensing, restriction on foreign investment. When restrictions are elevated, entry barrier is high and the incumbent may enjoy a high profit on sales. In this case, the s-curve of the PLC will be tall; in other words, the growth phase is high in revenue.


For the last half-century product life cycle (PLC) has been an important model for marketing strategists for determining the market position of a product. The literature concurs that the life cycle of any product goes through a four-phase evolution: introduction or market development, growth, maturity, and decline. That evolution may be represented with an s-curve.   The characteristics of every phase vary form one industry to the other and form one product to another. Along with other factors that may influence the shape the product life cycle s-curve, technology and government regulations were addressed in this paper. Technology advances may help introduce a product to the market as well as it may help in market penetration in the growth phase.

Government regulations on the other hand, may act as deterrent to new market entrants, thus heightening the barrier of entry for the benefit of the incumbents.

While the theory has been around and seems well accepted, there are critics who discredit the viability of the life cycle concept.


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Dr. Kouakou Claude PhD.
RASSU-MANHE Technology Solutions LLC.
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