Product Life Cycle
(Levitt)

Analyzing Industry maturity stages. Explanation of Product Life Cycle of Levitt, Fox, Wasson, Hofer, Anderson & Zeithaml, Hill & Jones. ('65)

The Product Life Cycle model can help to analyze maturity stages of products and industries.

The term was used for the first time by Theodore Levitt in 1965 in an Harvard Business Review article: "Exploit the Product Life Cycle" (Vol 43, November-December 1965, pp 81-94). Any company is constantly seeking ways to grow future cash flows by maximizing revenue from the sale of products and services. Cash Flow allows a company to maintain its viability, invest in new product development and improve its workforce. All this in an effort to acquire additional market share and become a leader in its respective industry.

A constant and sustainable cash flow (revenue) stream from product sales is key to any long-term investment, and the best way to attain a stable revenue stream is to have one or more Cash Cows. Cash Cows are strong products that have achieved a large market share in mature markets.

Also, the modern Product Life Cycle is becoming shorter and shorter. Many products in mature industries are revitalized by product differentiation and market segmentation. Organizations increasingly reassess product life cycle costs and revenues, because the time available to sell a product and recover the investment shrinks.

Although the product life cycle shrinks, the operating life of many products is lengthening. For example, the operating life of some durable goods, such as automobiles and appliances, has increased substantially. As a result, the companies that produce these products must take their market life and service life into account when they are planning. Increasingly, companies are attempting to optimize revenue and profits over the entire life cycle. They do this through the consideration of product warranties, spare parts, and the ability to upgrade existing products.

It is clear that the Product Life Cycle concept has significant impact upon business strategy and corporate performance. The Product Life Cycle method identifies the distinct stages affecting sales of a product. From the product's inception until its retirement.

The stages in the Product Life Cycle

• Introduction stage. The product is introduced in the market through a focused and intense marketing effort designed to establish a clear identity and promote maximum awareness. Many trial or impulse purchases will occur at this stage.
• Growth stage. Can be recognized by increasing sales and the emergence of competitors. At the vendor's side, the Growth stage is also characterized by sustained marketing activities. Some customers make repeat purchases.
• Maturity stage. This phase can be recognized when competitors beginning to leave the market. Also, sales velocity is dramatically reduced, and sales volume reaches a steady level. At this point in time, typically loyal customers purchase the product.
• Decline stage. The lingering effects of competition, unfavorable economic conditions, new trends, etc, often explain the decline in sales.

Several variations of the Industry Life Cycle model have been developed to handle the development of the product, market, and/ or industry. Although the models are similar, they differ as to the number and names of the stages. Here is a list of some major models:
 

variations of the life cycle model

1973: Fox: precommercialization - introduction - growth - maturity - decline.
1974: Wasson: market development - rapid growth - competitive turbulence - saturation/maturity - decline

1984: Anderson & Zeithaml: introduction - growth - maturity - decline

1998: Hill and Jones: embryonic - growth - shakeout - maturity - decline

Product Life Cycle Forum

NAWAS - UK

PLC vs Ansoff Model

"Can the relationship of Ansoff and the Product Life Cycle model be summarised as follows? Product Development - Introduction Stage of PLC. Market Development - Growth stage of PLC. Market Penetration - Maturity of PLC. Diversification - Decline stage?"

15

Walter H. - USA

When is a product successful?

"When can a product considered to be successful in the light of the Product Life Cycle Theory?"

22

Marta - Canada

PLC at company level?

"In MIT Sloan Management Review of Fall 2006, Donald Sull and Dominic Houlder of LBS stress that NOT companies, but chances are going through a life cycle. They recommend that companies manage a portfolio of business opportunities (chances) in various life cycle stages. In this way companies can anticipate future developments and prevent frequent portfolio erros, such as: No Exit, Throwing out the Baby with the Bath Water, Sticking to the Knitting, Letting a Thousand Flowers Bloom, One Size Fits All, and Generation Gap."

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