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