Life Cycle
The product life cycle is the succession of marketing stages that a product (good or service) goes through in time. Indeed, the conditions of sale of a product are constantly changing.
Life Cycle explained
In popular culture, as in the language of economists, the company is often compared to an organism or a species1. In cognitive theory, the phenomenon has been described as projection or metaphor. Like the organism, the firm has a life cycle, with stages of development including conception, gestation, birth, growth, decline and death.
In the life cycle described by economists, birth corresponds to the launch of the product on the market, growth and adolescence correspond to periods of expansion and market turbulence, and adulthood and old age correspond to market maturity, followed by decline.
Some economists revisit Darwin's theories and take the metaphor further by describing the ballet of fish killing each other:
"Hungry little sharks enter a pond on a high tide. They eat the small fish and then eat each other. The strongest survive, grow fat, grow old, grow soft. At the next big tide, young sharks arrive and devour them in turn ".
The life cycle used in commerce, which describes a bell-shaped trajectory, has little to do with the life cycle described in biology. The latter ignores the fact that the individual withers and dies, and focuses on reproduction. The life cycle described in biology is cyclical.
The product life cycle is the time a product exists on the market, the period of time from the conception of the product to its withdrawal from production and sale. The concept of product life cycle describes product sales, profits, competitors and marketing strategy from the moment a product enters the market until it is withdrawn from the market.
It was first published by Theodore Levitt in 1965. The concept proceeds from the fact that any product sooner or later is displaced from the market by another, better or cheaper product. In marketing, there is no such thing as a perpetual good.
The concept of the product life cycle applies to classes of goods as well as to subclasses and even to a particular model or brand. (Although many economists speak predominantly of the life cycle of goods alone, almost denying the existence of a life cycle for classes and subclasses of goods.) A specific product model follows the traditional product life cycle more closely.
When we speak of the life cycle of a commodity, we mean the following. The product's life span is limited; the sales volume of a product includes several stages, each of which is characterized by specific tasks, opportunities and problems; at different stages of the product's life cycle, the profit that a product brings varies; each stage of the product life cycle requires a different approach to marketing, finance, production, sales and human resources strategies.
The product life cycle characterizes specific patterns of development of the firm's turnover and profit in a particular market over time, i.e. the dynamics of competitive product behavior in the market. The product life cycle in this case acts as an ideal model of market reaction to the firm's product offer. The lifecycle model illustrates that any commodity as a product of labor has a limited life cycle period, during which it passes through several stages: development, introduction, growth, saturation and decline.
Stages of Life Cycle
Products generally go through five stages of life. These are:
- development;
- launch;
- growth;
- maturity;
- decline.
Development of a new product can be described as a stage with very high costs, low revenue and losses for the company. It is one of the hardest stages for a company to get through.
Launch stage is the introduction of the product to the market. During this step, the company meets high production and development costs, low sales volume. These factors lead to the losses for the company. In order to cover them, a business can rise prices.
Growth stage is notable for costs reduced by economies of scale, significant growth in sales volumes,increasing profits for the company and high margins, prices ensure a large market share, beginning of market simplification: large companies buy innovative small businesses.
Maturity stage. This step of the product life cycle outstands with low margins, disappearance of competitors unable to achieve economies of scale (absorption, withdrawal, bankruptcy, oligopolies, stabilization of market shares), low production costs, but high marketing and customer service costs, maximum sales volumes and high sensitivity to the economic situation. It also shows high profits but the revenue starts to stagnate. Strong segmentations take place: product ranges have diversified to meet demand. Prices begin to lower because of the appearance of competition. Anticipation of replacement products through research and development also takes place.
Decline stage. Stage of decline represents a decrease in sales, profits and prices. Substitute products start to emerge. However, many products do not overcome the resistance to innovation in the early stages, which explains the high failure rate.
Starting Life Cycle
The life cycle starts with the design and development of the product.
The process of consumer resistance to a disruptive innovation (good, service, technology, or ideology) begins as soon as it is announced or presented.
Dr. Biagio Di Franco has modeled this resistance behavior as a "consumer resistance spiral," which complements the life cycle model and explains the high rate of failure before and after innovative product launches. The use of appropriate marketing techniques can then reduce the process of consumer resistance during product launch.
Management of Life Cycle
In addition, some products seem to remain in the mature stage permanently (e.g., milk). However, these types of products are constantly evolving. In the example of milk: evolution of the packaging, adaptation of the product to diversified demands (growing children, slimming or therapeutic diets, various flavourings, etc.). Marketing uses different techniques to avoid or delay the decline stage. However, it is generally possible to estimate the life expectancy of a product category. Since life cycles are different in different geographic markets, a well executed international distribution strategy allows the product to last.
It is important for a company to coexist in marketing products that are at different stages of their life cycle, and to prepare, through innovation, the relay of products that are approaching the decline phase.
Marketing communication strategies change during the life cycle. For example, they can be informative and pedagogical in the introduction phase, persuasive and imaginative in the growth or maturity phase, then supported by cognitive clichés in the last stage (brand awareness, repetition of logos, slogans, colors, based on acquired representations inscribed in the consumers' subconscious).
The life cycle also plays a role in the choice of corporate strategy and can be used to determine it with the help of knowledge management. Bruno Bizalion has developed a new concept of life cycle based not on time, because it is too random and too variable according to the sectors, but on the growth rate.
