Product life cycle and portfolio

22.1 What is the product life cycle?

The product life cycle shows the sales of a product over time. When a new product is first launched sales will usually be slow. This is because the product is not yet known or proven in the market. Retailers may be reluctant to stock the product because it means giving up valuable shelf space to products that may or may not sell. Customers may also be hesistant, waiting until someone else has tried it before they purchase it themselves.

If the product does succeed, then it enters the growth phrase of the product life cycle, with new customers buying and existing customers making repeat purchases.  However, at some point sales are likely to stabilise; this is known as the maturity phrase. This slowing down of the growth of sales might be because competitors have introduced similar products or because the market has now become saturated. Everyone who wants one has bought one, so sales fall back to replacement purchases only.

At some point sales are likely to decline, perhaps because customer tastes have become more sophisticated. A decline in sales may also be because competitors have launched a more successful model or the original creator has improved its own product. 

The five stages of a product life cycle are known as development, introduction, growth, maturity and decline. These can be illustrated on a product life cycle diagram.

22.2 What is the value of the product life cycle?

The product life cycle model helps managers to plan their marketing activities. Marketing managers will need to adjust their marketing mix at different stages of the product life cycle; as outlined below:

• In the intoduction phase the promotion may focus on making customers aware that the product exists. In the maturity phase it may focus more on highlighting the difference between your product and competitiors that have arrived since its introduction.
• At the beginning of the life cyle, a technologically advanced product may be launched with a high price. Over time the price may fall as fewer models are being launched. By considering the requirements of each stage of the life cycle, marketing activities accordingly.

Managers know that the length of the phases in the life cycle cannot be predicted. They will vary form one product to another and this means the marketing mix will need to be altered at different times. For example, fad product will have a very short lifecycle. 

22.3 Extension strategies

The aim of an extension strategy is to prevent a decline in the product's sales. There are various means by which this can be achieved, as noted below:

• By targeting a new segment of the market
• By developing new uses for the product 
• By increasing the usage of the product.

Given the fact that developing the product can involve high costs and that there is a high failure rate of new products, it is not surprising that if a product is successful, managers will try to proing its sales for…