Product Life Cycle

Traditional marketing theory states that a product passes through four phases in its life cycle: Introduction, Growth, Maturity and Decline. The chart below outlines these phases graphically. You can of course also plot gross margins or net profits, based on the different stage.

The marketing strategy overall changes, depending on the phase. In the introductory phase, the objective typically is to build awareness and develop the market. This transitions in the growth phase to building brand preference, establishing a leading market share, and reaching not just early adopters but a broad mass audience. In the maturity phase, the objective often becomes one of defending market share and maximizing profits. The table below the graph highlights some of the basic tenets of marketing theory related to the 4 Ps (product, pricing, place/distribution, and promotion/marketing). It also illustrates that in the last phase, a firm has multiple options, from investing heavily to reinvigorate the product, to harvesting and focusing on other opportunities.
Of course, the reality is never as simple as this theory. Classifying different products into these phases is often tricky (by product family?, by SKU?). And even products who have been on the market for 20 years can often enjoy nice growth rates. But the product life cycle is nevertheless an interesting concept when looking for example at decision such as where to focus R&D or marketing resources, or also how to define strategic pricing principles.