Product is one of the 4Ps of the marketing mix.
The product lifecycle is the idea that products go through different levels of sales from their introduction to the market until when sales decline so much that there is no demand. The product lifecycle can be represented graphically by showing sales over time:
Introduction
At this stage the product has just been launched — it has a low market share. The product will have low sales and customer awareness will be low. Advertising costs will be very high as the business tries to raise awareness. If the product is unique and innovative, the price is likely to be high as there are few competitors. Profit will be very low or the business may even make a loss.
Growth
As awareness starts to rise, sales will start to grow rapidly. At this stage demand for the products is increasing and the product is starting to become established in the market. The market may be expanding and the business may start to make a profit. The price is still likely to be high. Advertising will continue to build brand awareness.
Maturity
Growth of sales will start to level off at this stage as competitors may start to enter the marketplace, sales are still very strong but the numbers are not increasing rapidly. At this stage, promotion is likely to be limited as the product is established. The business will focus on the distribution of the product and keeping up with demand.
Decline
Demand for the product is falling and so are sales. Many competitors may be in the marketplace and the market may be saturated with similar products. The product may be out of date or unfashionable. The business will likely discontinue the product or employ an extension strategy. Weaker sales lead to decreased profits. Prices may be lowered.
Extension strategies
As sales decline, the business will need to decide whether to discontinue the product or try extension strategies to increase sales again. possible extension strategies include:
- Changes in the marketing mix – when a business faces a decline in sales it can look at making changes to any of the 4Ps of its marketing mix. It could change the product by adding new features or new designs (e.g. Apple iPhone), changing its methods of promotion, altering the pricing strategy or changing the place it is sold, e.g. changing from direct to consumer to selling through a retailer.
- Entering new markets – to prevent decline, a business could look at entering new markets to stimulate sales. This means changing the industry in which the business operates. For example, Apple launched Apple News to add a new feature to their iPhone, however, they had never operated in the journalism industry before.
Quiz
Can you tell which stage of the product lifecycle these cars are in? Drag them to the correct stage to test your knowledge.
Tip: many governments have now imposed additional taxes on diesel cars.