The sales of most products will decline at some stage. This can be due to factors such as technological advances, trends, innovation or changing consumer tastes.
You will know when your product reaches the decline stage of its life cycle because you will notice a significant downturn in the revenue it generates.
Product decline strategies
At this stage, your options are to:
- maintain the product in the hope that your other competitors will withdraw their versions before you, which may create an increase in demand again
- reduce your costs and find another use for the product - entering into another niche area could increase profits
- reduce marketing support, 'harvest' the product, coast along until profits dry up and then discontinue the product
- discontinue the product when your profit disappears, or when you unveil a successor product
Extending the lifespan of your product
Some of these methods can form an 'extension strategy' that prolongs the life of your current product or service. Such a strategy can temporarily delay the decline and give you enough time to improve or amend your existing product or develop a new one. Read more about product life cycle strategies.
By understanding the product life cycle of all of your products and services, you can ensure that at least one of your ventures is at the growth or maturity stage, while another is in decline. By doing this you can guarantee a regular source of profit for all of your products.
Read more about the growth and maturity stage of a product life cycle.
An industry’s life-cycle position often has a large impact on its competitive dynamics, making this position an important component of the strategic analysis of an industry.
Life-Cycle Stages
- Embryonic: an industry just beginning to develop, characterized by slow growth, high prices, low volumes, a substantial need for investment, and a high risk of failure.
- Growth: characterized by rapidly increasing demand, improving profitability, falling prices, and relatively low competition (though a threat of new competitors is generally at its highest point in this stage).
- Shakeout: characterized by slowing growth, intense competition, declining profitability, and a focus on cost reduction.
- Mature: characterized by little or no growth, industry consolidation, and high barriers to entry.
- Decline: characterized by negative growth, excess capacity, and intense competition.
Limitations
Limitations
The evolution of an industry does not always follow a predictable pattern as various external factors (technological, regulatory, social, or demographic changes) may significantly affect the shape of the pattern. Also, the performance of companies within industries does not always mirror that of the overall industry as there can be successful companies in declining businesses and failing companies in high-growth industries.
Question
The newspaper industry has been shrinking for years in the shadow of the internet and 24-hour cable news networks. What is the life-cycle stage that best fits the newspaper industry?
- Mature.
- Decline.
- Shakeout.
Solution
The correct answer is B.
The newspaper industry has long ago moved past the shakeout stage and has more recently shifted into a period of decline against the increasing popularity of the internet.
A company has to be good at both developing new products and managing them in the face of changing tastes, technologies, and competition. Products generally go through a life cycle with predictable sales and profits. Marketers use the product life cycle to follow this progression and identify strategies to influence it. The product life cycle (PLC) starts with the product’s development and introduction, then moves toward withdrawal or eventual demise. This progression is shown in the graph, below.
The five stages of the PLC are:
- Product development
- Market introduction
- Growth
- Maturity
- Decline
The table below shows common characteristics of each stage.
0. Product development stage |
|
1. Market introduction stage |
|
2. Growth stage |
|
3. Maturity stage |
|
4. Decline stage |
|
Using the Product Life Cycle
The product life cycle can be a useful tool in planning for the life of the product, but it has a number of limitations.
Not all products follow a smooth and predictable growth path. Some products are tied to specific business cycles or have seasonal factors that impact growth. For example, enrollment in higher education tracks closely with economic trends. When there is an economic downturn, more people lose jobs and enroll in college to improve their job prospects. When the economy improves and more people are fully employed, college enrollments drop. This does not necessarily mean that education is in decline, only that it is in a down cycle.
Furthermore, evidence suggests that the PLC framework holds true for industry segments but not necessarily for individual brands or projects, which are likely to experience greater variability.[1]
Of course, changes in other elements of the marketing mix can also affect the performance of the product during its life cycle. Change in the competitive situation during each of these stages may have a much greater impact on the marketing approach than the PLC itself. An effective promotional program or a dramatic lowering of price may improve the sales picture in the decline period, at least temporarily. Usually the improvements brought about by non-product tactics are relatively short-lived, and basic alterations to product offerings provide longer benefits.
Whether one accepts the S-shaped curve as a valid sales pattern or as a pattern that holds only for some products (but not for others), the PLC concept can still be very useful. It offers a framework for dealing systematically with product marketing issues and activities. The marketer needs to be aware of the generalizations that apply to a given product as it moves through the various stages.