A product goes through four typical stages, which are: introduction, growth, maturity and decline. When a new product is introduced, it takes some time before it gets accepted. Once it is accepted, it may go through a period of rapid growth.
Eventually, the rate of growth for the product slows down and the market for the product matures. Finally, the product may enter into a decline stage. In terms of strategic planning the product life cycle approach suggests that different business strategies should be used to support products in different stages of their life cycles.
The duration of the product life cycle varies dramatically for different kinds of products. Fashion items usually have a short life cycle. Products like automobiles have been around for decades and are still in the maturity stage.
Understanding product life cycles and adjusting strategies accordingly is an important managerial skill. The managers must recognize the time frame for each stage of the product life cycle.
During the introduction stage, a product might be viewed as a “question mark” in the BCG matrix. In time of growth, it serves as a “cash cow” and it becomes a “dog” when its market share declines.
Products in the introduction and growth stages require investments in promoting the product in order to build a customer base in the market.
In the maturity stage, the focus shifts to cost effectiveness and production efficiency. The strategy would focus on prolonging the maturity stage of the product and delay the onset of decline stage. At the decline stage, there should he contingency plans either to reverse the decline or to develop alternative products with growth potential.
Many international organizations are taking advantage of the different product life cycles in different countries. A product in the decline stage in one country can be sold in another country market where it may be in the introduction or the growth stage. For example, Boeing company sells many of its older-model planes in developing countries.