Overview
The product life cycle (PLC) describes how a product's sales trace an S-shaped curve, rising and then falling over time. Theodore Levitt popularised it in his 1965 Harvard Business Review article "Exploit the product life cycle", urging managers to use it to plan strategy in advance. It is widely used to adjust the marketing mix (4Ps) stage by stage.
Stages and strategies
- Introduction: sales grow slowly and profits are often negative because of development and promotion costs; there are few competitors. The aim is awareness and trial. Pricing may follow skimming (start high and lower gradually) or penetration (start low to win the market quickly), two strategies set out by Joel Dean in 1950.
- Growth: sales rise rapidly, profits appear and competitors enter. Firms improve the product, widen distribution and shift advertising towards preference to build market share.
- Maturity: sales growth slows or stalls and competition is fiercest. Price competition, differentiation, new uses and new customers, and brand loyalty become central. Most products spend most of their lives here.
- Decline: technology or taste changes shrink sales and profits. Options are harvesting while cutting costs, dropping the product, or repositioning to revive it.
Variants and extensions
- Curve shapes: fads rise and vanish quickly, while styles and fashions recur in cycles. A scalloped pattern appears when new uses restart growth during maturity.
- International product cycle: Raymond Vernon (1966) argued that new products are first made and exported by advanced economies, and that production moves abroad and eventually to developing countries as the product matures and becomes standardised.
- Link to portfolio analysis: the question marks, stars, cash cows and dogs of the BCG matrix are often explained as roughly matching introduction, growth, maturity and decline.
Critiques
Dhalla and Yuspeh (1976), in "Forget the product life cycle concept!", argued that there is no objective way to identify stages, and that treating a temporary sales dip as decline and cutting investment can create a self-fulfilling prophecy. The length and shape of the cycle also vary greatly between products, limiting its value for forecasting. The PLC is therefore best used as a framework for diagnosing market conditions and reviewing STP and the 4Ps rather than as a precise forecasting model.
References
- Dean, J. (1950). Pricing policies for new products. Harvard Business Review, 28(6), 45–53.
- Levitt, T. (1965). Exploit the product life cycle. Harvard Business Review, 43(6), 81–94.
- Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics, 80(2), 190–207.
- Dhalla, N. K., & Yuspeh, S. (1976). Forget the product life cycle concept! Harvard Business Review, 54(1), 102–112.