Strategic Marketing Basics

The product life cycle (see below) is one of the most popular marketing models. It is explained in detail in most bibliographical references (see "learn more" section)

 

The principle is simple: sales and profits levels of a product category or a product model vary in function of time and the marketing issues to address (pricing, number of models to place on the market, type of communication, competitive pressure, etc.) differ from one phase to the next.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the introductory stage a "first mover" will have the responsibility to create the market and educate the "early adopters". Price will generally be quite high (skim the cream pricing) and the first mover will most probably incur losses.

 

In the growth phase, new competitors will enter the market and stimulate sales through active marketing activity (new product features, advertising and promotion,...). Prices will decrease and distribution will widen.

 

Then will come maturity, a time when sales plumet and growth is slowing down.  Most competitors have positioned themselves and chosen their preferred target segments. Those who compete for the same customers will enter a savvy war leading to more price cuts, short term deals and any other action aimed at protecting their market  share. At that time, profits of the category are down.

 

Finally, decline occurs due to the appearance of a new product, model or solution. The weakest competitors are leaving the market and the strongest take advantage of that to reinforce their market shares and ripe the leftover profit.

 

This model should nevertheless be handled with caution. In fact, life cycles have shortened dramatically nowadays, due to the increasing speed of technological innovation. So, the logical recommendations offered by the model may be questioned. For example, we could find ourselves in an introductory phase for a new product and from the outset encounter a competitive situation typical of the growth phase (many competitors seeking to differentiate themselves instead of a single competitor seeking to educate the market).