A product life cycle is comprised if the combined demand over an extended period of time for all brands including a product category. A product life cycle is composed of four different stages each with its own properties and characteristics. The four stages that compose the cycle are introduction, growth, maturity and decline. In the introduction stage, also known as the pioneer stage, a product is first launched into the market in a full-scale marketing programme. The marketing programme’s main objective is to stimulate demand, seeing that the consumers are still unfamiliar with the innovative product or feature.
Furthermore, in the introduction stage sales if any are relatively low. Low sales signify losses rather than profit; the high costs of developing the product and marketing it and the low level of sales results in the introduction stage being an unprofitable one. The introduction has been said to be the riskiest and most expensive of all four stages due to its high costs. Following the introduction stage is that of the growth stage, which is also sometimes referred to as the market-acceptance stage. During the growth stage profits and sales rise frequently at a rapid rate.
The increase in sales and profits is due to the fact that consumers are now familiar with the product, and the company has achieved its main objective of stimulating aggregate demand. The high profit rates however have their drawbacks; competitors begin to enter the market in large numbers seeking such rates. Profit is usually maximized towards the end of the growth stage, since competition causes it to decline. The third stage in the product life cycle is the maturity stage. The maturity stage may be divided into two parts. During the first part sales continue to decrease but at a decreasing rate.
And in the second part of the maturity stage sales level off and profits begin to decline. The leveling off of sales and the decline of profits are due to one primary reason which is that of intense price competition. The fourth and last stage is the decline stage. In this stage sales decline rapidly and profits become low to none. There are three possible reasons for the decline stage; a new better or less expensive product which satisfies the same need is developed; the actual need for the product no longer exists; or the consumers grow tired of a product. The decline stage usually results in the firm’s exit from the market.