Slide 4.

Chapter 4

The product life cycle in

theory and practice

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.2

The product life cycle (PLC) is

‘A generalized model of the sales trend for a

product class or category over a period of time,
and of related changes in competitive behaviour’.
(Buzzell)

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.3

The Product Life Cycle

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.4

The stretched product life cycle

contains seven stages:

• Gestation or new product development.

• Launch or introduction.
• Growth
• Maturity
• Saturation
• Decline
• Elimination

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.5

Graphically we may represent

this as follows

Maturity Saturation
Quantity
Decline

Growth
Gestation Elimination
Launch

Time

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.6

Stage one: Gestation (new

product development)
• Introduction of new product due to
technological change and intense competition
• Average PLC is shortening
• Importance of ‘Time to Market’ and ‘get it
right first time’
• Market response cannot be predicted
• Less than a perfect product but capability to
respond quickly will outperform

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.7

Stage two: Introduction (launch)

• Customer finds new and better ways of
satisfying needs which leads to innovation
• Products developed from customers’ ideas are
more likely to succeed
• The more radical-greater the resistance-longer
time to diffuse
• Introduction may be slow:
– Delay in expansion of product capacity
– Technical problems
– Delay in making the product available
– Reluctance to change

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.8

Stage three: Growth

• Successful survival of trials and prospects
of profitability
• Demand and supply – ‘pull’ and ‘push’
• New suppliers
• Incremental innovation and product
improvement

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.9

Stage four: Maturity

• New product has substituted the old one
• Proliferation of variants will cease
• Physical attributes of the product are well
known and understood
• Professional marketer are engaged in
developing and delivering effective marketing
mix
• Growth slows down and non-price
competition dominate

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.10

Stage five: Saturation

• Advanced stage of maturity
• Pareto principle: 80/20
• Competition will be intense as suppliers
want to build market share
• Price levels will remain fairly stable in the
mass market
• Saturation is a stage of greatest reward
and greatest danger

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.11

Stage six: Decline

• Innovators and entrepreneurs have
alternative ways of satisfying customer
needs which acts as challenge
• Some innovations will succeed and win
market share from saturated market
• Two options : resist the change with risk of
extinction or voluntary elimination

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.12

Stage seven: Elimination

• Survival of the fittest
• Elimination/withdrawal needs to be
conscious and considered decision

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.13

When a life cycle reaches a limit of

growth three basic options exist:

• A way round the limit cannot be found and the

process goes into decline.
• An equilibrium is established and the life cycle
is stretched or extended.
• The limit is broken and a new growth phase
is initiated.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.14

The ‘biological’ life cycle.

Renewed growth

Limit Extension
Turbulence

Growth Decline

0 Time

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.15

Managerial Applications of the

PLC Concept
• No universal prescription
• Identify the issues and events and devise
strategies and tactics to deal with them
• It is possible to define the phases of the PLC
and take appropriate action
– Entry of new competitor: onset of growth phase
– Cluster of new competitors, increased price
competition, intensified promotional activity: end of
high growth phase
– Decline in market size: decline phase

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.16

Characteristics of life cycle stages.

Product Introduction Growth Maturity Decline
life-cycle
Characteristics
Sales Low Fast Slow to decline Declining
Profits Negligible Peak levels Begin to decline Declining to zero
Cash flow Negative Moderate High Low
Customers Early adopters Mass market Mass market Laggards
Competitors Few Growing Many ‘me too’ rivals Taking market
Key actions
Strategy Expand market Market penetration Defend share Productivity
Marketing costs High High (declining%) Falling Low
Marketing Product Brand preference Brand loyalty Image
emphasis awareness maintenance
Pricing High
Maintain Maintain/increase Rising
Distribution Patchy
Intensive Intensive Selective
Product Basic
Improved Broaden position Rationalize
Product development
Re-segment
 Brand life  Generic life 

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.17

CRITICISMS OF THE PLC

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.18

The conceptual arguments

against the PLC are:
• Products are not living things, hence the biological metaphor
is entirely misleading.
• The life cycle of a product is the dependent variable, being a
function of the way in which the product is managed over time.
It is certainly not an independent variable.
• The product life cycle cannot be valid for product class, product
form and for brands – indeed, an important function of a brand
name is to create a franchise that has value over time,
permitting changes to take place in the product formulation.
• Trying to fit product life cycle curves into empirical sales data
is a sterile exercise in taxonomy.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.19

The main operative arguments

against the PLC include:
• The four phases or states in the life cycle are not
clearly definable.
• It is impossible to determine at any moment in time
exactly where a product is in its life cycle hence:
• The concept cannot be used as a planning tool.
• There is evidence that companies who have tried to
use the product life cycle as a planning tool have
made costly errors and passed up promising
opportunities.

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.20

• If one wants to use PLC as a basis for

developing strategies, then following
questions must be answered
– Given a proposed new product or service,
how and to what extent can the shape and
duration of each stage be predicted ?
– Given an existing product, how can one
predict which stage it is in ?
– Given all this knowledge, how can it be
effectively used ?

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.21

• Doyle cites six reasons why the PLC is not

of much use to marketing strategy
– Undefined concept
– No common shape
– Unpredictable turning points
– Unclear implications
– Not exogenous
– Product oriented

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.22

Table 4.2 Doyle’s product life cycle factors

Source: Doyle (1999)

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.23

• It cannot be converted into a precise formula

which will predict accurately the behaviour of
individual brands in a market.
• It cannot tell you in advance which innovation
will achieve this status.
• The PLC is a tool which encourages strategic
insight, policy formulation and long term
strategic planning. It is not a tactical device

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.24

OPERATIONALIZING THE PLC

• What the PLC for a particular product look
like ?
• What stage it has reached ?
• Three complementary indicators
– Sales volume
– The rate of change of sales volume
– Profit-loss curve

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.25

Product’s position on the life cycle

source: Scheuing, 1974

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.26

• From the above graph

– Sales commence: generate revenue:
introductory phase
– All three indicators move rapidly: growth
phase
– Negative sales volume: peak of maturity
– Rate of change curve goes reverse: sales are
accelerating: need to replace the product

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.27

Linear vs exponential sales forecasts

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.28

• From the above graph

– Predetermined sales target in linear forecast
– Zone of ‘over-performance’ and ‘under-
performance’
– Product underperforms the target at
introduction
– Premature withdrawal of the product as
unable to meet the target thinking that it is a
failure

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.29

Deviant cases – fads and fashions

The classic fashion-good PLC

The fad PLC

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.30

• From the above graph

– Exceptions to the PLC rule
– Near absence of an introductory phase
– Meteoric fall in sales once market saturation has been
reached
– In fad curve: delayed maturity due to residual
demand, no precise idea, trial and error marketing
– In fashion curve: firms substitute a new product for an
existing product, withdraw the ‘new’ product at sales
peak
– Done to prevent competitors from benchmarking and
developing a reputation of industry leader
– Firms will be successful if they predict and anticipate
changing consumer tastes

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.31

QUESTIONS ??

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007
Slide 4.32

THANK YOU

Michael Baker and Susan Hart, Product Strategy and Management, 2nd Edition, © Pearson Education Limited 2007