What is the product life cycle?
The product life cycle (PLC) shows how the sales of a product change from the day it is planned to the day it is withdrawn. It has five stages:
- Development: research, design, prototypes and testing. No sales yet, but high costs.
- Introduction: launch. Sales are low and grow slowly. Heavy spending on advertising. Price may be high (skimming) or low (penetration).
- Growth: more customers buy; sales rise quickly. Profits start. Rivals copy the idea.
- Maturity (and saturation): sales are highest but level off; most people who want it have it. Competition is strong.
- Decline: sales fall as tastes change or newer technology appears. The product may be withdrawn.
Products have very different life lengths: a fashion item may last one season, while some soft drinks have been in maturity for over 100 years.
The PLC and cash flow
Cash flow is money coming in minus money going out.
- Development and introduction: big costs (research, tooling, launch advertising) and few sales, so cash flow is negative.
- Growth: sales rise and cash flow turns positive.
- Maturity: cash flow is usually highest; development costs are paid off.
- Decline: cash flow falls.
This is why firms plan design, marketing and logistics together before launch: they need enough money to survive the negative stage, a marketing plan to reach buyers, and supply and distribution ready for growth. Cash from mature products often pays for developing the next ones.
Extension strategies
An extension strategy is an action that delays decline and keeps sales up. Common ones:
- New features or versions: new flavours, sizes or models.
- New markets: sell in another country or to a new group of customers.
- New packaging or image: a fresh look, a new advert campaign.
- Price change: lower the price or offer deals.
- New uses: show customers another way to use it.
Extension strategies cost money, so the firm must judge whether the extra sales are worth it, or whether it is better to let the product go and launch a new one.
Design mix, USP and the Boston Matrix
The design mix is the balance of three things a designer must get right:
- Function: does it work well and is it reliable?
- Aesthetics: how it looks, feels, smells or sounds.
- Cost: can it be made cheaply enough to sell at a profit?
A USP (unique selling point) is a feature that makes a product different from its rivals. A strong brand image lets a firm charge more and keeps customers loyal.
The Boston Matrix
A business usually sells many products, called its product portfolio. The Boston Matrix sorts them by market share and market growth:
- Stars: high share, high growth. Need investment but earn well.
- Cash cows: high share, low growth. Bring in lots of cash with little spending.
- Question marks (problem children): low share, high growth. Could become stars; need money and a decision.
- Dogs: low share, low growth. Often dropped.
A balanced portfolio uses cash from cows to grow question marks into stars.
Technology, culture and quality through the life cycle
New technology often ends one product's life and starts another's: film cameras gave way to digital cameras, then to phone cameras. Culture and fashion change too: people now want products that are repairable, recyclable and low-carbon. Designers must watch these trends to know when to improve or replace a product.
Continuous improvement (in Japanese, kaizen) means making many small improvements all through the life cycle, guided by customer feedback and test results.
Quality control checks that products meet their specification. It relies on metrology (accurate measurement with tools like vernier callipers and micrometers, in SI units) and on standards such as ISO standards, so parts made in different places fit and work safely. Good quality slows decline because customers trust the product.
Key formulas and definitions
- PLC stages: Development → Introduction → Growth → Maturity → Decline
- Cash flow: negative (development, introduction) → positive (growth) → highest (maturity) → falling (decline)
- Extension strategies: new features, new markets, new packaging, price change, new uses
- Design mix = function + aesthetics + cost
- Boston Matrix: Star (high share, high growth), Cash cow (high share, low growth), Question mark (low share, high growth), Dog (low share, low growth)
- Quality control = measure (metrology) + compare with a standard + act
Worked examples
1. A new electric scooter brand sells 200 units in its first 3 months, while spending heavily on adverts. Which stage is it in, and what is its cash flow likely to be?
Introduction: sales are low and growing slowly after launch. Cash flow is probably negative, because design and launch costs are high and income is small.
2. A toothpaste has had steady sales for 10 years but they have just started to fall. Suggest two extension strategies.
1) Launch a new version, such as a herbal or whitening formula. 2) Enter a new market, for example selling small low-price packs in rural areas or exporting. A new advert or packaging could also refresh its image.
3. A firm's soft drink has 40% market share in a market growing at 1% a year. Its new energy drink has 5% share in a market growing at 20% a year. Place each in the Boston Matrix.
Soft drink: high share, low growth → cash cow. Energy drink: low share, high growth → question mark. The firm could use cash from the soft drink to promote the energy drink and try to make it a star.
Common mistakes
- Thinking every product goes through the stages at the same speed. Life cycles can last weeks or a century.
- Saying profit is highest at launch. In introduction, cash flow is usually negative.
- Mixing up stars and cash cows. Stars are in fast-growing markets; cash cows are in slow-growing ones.
- Thinking an extension strategy always works. It costs money and may only delay decline briefly.