Product Life Cycle

Product Life Cycle
Figure 7.5: Historical Market Penetration
100 80
P erc en t
Cars per 100 Radio % Television Telephone VCR

60 40 20 0
05 15 25 35 45 55 65 75 Ye 19 19 19 19 19 19 19 19 19 85 ar

Cable TV

Four Phases
Introduction Growth Maturity Decline

Figure 7.7: Industry Demand during the Four Phases of the Product Life Cycle.

Time

1

Introduction
Customer education and development
– Total solution – Government, regulator education – Mom & Pops – Free samples

First-mover advantages and Firstdisadvantages
+ Early brand name building + Learning curve – “Wrong” customer base – Obsolete technology

Growth
High profits Brand name creation Efficient scale Mass market distribution starts Exports New varieties from outside industry

Maturity
Non-durables converge upward NonDurables may crash (CB radios) Increasing importance of product variety Cost minimization
– Plant size – Distribution

Threat of “caught in the middle” Shakeout Imports

2

Decline
Candy cigarettes, CFCs, lead paint Strategies
– Switch to related products – Exit – Harvest – Consolidation

First mover advantages in choosing strategy

Durable Goods
Transition to Maturity
– Non-durables (pharmaceuticals, bagels) Nonhave a “soft landing” – Durables (CB radio, Desktop PCs) may crash

Over-capacity and shakeout for Overdurables Positioning critical to survival

Major Life Cycle Characteristics
Customers Number of firms Profits Product varieties Distribution Foreign trade Marketing

3

Table 7.2: Life Cycle Characteristics Industry Phase Introduction Number Of Firms Market Size Market Growth Entry Market Leader Characteristics Small, growing fast Small Fast Large Existing Reputation Innovator, Educator, Flexible, Total solution Negative Few and Growing Growth Large Large Fast Medium Existing Reputation Marketing, Quality production, Modular Low, but sharply increasing Increases, then declines to few dominant designs