Maturity Stage of the Product Life Cycle

Instructor: Noel Ransom

Noel has taught college Accounting and a host of other related topics and has a dual Master's Degree in Accounting/Finance. She is currently working on her Doctoral Degree.

The challenges and benefits of a business during the maturity stage of the product life cycle are identified in this lesson. A brief overview of the introduction and growth stages are also explained.

The Coffee Shop - Maturity Stage

Bradley is a business analyst for a large investment firm. Bradley's job is to analyze various organizations to determine if the company's investors should invest money in each business organization. This week, Bradley needs to review the performance of a coffee shop. The coffee shop is the only shop in the region and has been in business for over five years. Consumers in the area can only buy coffee at this location because no other retail establishment sells coffee.

During the first few years in operation, Bradley notices sales for the shop increase from 10% to over 80%.

The increase in sales is a result of increased interest and demand in the new product. No other establishment offers coffee, so the company experiences high sales the first two years in business. During year three, the coffee shop hit an all-time high with sales shooting through the roof! However, quickly after the exponential sales growth, the company starts to experience a decline in sales. The company did not have a change of management; customer service is still exceptional; and customers still love the coffee. Bradley realizes the decline in sales resulted in a new competitor entry into the coffee business. Three miles down the road a new coffee shop popped up, and now there are two coffee shops, and the new shop is offering discounts on coffee.

Stages of the Product Life Cycle

The first year the coffee shop opens is the introductory stage of the product life cycle. During this stage, the coffee shop introduces a new product to the region. As the consumer becomes familiar with the product and begins to enjoy the brand, the business experiences a growth in sales. The coffee shop has the best sales year during the third year in business; this stage is the growth stage. Sales grow, and the company thrives. However, as new competition enters the market, the original company may experience a decrease in sales because there is a new company selling similar products often at slightly lower price points. As Bradley reviews the coffee shop's sales, he realizes the coffee shop is now in the maturity stage of the product life cycle. The maturity stage occurs after the introduction and growth stages. The maturity stage is the longest stage of the product life cycle. In this stage, sales growth begins to decline; the company reaches the highest point in the demand cycle; and advertising strategies have minimal impact on sales growth.

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