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 Maturity Stage Background
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.
An error occurred trying to load this video.
Try refreshing the page, or contact customer support.
You must cCreate an account to continue watching
Register to view this lesson
As a member, you'll also get unlimited access to over 83,000 lessons in math, English, science, history, and more. Plus, get practice tests, quizzes, and personalized coaching to help you succeed.
Get unlimited access to over 83,000 lessons.Try it now
Already registered? Log in here for accessBack
- 0:04 The Maturity Stage Background
- 1:21 Product Lifecycle Changes
- 2:20 Maturity Stage Challenges
- 2:58 Maturity Stage Benefits
- 3:30 Lesson Summary
Product Life Cycle Changes
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. In this 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.
Maturity Stage Challenges
The coffee shop is at the maturity stage and now faces different challenges as the second shop to offer coffee in the region. Bradley conducts additional research on the maturity cycle and uncovers several potential obstacles for the coffee shop during this time. The coffee shop can experience declining profits and sales volumes. As more and more coffee shops emerge in the same region, the shop may experience lower demand, especially if other shops offer a similar product at a lower price. The coffee shop then begins to increase marketing and advertising dollars to get its customers back. However, the shop may not be able to sustain advertising expenses when sales continue to decline.
Maturity Stage Benefits
One of the main benefits of the maturity stage for the coffee shop is the opportunity to increase sales by differentiating their brand and products from the newcomers to the market. For example, the coffee shop may start out offering basic coffee with two or three different flavors. As the company evolves and develops its brand, the shop starts offering additional flavors, introduces reloadable coffee cards, and offers free wireless internet to coffee lovers who like to sit in the coffee shop and conduct business. The coffee shop differentiates itself from other shops to increase demand.
Let's take a couple of moments to review what we've learned about the maturity stage of the product life cycle!
We first learned that the product life cycle begins with the introductory stage, in which a company introduces a new product to the region. It is followed by the growth stage, which is where sales grow and the company thrives. Then comes the maturity stage of the product life cycle, which, on the other hand, is the longest stage with characteristics of declining sales and lower profits.
Businesses face challenges during the maturity stage as new businesses emerge that offer a similar product at a lower cost. Companies have difficulty sustaining a loyal customer base during the maturity stage. The primary benefit of the maturity stage is the opportunity for a business to differentiate itself from other competitors.
To unlock this lesson you must be a Study.com Member.
Create your account
Register to view this lesson
Unlock Your Education
See for yourself why 30 million people use Study.com
Become a Study.com member and start learning now.Become a Member
Already a member? Log InBack
Maturity Stage of the Product Life Cycle
Related Study Materials
Explore our library of over 83,000 lessons
- College Courses
- High School Courses
- Other Courses
- Create a Goal
- Create custom courses
- Get your questions answered