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Product Life Cycle Stages: Theory & Model

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.

This lesson defines the product life cycle and describes the various stages of the product life cycle through which a product passes from growth to decline.

The Product Life Cycle

As organizations introduce new products to consumers, demand for the product increases, peaks, and declines. Each product passes through a series of stages from product introduction to product decline. The series of stages is known as the product life cycle. Most products have a short lifespan and organization must be aware of which product life cycle stage the product is in at a particular point in time. There are four stages in the product life-cycle.

The Introduction Stage

The introduction stage is the first stage in the life cycle where companies invest heavily in product development. The introduction stage could be the most expensive of all four stages. When a company introduces a product into the market for the first time, demand for the product is low, and sales are slow. The company must invest in brand marketing and advertisement to create awareness and interest in the new product.

For example, a new smoothie shop opens in a town where there were no smoothie shops. The concept for the smoothie shop allows each customer to make and mix their own smoothie. The smoothie company invests heavily in the development of the shop, marketing and advertising during the introduction stage of the product life cycle. As the demand for more smoothies increases and consumers begin to gain more interest in the product, sales begin to increase.

The Growth Stage

The growth stage is the next stage in the product lifecycle and is the stage when profits and sales are strong. During the growth stage, products and brands can become household names. Businesses continue to invest in advertising to sustain sales growth and customer demand.

The smoothie shop is a well-known brand during the growth stage. Mostly everyone in the small town knows about the smoothie shop and visit frequently before and after work to make their favorite smoothies. Sales and revenue from the smoothie shop increase to the highest levels during the growth stage as more customers refer their friends and family to the smoothie shop.

The Maturity Stage

The maturity stage is the third stage in the product life cycle. During the maturity stage, the product demand is at its peak. It is unlikely sales revenue will continue to grow during the maturity stage. The company is now faced with the challenge of sustaining market share, and business leaders seek consistent and steady sales during the maturity stage. Marketing and advertisement dollars invested in the product campaign are steady. During the maturity stage, business leaders may need to enhance the original product or introduce new product offerings to maintain profits.

The smoothie shop is running like a well-oiled machine. Customers make visits to the shop part of their daily routines. However, sales from smoothies haven't increased much and the company owners begin to think of ways to expand their smoothie product. As the company owners come up with more smoothie products, the owners notice sales begin to decline.

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