During which stage of the industry life cycle would a firm experience stable growth in sales?

A company has to be good at both developing new products and managing them in the face of changing tastes, technologies, and competition. Products generally go through a life cycle with predictable sales and profits. Marketers use the product life cycle to follow this progression and identify strategies to influence it. The product life cycle (PLC) starts with the product’s development and introduction, then moves toward withdrawal or eventual demise. This progression is shown in the graph, below.

The five stages of the PLC are:

1. Product development
2. Market introduction
3. Growth
4. Maturity
5. Decline

The table below shows common characteristics of each stage.

1. investment is made
2. sales have not begun
3. new product ideas are generated, operationalized, and tested

1. costs are very high
2. slow sales volumes to start
3. little or no competition
4. demand has to be created
5. customers have to be prompted to try the product
6. makes little money at this stage

1. costs reduced due to economies of scale
2. sales volume increases significantly
3. profitability begins to rise
4. public awareness increases
5. competition begins to increase with a few new players in establishing market
6. increased competition leads to price decreases

1. costs are lowered as a result of increasing production volumes and experience curve effects
2. sales volume peaks and market saturation is reached
3. new competitors enter the market
4. prices tend to drop due to the proliferation of competing products
5. brand differentiation and feature diversification is emphasized to maintain or increase market share
6. profits decline

1. costs increase due to some loss of economies of scale
2. sales volume declines
3. prices and profitability diminish
4. profit becomes more a challenge of production/distribution efficiency than increased sales

Using the Product Life Cycle

The product life cycle can be a useful tool in planning for the life of the product, but it has a number of limitations.

Not all products follow a smooth and predictable growth path. Some products are tied to specific business cycles or have seasonal factors that impact growth. For example, enrollment in higher education tracks closely with economic trends. When there is an economic downturn, more people lose jobs and enroll in college to improve their job prospects. When the economy improves and more people are fully employed, college enrollments drop. This does not necessarily mean that education is in decline, only that it is in a down cycle.

Furthermore, evidence suggests that the PLC framework holds true for industry segments but not necessarily for individual brands or projects, which are likely to experience greater variability.[1]

Of course, changes in other elements of the marketing mix can also affect the performance of the product during its life cycle. Change in the competitive situation during each of these stages may have a much greater impact on the marketing approach than the PLC itself. An effective promotional program or a dramatic lowering of price may improve the sales picture in the decline period, at least temporarily. Usually the improvements brought about by non-product tactics are relatively short-lived, and basic alterations to product offerings provide longer benefits.

Whether one accepts the S-shaped curve as a valid sales pattern or as a pattern that holds only for some products (but not for others), the PLC concept can still be very useful. It offers a framework for dealing systematically with product marketing issues and activities. The marketer needs to be aware of the generalizations that apply to a given product as it moves through the various stages.

The industry life cycle refers to the evolution of an industry or business through four stages based on the business characteristics commonly displayed in each phase. The four phases of an industry life cycle are the introduction, growth, maturity, and decline stages. Industries are born when new products are developed, with significant uncertainty regarding market size, product specifications, and main competitors. Consolidation and failure whittle down an established industry as it grows, and the remaining competitors minimize expenses as growth slows and demand eventually wanes.

Key Takeaways

• The industry life cycle refers to the evolution of an industry or business based on its stages of growth and decline.
• The four phases of the industry life cycle are the introduction, growth, maturity, and decline phases.
• The industry life cycle ends with the decline phase, a period when the industry or business is unable to sustain growth.

Understanding the Industry Life Cycle

There is no universal definition for the various stages of the industry life cycle, but commonly, it can be organized into introduction, growth, maturity, and decline. The relative length of each phase can also vary substantially among industries. The standard model typically deals with manufactured goods, but today's service economy can function somewhat differently, especially in the realm of Internet communications technology.

Industry Life Cycle Phases

Introduction Phase

The introduction, or startup, phase involves the development and early marketing of a new product or service. Innovators often create new businesses to enable the production and proliferation of the new offering. Information on the products and industry participants are often limited, so demand tends to be unclear. Consumers of the goods and services need to learn more about them, while the new providers are still developing and honing the offering. The industry tends to be highly fragmented in this stage. Participants tend to be unprofitable because expenses are incurred to develop and market the offering while revenues are still low.

Growth Phase

Consumers in the new industry have come to understand the value of the new offering, and demand grows rapidly. A handful of important players usually become apparent, and they compete to establish a share of the new market. Immediate profits usually are not a top priority as companies spend on research and development or marketing. Business processes are improved, and geographical expansion is common. Once the new product has demonstrated viability, larger companies in adjacent industries tend to enter the market through acquisitions or internal development.

Maturity Phase

The maturity phase begins with a shakeout period, during which growth slows, focus shifts toward expense reduction, and consolidation occurs. Some firms achieve economies of scale, hampering the sustainability of smaller competitors. As maturity is achieved, barriers to entry become higher, and the competitive landscape becomes more clear. Market share, cash flow, and profitability become the primary goals of the remaining companies now that growth is relatively less important. Price competition becomes much more relevant as product differentiation declines with consolidation.

Decline Phase

The decline phase marks the end of an industry's ability to support growth. Obsolescence and evolving end markets negatively impact demand, leading to declining revenues. This creates margin pressure, forcing weaker competitors out of the industry. Further consolidation is common as participants seek synergies and further gains from scale. Decline often signals the end of viability for the incumbent business model, pushing industry participants into adjacent markets. The decline phase can be delayed with large-scale product improvements or repurposing, but these tend to prolong the same process.

Which stage in industry life cycle result in stable revenue?

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During which stage of product life cycle The sales start increasing?

What stage in the product life cycle which normally characterized by a strong growth in sales and profits?