What Is the Product Life Cycle?

The reference text is "Exploit the Product Life Cycle" by Theodore Levitt, published in Harvard Business Review in November 1965. Levitt was not presenting a new idea. He opens by saying that marketing executives already knew the concept and hardly used it, and the article is about how to apply it. Among its advocates, Dhalla and Yuspeh cite a paper by Arch Patton for McKinsey from June 1959. This glossary does not name a first author.

Levitt describes four stages. He calls the first one market development. Dhalla and Yuspeh already call it introduction in 1976, and that is the name used here. - Introduction: the product reaches the market before demand is proven, sometimes before it is fully proven technically. Sales rise slowly. - Growth: demand accelerates, the total market expands quickly and competitors enter. - Maturity: demand levels off. Most possible buyers already have the product, and sales grow at about the rate of the population. - Decline: the product loses appeal and sales fall. There is overcapacity, production concentrates in fewer companies, and prices and margins drop.

The misreading is to take the curve as a forecast: look at today's sales, put the product in a stage and deduce what comes next. There are three reasons not to.

First, the stage is recognised late. Levitt himself writes that hindsight will always be more accurate than the view of the present. Dhalla and Yuspeh add that the length of each stage varies from product to product and that some barely have a growth stage. A plateau can look like maturity and be no more than a pause before another rise.

Second, the curve describes the winners. Levitt speaks of the history of successful products and makes clear that most new products never get this curve, because they sink from the start.

Third, the curve depends on marketing. Dhalla and Yuspeh argued this in 1976 in "Forget the Product Life Cycle Concept!": the cycle is a dependent variable, determined by what the company does, not an independent variable that marketing has to adapt to. That produces a self-fulfilling prophecy. A brand has a few bad years because of a weak campaign or a new competitor, management concludes it has entered decline, withdraws the budget, and sales really do fall. Nylon is the counterexample, used by Levitt and by his critics alike: by Levitt's estimate, consumption without new uses would have stopped at about 50 million pounds, and in 1962 it exceeded 500 million.

The evidence for the model is weak. Dhalla and Yuspeh cite a study by Polli and Cook for the Marketing Science Institute (1967, also published in 1969) covering over 100 categories in food, health and personal care. It compared real sequences with randomly generated ones. Only 17% of the sequences for product classes and 20% for product forms differed significantly from chance. It helps to know who signed the critique: Dhalla and Yuspeh worked at the advertising agency J. Walter Thompson, and their conclusion is to keep supporting existing brands with marketing. They also accept that some falls cannot be reversed, after a change in tastes or a better competing product.

The term should not be confused with product lifecycle management (PLM), an approach tied to manufacturing that runs from design to the final disposal of a product. This entry is about the cycle in the market.

The first step is to choose the level of analysis. Dhalla and Yuspeh separate product class (cigarettes), product form (filter cigarettes) and brand (Winston), and each level gives a different curve. Levitt also separates the industry's curve from the pioneer's: the pioneer's sales can slow while the industry is still growing fast.

The second step is to look for signs of the stage beyond sales. According to Levitt, maturity begins with saturation: most possible buyers already own or use the product. Another sign is profit per unit, which can fall long before the sales curve flattens. Levitt also suggests trying to foresee the next stage and reasoning back from it.

An invented example: a coffee capsule brand has had flat sales for two quarters. That may be maturity or it may be a pause. The curve does not answer this. You have to check whether new buyers are still arriving, whether a competitor has cut prices and whether the brand has lost shelf presence.

The third step is to adjust the marketing mix. Levitt does not sort his observations by the four Ps, so this summary by stage is this glossary's reading: - Introduction: communication has to create demand and get people to try the product. The producer depends on the efforts of its distributors. Price and channel can still be tested freely, and at such low volume profit per unit is negative. - Growth: the goal moves from trial to brand preference. Competitors copy or improve the product, channels become easier to open and some rivals cut prices. - Maturity: price competition becomes intense. Differences come from product details, services, deals, packaging, advertising and specific segments. In distribution the job is to hold outlets and shelf space, and the brand has to speak to consumers directly. - Decline: prices and margins fall. The decision is to sustain, renew or withdraw. Levitt includes the planned phasing out of costly products. Dhalla and Yuspeh ask for research first, to check whether the fall is irreversible.

The fourth step is to plan how to extend the product's life, according to Levitt even before launch. He proposes four routes: more frequent use among current users, more varied use among them, new users and new uses for the material. He admits himself that nylon may not have been planned that way from the outset.

The model puts an order on questions that change over time: whether to explain the product or defend the brand, whether to open channels or hold them, when to watch the margin. Levitt adds a useful warning: profit per unit can fall while sales are still rising.

Misusing it is expensive. Dhalla and Yuspeh argue that the concept has led companies to neglect existing brands and give too much weight to launches. Their example is Ipana toothpaste, which its maker abandoned in 1968. Two Minnesota businessmen picked up the name in 1969 and, with hardly any promotion, sold 250,000 dollars' worth in seven months.

The BCG matrix answers a different question. It is a snapshot of the portfolio at one moment, on two axes: market growth and relative share. The life cycle follows one product over time and does not look at share. That is why stages and quadrants do not match one to one: in a mature market, a product can be a cash cow or a dog depending on its share. You can combine the two tools, but a quadrant does not tell you which stage a product is in, and a stage does not tell you which quadrant it belongs to.

The Ansoff Matrix helps to make Levitt's routes concrete. More use among current users resembles market penetration, and new users resemble market development. The comparison is this glossary's, not the authors'. To see whether a change in the mix moved sales or something else did, marketing mix modeling separates the effects with data.

• Write the level analysed next to the curve: class, form or brand.
• Compare your own curve with the industry's.
• Watch profit per unit as well as sales.
• Look for the cause of a fall before calling it decline.
• Research attitudes and purchase intent before withdrawing support from a brand.
• Think through the routes to extend the product's life before sales flatten.

• Using the curve as a sales forecast.
• Assuming that every product goes through all four stages in order.
• Cutting the budget because the product is "already in decline", and causing the fall that way.
• Taking a plateau for maturity.
• Applying a product class's curve to a single brand.
• Confusing a stage with a BCG quadrant.