Product Life Cycle of Industrial Products

The product life-cycle is a series of different stages a product goes through, beginning from its introduction into the market and ending at its discontinuation and unavailability. These stages are commonly represented through the sales and profit history of the product itself, although there can be many other variables that affect the lifespan of a product line. Between the initial growth and concluding maturity stages, the profit curve usually reaches its peak. During the maturity phase of the life-cycle, sales volumes for an established product tend to remain steady, or at least do not suffer from major declines, but the rate of profit drops.

In most cases, the trajectory and behavior of the product life-cycle is determined by a set of factors over which manufacturers and marketers have little control, forcing them to react to changing circumstances in order to keep their product development strategy viable. These external factors include shifting consumer requirements, industry-wide technological advances,

and an evolving state of competition with a companys market rivals. The fluctuating patterns of a life-cycle indicate that a different marketing and product development approach may be needed for each stage of the cycle. Understanding life-cycle concepts can aid in long-term planning for a new product, as well as raising awareness of the competitive landscape and estimating the impact that changing conditions can have on profitability.

The Life-Cycle Curve

Industrial products usually follow an S-shaped life-cycle curve when sales and profits are plotted over time. However, certain products, such as high-tech goods and commodities, may follow a different life-cycle pattern. High-tech products often require longer development times and higher costs, making their growth stages long and their decline stages short, while commodities, such as steel, tend to have relatively static demand with sales that do not appreciably decline from an absence of competition. Sales would drop, though, from an increase in competing products.

Under most life-cycle conditions, profits typically peak before sales do, with profits reaching their peak level during the early growth stages and sales reaching their peak in the maturity stages. Competition tends to be lower at the beginning of the life-cycle, but as competing companies start to offer lower prices, newer services, or more appealing promotions in the maturity phase, the initial product must be made more attractive. This often results in comparable price drops or increased spending on advertising and promotions,as well as greater investment in distribution and modifications to the existing product. The initiatives improve sales, but drive up costs and lower profits.

The Introductory Stage

After being introduced into the market, a new industrial product will yield varying degrees of acceptance. Some products may find acceptance soon after release, while others may take longer to develop a customer base. One of the reasons for this disparity involves the skill set required to

make full use of a new product. Goods that need relatively little training and do not obligate users to learn new skills or refine existing ones typically find market share more rapidly than complex products. A company that introduces a product requiring a high degree of learning and expects a relatively low rate of acceptance can focus on market development strategies to help build consumer appeal. Conversely, products with a low learning curve and a quick route toward acceptance may need a marketing strategy designed to offset rival products, as competition at these levels tends to be higher.

The Growth Stage

When an industrial product enters a period of higher sales and profit growth, the marketing plan often shifts to focus on improvements to the design and any added features or benefits that can expand its market share. Increasing the efficiency of distribution methods can help improve product availability by reaching more customers, and some degree of price reductions, particularly for large-scale operations, can be introduced to make the product more appealing for purchase. Maintaining the higher price set at the introductory stage increases the risk of competitors entering the market due to the wider profitability margin. Similarly, without stronger distribution efforts the product may have limited availability, which encourages rival companies to encroach on market share. The Maturity Stage The maturity stage of a life-cycle is characterized by an increase in the number of market competitors and a corresponding decline in profit growth as a percentage of sales. To compensate for the level of saturation that occurs during this phase, the product development strategy revolves around entering new markets, often through exports. It may also be helpful to increase efforts to satisfy existing customers in order to preserve the customer base. Reducing spending on marketing and production can help maintain profit margins. The Decline Stage In the decline stage, the competition for product pricing tends to escalate, while profits and sales generally decrease. When working with industrial products, marketers sometime opt to discontinue a product when it has reached this level or introduce a replacement product that renders the previous version obsolete. Marketing and production budgets are typically scaled back to save on costs, and resources may be shifted to newer products under development.

Product decline usually proceeds more quickly among industries that rely on rapidly changing technologies, with newer advances periodically driving existing goods out of the market.

RATIONALE FOR THE PRODUCT LIFE CYCLE

Since products are not living beings, why do they have life cycles? The reason is that society accepts products at different rates, but all go through similar stages of societal acceptance. This acceptance of innovations by societies is called the diffusion of innovations. As society begins to adopt and accept an innovation, the new product grows, eventually reaching maturity. When there is a better alternative to the product or when public preference changes, the products will enter a decline, possibly ending with the death of the product. The diffusion-of-innovations concept categorizes society by the speed with which the individual members adopt a new product. It classifies people into the five categories of innovators, early adopters, early majority, late majority, and laggards.

INNOVATORS.
The first people in a society to adopt a new product are the innovators. These people are risk takers and may be looking for new products to try. They represent only 2.5 percent of the population. Though these people are the first to try a product, they are not usually opinion leaders. Consequently, they do not pass information about the product to the rest of the population.

EARLY ADOPTERS.
The early adopters have many opinion leaders in their ranks. They are the first people in the neighborhood to try a new product, and many of them willingly pass the information about the product onto other people. Their experiences can determine whether a product will have a long or short life cycle. They represent about 13.5 percent of the population.

EARLY MAJORITY.
Once the early adopters have tried and given their approval to a product, the early majority will begin to follow. Thirty-four percent of the population is in this category. Since they represent such a large percent

of the population, the adoption by the early majority causes the new product to enter a period of rapid growth.

LATE MAJORITY.
After a significant portion of the population has adopted a product, the late majority will consider its use. These people are not risk takers; they typically wait until they see the product approved by others. They also represent about 34 percent of the population. Once they have adopted the product, the innovators, early adopters, early majority, and late majority represent a total of about 84 percent of the population. By this point, the new product will have reached its maturity.

LAGGARDS.
The last category of society to adopt a new product is generally fearful about trying new things. Often, they wait until being forced to adopt because the alternate product is no longer being produced. The laggards represent about 16 percent of the population.