Product Life Cycle (SQA National 5 Business Management): Revision Note

Stages of the product life cycle

• The product life cycle describes the different stages a product goes through, from its conception to its eventual decline in sales

The product life cycle

• The implications for cash flow and marketing vary at each stage of the product life cycle

1. Development

• In this stage, the business focuses on designing and developing the product

• It usually involves high spending on research and product testing to make sure the product meets customer needs

• The business is investing heavily without earning any sales revenue yet, so cash flow is negative

• Marketing strategy at this point is centred on creating awareness and generating early interest in the upcoming product

2. Introduction

• The introduction stage begins when the product is launched into the market

• Sales growth tends to be slow, as the product is still new and most customers are unfamiliar with it

• Cash flow is generally negative, since promotional costs, advertising, and distribution expenses are high while revenue remains low

• Marketing efforts are aimed at building awareness and encouraging trial purchases from early adopters

3. Growth

• The product reaches the growth stage when sales begin to rise quickly

• The business now focuses on increasing market share and expanding production to meet growing demand

• Cash flow typically becomes positive, as higher sales revenue helps cover earlier costs and benefits from economies of scale

• Marketing at this stage aims to differentiate the product from competitors and build brand loyalty among customers

4. Maturity

• During the maturity stage, sales remain high but start to slow down as most potential customers already own or use the product

• The market becomes saturated, with many similar products competing for customers

• Cash flow is usually strongly positive, as sales remain steady and production costs are reduced

• The marketing strategy focuses on maintaining market share, controlling costs, and finding new markets or uses to extend the product’s life

5. Decline

• The decline stage begins when sales start to fall, often because the product has become outdated or replaced by newer alternatives

• The business now aims to manage the decline by cutting costs and deciding whether to continue, adapt or withdraw the product

• Cash flow may become negative again, as revenue drops and the cost of clearing stock or closing production increases

• Marketing during this stage may involve discounting prices, selling off remaining stock, or promoting alternative uses to keep some sales going

Applying the product life cycle

• Some products enjoy long life cycles

  • They meet enduring needs, have strong brand loyalty and cannot easily replaced by new technology

  • Examples of products with long life cycles include

    • Coca-Cola - the original recipe has remained successful for over a century, with steady demand across generations

    • Levi’s 501 jeans - this style has remained popular and in production for many decades because of its lasting appeal and brand heritage

• Some products have short life cycles

  • Customer tastes change fast, competitors copy easily and technology or fashion trends evolve rapidly

  • Examples of products with short life cycles include

    • Fast fashion clothing items - trendy garments that are popular for a season or a few months, then replaced by new trends

    • Fidget spinners - these were a very brief craze that disappeared from mass demand within about a year

Extending the product life cycle

• When a product reaches the decline stage, sales begin to fall and profits decrease

• Businesses can use a range of extension strategies to refresh customer interest and extend its market life

Examples of extension strategies