Product Life Cycle

After launching a new product, the company is naturally eager to

see it enjoy a long and profitable life. It is difficult to forecast how long

the public will go on liking a product. Public tastes change very quickly.

Even if a product is successful at first, this may not last for very long, as

rival products may begin flooding the market or another manufacturer

may produce a more advanced product. Few products last forever. Most

go through a product life cycle, passing through four distinct stages in

sales and earnings: introduction, growth, maturity, and decline.

The amount of time that elapses during any one of the stages depends

on consumer needs and preferences, economic conditions, the nature

of the product itself, and the manufacturer’s marketing strategy. A basic

product that serves a real need is likely to show steady growth for quite

a few years before leveling off. In contrast, some high-technology items

and many fashions generally have relatively short life cycle.

The first stage in the product life cycle is the introductory stage, dur-

ing which the producer tries to stimulate demand. Typically, this stage

involves an expensive advertising and promotional campaign, plus re-

search and development costs. Products in the introductory phase

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generally require large investments to cover the costs of developing the

product, building distribution systems, and educating the public about

the product’s benefits. The producer is not likely to make a great profit

during this phase.

Next comes growth stage, marked by a rapid jump in sales – and,

usually, in the number of competitors – as the introductory effort starts

paying off. As the product enters the growth phase, competition increas-

es and the war for market share begins, creating pressure to maintain

large promotional budgets and reduce prices. This competitive warfare is

expensive, and often the small, weak firms do not survive. The remaining

participants divide the market, and competition diminishes.

During the maturity stage, sales begin to level off or show a slight

decline in unit terms. This slowdown may result in overcapacity in the

industry, prompting producers to cut prices. Nevertheless, mature prod-

ucts are a primary source of profits for most companies, since the matu-

rity phase is typically the longest phase in the product life cycle.

Although maturity can be extended for many years, eventually most

products enter the decline phase, when sales and profits begin to slip and

eventually fade away. Declines occur for several reasons: changing de-

mographics, shifts in popular taste, and advances in technology. When a

product reaches this phase, the company must decide whether to remain

in the game or discontinue the product and focus on newer items.

Text 6

Read the text. In each paragraph, find the topic phrase or sentence and those related

and unrelated to it.