LESSON 3.

3
Product Life Cycle Theory
LESSON OBJECTIVES:

At the end of the lesson, the stuudents should be able to:

1. Compare life cycle and product life cycle;

2. Discuss the product life cycle theory;
3. Explain what goes on at each of the stages of the product life cycle
4. Differentiate price skimming from price penetration; and
5. Elaborate on the strategies that can be employed in the decline
stage
Life Cycle

 the series of stages which a

living thing passes from the Product Life Cycle

V
beginning of its life until its
death
 refers to the length of time
a product is introduced in
the market until it is

S
removed from the shelves
Product Life Cycle Theory
 a marketing strategy developed by Reymond Vernon in 1966 to help
companies plan out the progress of their new products and explain the
pattern of international trade and foreign direct investment, which
follows the product life cycle
FOUR STAGES
1. Introduction
2. Growth
3. Maturity
4. Decline
1. Introduction Stage
- the need is to create awareness, not profits, and the underlying goal
is to gain widespread product and brand recognition as consumers
try the product

There re two price-setting strategies at this stage:

a.Price skimming - charging an initially high price and gradually reducing

(“skimming”) the price as the market goes

b.Price penetration - charging a low price to “penetrate” the market and

capture market share, before increasing prices in relation to market growth
2. Growth Stage
- demand for the product begins to increase and sales usually grows
exponentially from the takeoff point

3. Maturity Stage
- sales increase continues in a decreasing pattern, but the sales curve
tends to decrease after the top selling point is reached
4. Decline Stage
- when no amount of marketing or promotion can keep the sales
figure from declining

Some off the strategies that can be employed in the decline stage
are:

a.Milking or harvesting - means reducing marketing efforts and attempt to

maximize the life of the product for as long as possible;
b.Slowly reducing distribution channels and pulling the product from
underperforming geographic areas allowing the company to pull the product;
and
c.Selling the product to a niche operator or subcontractor to allow the
company to dispose of a low profit product, while retaining loyal customers.
Reference:
https://corporatefinanceinstitute.com/resources/management/
product-life-cycle/