Abstract: The life cycle of a product on the market: phases of development, types of life cycles. Forecasting product life cycles

Enterprises systematically have to determine the position of a product on the market, that is, correlate their offers with the wishes of consumers. They have to monitor the life cycle of a product from the moment it enters the market until the moment it is withdrawn from the market. The concept of the product life cycle was first proposed by one of the outstanding marketing theorists, Theodore Levitt, in 1965.

For various products in different conditions life cycles vary greatly in both form and duration (Fig. 27).

The traditional curve includes distinct periods of introduction, growth, maturity, saturation and decline.

The classic curve (boom) describes a very popular product with stable sales over a long period of time.

A craze curve describes a product that has a rapid rise and fall in popularity.

A long-term hobby manifests itself in a similar way, but the product remains on the market for some time.

A seasonal curve is formed when selling seasonal or fashionable goods.

A renewal curve describes a product that has regained popularity.

The failure curve characterizes a product that has not achieved success in the market at all.

Rice. 27.

At the stage of introducing a new product, the following factors have a negative impact on sales volume:

o insufficient level of product promotion;
o production difficulties in mastering the serial production of a new product;
o inefficient use of goods distribution channels;
o incorrectly set price.

In terms of withdrawal negative impacts sales and profits require appropriate strategies and approaches that are acceptable for the implementation stage.

Depending on the buyer’s attitude to the new product, the level of competition, etc., four strategies are used to enter the market with a new product: intensive marketing, selective penetration, wide penetration, passive marketing.

In the case of an intensive marketing strategy, a high price is set for the product and a lot of money is spent on sales promotion. At the same time, a high price ensures an increase in profits, and sales promotion accelerates the promotion of goods to the market.

The selective penetration strategy is a high price with low marketing costs. This strategy is beneficial if:

o market capacity is small;
o the product is well known to most buyers;
o buyers are willing to pay a high price;
o competition is insignificant.

A high penetration strategy occurs when the price is set low while marketing costs are high.

It applies if:

o the market capacity is large;
o buyers are not familiar with the product;
o for most consumers the high price is unacceptable;
o competition is strong.

Passive marketing strategy relies on low price and minor marketing expenses. The main conditions for its implementation are:

o significant market capacity;
o sufficient popularity of the product;
o refusal of consumers to purchase expensive goods;
o insignificant threat of competition.

Factors characterizing various product life cycles are shown in Table. 17.

Table 17.

At the growth stage general level Product sales largely depend on two interrelated processes in consumer behavior: recognition and distribution.

The recognition process is a sequence of inferences and behavioral actions that a consumer goes through when recognizing and purchasing a new product. This process consists of five stages: knowledge (the consumer learns about the existence of the product), belief (the consumer forms his attitude towards the product), decision (the consumer carries out an action (purchase), implementation (the consumer uses the product), confirmation (the consumer seeks reinforcement and can receive satisfaction from the purchase). The rate of recognition depends on the type of consumers, the quality of the product and the marketing efforts of the company.

The diffusion process describes how consumers recognize and purchase a product and spans the period from product introduction to market saturation with the product.

The first consumers to recognize a new product are innovators. They are experimental, risk-taking, socially dynamic, sociable and cosmopolitan.

The next group of consumers are those who quickly recognize a new product. They enjoy being in charge and enjoy the prestige and respect that comes with making their first purchase of a new product. The fast-accepting majority are open, communicative, and attentive to information cues.

The slow-to-recognize majority is less cosmopolitan and less responsive to change. These are people with lower economic and social status.

Retrogrades are the last to buy goods. They are price conscious, highly suspicious of newness and change, low in income and status, conservative, and do not accept a product until it reaches maturity.

At the growth stage, competition usually intensifies due to the fact that “our” product begins to displace competitors’ products. Competition is further intensified if competing manufacturers introduce new alternative products to the market. In the current situation, both firms seek to attract independent participants in commodity distribution channels or organize their own distribution channels. Under these conditions, firms can expect success if they take the following actions:

o improve the quality parameters of the product to consolidate the emerging gap from competitors;
o enter new segments with modified products;
o Reinforce promotional elements to encourage repeat purchases from customers satisfied with previous purchases.

At the growth stage, goods are purchased mainly by individuals belonging to the categories of innovators and “ordinary” individuals, making up no more than 50% of total number potential consumers. Having crossed the fifty percent mark, products are at the maturity stage.

During the maturity stage, companies try to maintain a product's distinctive advantage for as long as possible. Many firms are entering the market. Competition is at its maximum. Profits are shrinking. Promotion is becoming extremely competitive. Price competition is becoming the most fierce. The situation can be corrected in many respects, relying on the remaining loyalty of consumers to this company and this brand of product.

To stay in the maturity phase as long as possible, you should adhere to the following directions:

o development of various modifications of traditional products, including additional parameters;
o development of new areas of application of the product;
o identifying new consumer groups for existing traditional products;
o increasing the targeting of manufactured products;
o expanding the scope of application of the modified product and involving new consumer groups;
o expansion of the sales network.

Firm managers must pay close attention to the problems and opportunities specific to each phase of the cycle and the actions to realize the profit opportunity in each phase, which should include an assessment of the product life cycle concept. At the same time, it should be taken into account that it is difficult to make clear distinctions between individual phases and that the duration of the phases is influenced in addition to internal and external factors.

Depending on the specifics of individual goods and the particular demand for bottoms, there are different kinds life cycle of goods, differing both in duration and in the form of manifestation of individual phases. The following types of product life cycles are distinguished: 1. The traditional curve includes distinct periods: introduction, growth, maturity, decline. 2. The classic curve (boom) describes an extremely popular product with stable sales over a long period of time. 3. A craze curve describes a product that has a rapid rise and fall in popularity. 4. Long-term fad manifests itself similarly to the fad curve, except that “residual” sales continue in amounts that make up a small fraction of the previous sales volume. 5. A seasonal curve (fashion curve) occurs when a product sells well over periods spaced apart in time. 6. The renewal curve (nostalgia) describes a product that was seemingly outdated but has regained popularity. 7. A failure curve describes a product that was not successful at all.

Curve boom describes a very popular product with stable sales over time. An example of such a product would be the drink Pepsi. In the case of such a product life cycle curve, the company produces the product and makes a profit for a long time. Infatuation curve. It describes a product with rapid rise and fall in sales. Often a fashionable, popular product has such a curve. An example of such a product is the once fashionable fox glasses, which now cannot even be found on sale. Long-term infatuation curve. It also describes a popular product, but this product is still preferred by some consumers. Seasonality curve. The curve of a product that sells well over certain periods of time. Such a product could be: winter or summer clothes, New Year's souvenirs and much more. New start or nostalgia curve. Demand for this product falls, but after a while it resumes. An example would be the return to women's platform shoes, which were popular in the 70s. Failure curve. Characterizes a product that almost immediately ceases to be in demand among buyers. New rise curve. Such a curve is typical for goods whose sales stop growing, but after slight improvements and the appearance of additional beneficial properties The company manages to increase sales again. Such a product is chewing gum ("Orbit", "Dirol"), which first "become a means for dental care", and then each time they do it better and better due to the use of new components (xylitol) or refusal to use old ones ( sugar). Hatch failure curve. Such a curve is typical for products whose introduction to the market was unsuccessfully planned and carried out, but when they were launched again they achieved great success.

Life cycle identification can be done based on mathematical models and reporting data of the enterprise, industry statistics on production and sales, taking into account seasonal fluctuations in demand, inflation rates. At the first stage of the analysis, you should use an analog model - a graph of the dependence of sales volumes on time and approximately estimate which stages of the life cycle have already been completed, at what stage the system or object being studied is currently located. At the second stage of the analysis, the hypothesis that will be put forward at the first stage should be tested by building regression models. The life cycle curves of goods, enterprises, and industries in specific cases can differ significantly, so the selection of a mathematical model - a function that describes the life cycle as a whole - is usually difficult. In this regard, each of the four stages of the life cycle is analyzed separately. Linear models are used, as well as models of polynomials of the second and third degree:? BB = a0 + a! x I + e, BB = a0 + i1 x I + a2 x I2 + e, BB = ao + a! x I + a2 x I2 + a3 x I3 + e. where ВВ is gross revenue or sales volume for calendar period; I is the number of calendar periods from the moment of entering the market or from some conditional initial period; a^ a1? a2 and a3 are model parameters; e - random error. When identifying each stage, only linear models can be used, for which the analyzed stage must be divided into 2-3 parts, including equal number periods. Such an analysis can be further supplemented by obtaining a nonlinear model that describes the entire stage of the life cycle as a whole. For identification, only adequate models are used, from which the model with the highest level of determination is selected. The first stage of the life cycle, for example, the stage of introducing a product to the market, can be identified on the basis of models showing that sales of the product in value terms are increasing at an accelerating pace. The analysis can be performed using multiple linear models or using a quadratic model. The second stage of the life cycle, for example, the stage of rapid industry expansion, can be identified on the basis of models showing that sales of a product in value terms are growing at a stable rate, with growth at an increasing rate at the very beginning of the stage, and at a slowing rate at the end of the stage. The analysis can be performed using a linear model or using a third-degree polynomial model describing an 8-shaped curve. The third stage of the life cycle can be identified based on models showing that the sales growth rate decreases, then the sales value stabilizes, and then begins to fall. The analysis may use multiple linear models, a quadratic model, or a combination of both. The fourth stage of the life cycle can be identified on the basis of models showing that sales volumes are rapidly declining, and stabilization of sales after a sharp reduction is also possible. Analysis can be performed using linear model, a quadratic model, and in the event of a fall and subsequent stabilization of sales - using a third-degree polynomial model.? Example. The company brought to the market at the beginning of the year new model TV. The sales volume for the first 18 months is shown in table. 2.2. It is necessary to identify the stage of the product life cycle and provide a forecast of sales volumes until the end of the second year of production. Submitted, given in table. 2.2, let’s build a graph of sales volumes for 18 months. The graph obtained using MS Excel spreadsheets is shown in Fig. 2.2. Its consideration allows us to hypothesize that the new TV model is still at the stage of being introduced to the market, as sales growth rates are increasing. To confirm the hypothesis, we first perform regression analysis using linear models. Let us divide the period under study into three more short periods- three time periods of six months each and using MS Excel spreadsheets we will obtain characteristics and graphs of linear revenue models for the three specified periods. Model graphs are shown in Fig. 2.3, the characteristics of the models are given in table. 2.3. All the resulting models turned out to be adequate according to the Fisher criterion and have significant coefficients. Recall that the adequacy of models is necessary condition their use instead of the average value of the function; Coefficients are considered significant if their errors do not exceed half their value; the coefficient of determination shows the degree to which the described phenomenon is explained by the model. Linear regression analysis confirms the hypothesis that the period under consideration corresponds to the stage of launching the market, since the sales growth rate is increasing, as evidenced by the growth of the coefficient for the variable (a^ for periods from the beginning of the life cycle. As an additional confirmation of the hypothesis, we will calculate the quadratic coefficient for the period of 1318 months model. To do this, you can use various statistical packages, of which we recommend the American package SPSS 10, as well as the very easy-to-use statistical package of the Moscow NPO Informatics and Computers STADIA 6. The demo version of this package is suitable for solving small-scale problems, is publicly available and can be used in practical classes in educational institutions, when solving the problems discussed in this book. The resulting quadratic model has a standard error (100.59 thousand rubles) lower than the standard error for the 1318th month of the linear model (281.15 thousand rubles), and the coefficient of determination (99.57%) is higher than that of the linear model (96 .62%), i.e. the quadratic model fits the data better. This is an additional basis for considering the stage of introducing a product to the market identified. For forecasting, we use a quadratic model and data for all 18 months of production and sales. Let's use the STADIA 6 package. The model looks like: BB = 794.0 - 84.92 X t + 25.75 X t2. Here, their standard deviations are shown below the model coefficients. BCG classification. Sales growth rate and market share are indicators that serve as the basis for classifying products, enterprises and industries into life cycle stages according to the scheme proposed by the Boston Consulting Group (BCG).

The product life cycle curve shown in Fig. 1 can be called ideal or average. In reality, the life cycle curve may have a different shape, since in market practice the life cycle of a product differs significantly from the classical one both in shape and in duration. Most researchers identify 6 main types of life cycle: “Boom”, “Fascination”, “Failure”, “Renewal”, “Scallop Line”, “Seasonality”.

A craze curve describes a product that has a rapid rise and fall in popularity. Within one season, such a product goes through all stages of its life cycle, from sales growth to its rapid decline. Significant profits are made by sellers who leave the market in a timely manner, as sales volume drops sharply. A variation of such a cycle is the “Continuous Passion”, which is characterized by an increase in sales of a product, and then its rapid decline to an average sales level. The entrainment curve is shown in Figure 2.

Fig.2 : life cycle curve "Entrainment".

- "Boom." This type of life cycle describes a popular product with stable sales over a long time. The curve of such a life cycle is shown in Figure 3.

Fig.3 : curve of the Boom type of life cycle.

- “Seasonality” or repeated life cycle occurs when a product sells well over periods separated in time. This applies to goods seasonal demand. For example, the demand for warm clothes and shoes increases several times in autumn and winter, and drops to a minimum in the spring and summer. The seasonal life cycle curve is shown in Figure 4.

Fig.4 : curve of the type of life cycle "Seasonality".

The "failure" curve describes a product that is not successful in the market at all and expresses the unsuccessful entry of the product into the market. The life cycle graph of a “failure” product is shown in Figure 5.

Fig.5 : life cycle curve "failure".

Resumption. This curve describes a product that was considered obsolete but has become popular again. An example is the renewed demand for old models of cars and furniture. The curve of such a life cycle is shown in Figure 6.

Fig.6 : life cycle curve "resumption".

The scallop curve consists of a sequential series of cycles resulting from the discovery of new characteristics of a product and new ways of using it. A good example Nylon serves as such a life cycle: this material is finding more and more new areas of application (parachutes, stockings, underwear, carpeting, etc.). Such a curve is shown in Figure 7.

Rice. 7 : scallop curve of life cycle.

A.V. Lukina in her marketing manual provides another way to classify the types of product life cycle, depending on the type of product Lukina A.V. Marketing: Tutorial. - M.: FORUM: INFRA-M, 2006. pp. 128-129.. In total, she identifies 4 types of goods and, accordingly, 4 forms of life cycle curves: complex goods, simple goods, fashionable goods, fad goods.

Complex product- This is a product that requires significant training from consumers and, as a result, the implementation phase is extended. This is the shape, for example, of the life cycle curve of household computers, as consumers need to realize the benefits of purchasing them or learn to perform familiar tasks in a new way. The life cycle curve of a complex product is shown in Figure 8.

Rice. 8 : life cycle curve of a complex product.

Simple product, on the contrary, finds quick sales because consumers easily master it and immediately realize the benefits of its acquisition. Such a product can usually be easily copied by competitors, so the marketing strategy should be to quickly expand the distribution network. It is also important to have production facilities capable of meeting existing demand. One example of such a product is crackers, which, having appeared relatively recently, are already produced under several brands. trademarks. The life cycle curve of a simple product is shown in Figure 9.

Fig.9 : life cycle curve of a simple product.

Fashionable goods quickly become obsolete and then come back into use. The curve presented by the author of the manual to depict the life cycle of fashion products is identical to the curve seasonal goods, shown in Figure 4. Therefore, the researcher omitted this curve in her work.

Fad Products, for example, stickers for cars, phones, laptops in the form of blots or scratches, etc. - are characterized by a rapid rise at the implementation stage and an equally rapid decline. Such products usually have unusual new features. The life cycle curve of a fad product is shown in Figure 10.

Fig.10 : sales curve for a fad product.

However, in my opinion, modern stage development of scientific and technological progress and the economy, such a division is losing its relevance. Products move too quickly from one category to another. Thus, for example, those products that recently fell into the category of "fads" are now often fashionable, but familiar things. This is true, for example, take at least the topic mobile phones. In 2000, they clearly belonged to complex goods, after purchasing which the consumer spent a long time studying the instructions, sighing, poking the buttons, trying to understand what was what. Today though Cell Phones have become many times more complex and are often superior in complexity and functionality to personal computers of the 2000 model; buyers, having made a purchase, often do not even look at the instructions. And even five-year-old children can handle modern phones.

“Each product exists on the market for a certain time. Sooner or later it is forced out of the market by another, more advanced one.” - This was the opinion of Theodore Levit, who first published the concept of the product life cycle (PLC) in 1965.

The concept of the product life cycle in marketing (abbreviated as “LPC”) describes the stages of development of any product or service, starting from the moment it first appears on the market until its cessation of sale and discontinuation. This article contains comprehensive information on how to make the most of the product life cycle model in marketing. We will briefly describe the essence of the concept, analyze the concept and each stage of the product life cycle theory, and show possible types of life cycle curves using specific examples. At the end of the article you will find recommendations on which marketing programs, strategies and promotions are most effective in different stages product life cycle.

General characteristics of the life cycle model

The product life cycle theory quite fully describes the dynamics of sales and profits of any product on the market. According to the life cycle model, the sales volume, and therefore the profit volume, of any product or service changes over time in a predictable manner; and all products go through sequentially 4 stages of existence on the market: introduction, growth, maturity (or saturation) and decline.

The model has a high practical use and allows you to more effectively launch a new product on the market, strengthen its position in the segment and extend its life on the market. The concept of a product life cycle quite fully describes the dynamics of product sales and profits. The theory states that the sales volume, and therefore the profit margin, of any product or service changes in a predictable manner over time.

The concept of a product life cycle is very often used in marketing. After all, understanding what stage of development a company’s product or service is at allows you to correctly build competition, build a forecast of sales volumes and profits, and choose a strategy for pricing, promotion and distribution of goods.

The main disadvantage of the product life cycle model is its normative approach to the formation of new product development strategies. Using the life cycle theory, it is necessary to take into account market realities, competition, changes in macroeconomic factors and consumer behavior - everything that can also affect the company’s successful functioning in the product market.

Life cycle curve

The classic product life cycle curve looks like a graph of sales and profit over time. The graph shows the main stages of the product life cycle: introduction to the market, growth stage, stage of product maturity, stage of sales decline.

Fig. 1 View of the traditional product life cycle curve

It is very easy to construct a product life cycle curve for your product. It is enough to have accumulated sales statistics, using which you can build a graph of sales dynamics for the available periods. The resulting sales dynamics will be the product life cycle curve. The longer the analyzed period, the more accurate the graph is.

Stage name	Short description
Market introduction stage	The market introduction stage is characterized by insignificant sales volume, low growth rate and relatively high level investment in product support. Profit from sales at the product launch stage may be negative. The length of the period depends on the intensity of the company's efforts to distribute the product to the market.
Growth stage	The growth stage in the product life cycle model is the most important stage product life cycle. At that stage it is laid future success new product. The growth phase is characterized at a fast pace sales and increased profits, which can now be reinvested in new product development programs. At the growth stage, the first competitors appear who borrow successful production technology and product quality.
Product maturity stage	As a product reaches maturity, sales and profits stabilize and growth slows. The product becomes well known in the market and can exist with minimal support. Competition at the growth stage reaches its maximum.
Sales decline stage	The decline phase of a product's life cycle is characterized by a significant decline in sales and profits. Consumers are beginning to abandon the product in favor of more modern, new and technological innovations on the market. But despite the decline in demand, the company still has loyal, conservative consumers.