The product life cycle

Recently, Apple Inc. brought out the Apple iPhone 4S and sales of the iPhone 4 plunged, while the new model sold over 4 million units.

Why would Apple obsolete one model for another?

In order to maintain their market share in hand held devices, Apple elected to introduce the iPhone 4S when the iPhone 4 was still selling. Why execute such a strategy?

This fall, Target introduced a fashion collection by Messoni for women. This collection blew out of their stores in matter of days. Was this a fad or the start of a new trend?

The answers to all of these questions can be found in the five phases to the product life cycle.

No matter if you offer tangible products like Target and Apple, or just business services, you need to sit down and evaluate where they are in the product life cycle. Each of these phases: introduction, rapid growth, growth, maturity and decline, have their own customers and levels of profitability.

In addition, there are three types of life cycles: traditional, fad and technology. The cycle your products or services interact in depends on the business segment in which you participate.

For Target, and other apparel, home goods and specialty stores, it could be all three cycles. For Apple and other technology based organizations, it is the shorter, more turbulent technology cycle. Let’s look at each of the life cycle phases and see how they impact your business.


In this phase of the life cycle, a new product or service enters the market. There are few if any sales and a great deal of investment is put into getting the business community and public aware of its value and utility. The customer in this phase is the innovator, the techie. An example of a product in this phase would be the Apple iPad. When first introduced, the price was high and the sales went to people who understood and wanted the newest technology. Profitability is usually low or negative in this phase because of the low level of sales and high level of investment in promotion, inventory and distribution.

Rapid growth

This second phase is where sales grow at a rapid pace as the public becomes aware of the products attributes and value. Prices begin to drop as production increases and economies of scale take hold. The customer at this phase is the early adopter. There is still a high level of publicity and product placement in the media. Sales continue to increase as a larger number of market segments are penetrated. Profitability increases as unit costs continue to drop due to increased levels of production. It is at this phase competition begins to enter the market place, as demand begins to exceed supply.


No longer are sales doubling each quarter and more competitors are entering the market to gain their share of the business. The market begins to fragment and it is time to differentiate your product from the competition. Using Apple as an example, the features of the iPhone 4S differentiate it from the current competition, making it unique at this time. At this phase of the cycle, profits are still increasing and the adopters are now purchasing your product or service.


In this phase, sales level off, market share remains stable and it takes small amounts of advertising and publicity to maintain your position in the market. Consider breakfast cereals as an example. Think about how long Corn Flakes, Raisin Bran, Cheerios, Special K and others have been staples in your home. They have lasted so long, because they are constantly being improved and reinvented. More raisins, freeze dried strawberries have been added, and new flavors are continually introduced. These evolutions keep the customer, the majority, interested in the product and reduce their desire to switch.

This strategy does not work with products that are fads, which have a very short life cycle. In the technology arena, not many products reach maturity because they are replaced with a newer improved version during the growth phase. Profits are steady in this phase and the products are referred to as “cash cows” since they generate high profitability levels, which can be reinvested in the next product group. Competitors begin to drop out at this phase because the market growth slows.


Sales begin to decrease and market share is beginning to decline. More players in this market segment leave and prices begin to drop. Profitability declines because of shrinking margins and the laggard is your customer. Your product placement is reduced and assortments shrink to reduce investment. The “rising star” is now a “dog” you look to divest yourself from this market segment. An example at this phase would be your basic cell phone. There is a market, but it is smaller and no longer profitable for many manufacturers.

It is time for you to determine what phase of the cycle your products or serves are in. Do you have sufficient “cash cows” to fund your “rising stars” or are they “dogs” that you need to divest? What do you need to do to extend the life of your “cash cows,” so they continue to generate consistent levels of profits?

Using the GE model, you have four possible decisions during the product life cycle: invest (introduction and rapid growth), hold (growth), harvest (maturity), and divest (decline). What decisions will you make to strengthen your profitability in the future?

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