The course of events that brings a new product into
existence and follows its growth into a mature product and into final critical
mass and decline. The most common steps in the life cycle of a product take in
the following phase:
• Product Development Phase - include market analysis, product design, conception, and testing.
• Market Introduction Phase - early release of the product, usually marked with high levels of advertising.
• Growth Phase - Sales development begins to accelerate, characterized with increasing sales year-over-year. As making levels increase, gross margins should steadily decline, making the produce less profitable on a per-unit basis. An increase in competition is probable.
• Maturity Phase - The product will reach the upper bounds of its demand cycle and auxiliary spending on advertising will have little to no effect on increasing demand.
• Decline/Stability Phase - This is where a product has reached or passed its point of top demand. At this point, demand will either remain steady or slowly decline as a newer product makes it obsolete.
• Product Development Phase - include market analysis, product design, conception, and testing.
• Market Introduction Phase - early release of the product, usually marked with high levels of advertising.
• Growth Phase - Sales development begins to accelerate, characterized with increasing sales year-over-year. As making levels increase, gross margins should steadily decline, making the produce less profitable on a per-unit basis. An increase in competition is probable.
• Maturity Phase - The product will reach the upper bounds of its demand cycle and auxiliary spending on advertising will have little to no effect on increasing demand.
• Decline/Stability Phase - This is where a product has reached or passed its point of top demand. At this point, demand will either remain steady or slowly decline as a newer product makes it obsolete.
It is chief for investors to understand a company's product
life cycle. Firms that are predominately in the development phase will possible
be characterized with small levels of sales and are more speculative in nature
than firms in the growth or maturity phase.
While a firm reaches the maturity stage, it does not mean that a product is no longer a growing income source for the company, as there may still be further margin improvements and innovation. Furthermore, a more full-grown firm with mature products may be extra likely to issue dividends than firms in the other phases.
While a firm reaches the maturity stage, it does not mean that a product is no longer a growing income source for the company, as there may still be further margin improvements and innovation. Furthermore, a more full-grown firm with mature products may be extra likely to issue dividends than firms in the other phases.
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