Product life cycle theory uses an analogy between the creation and establishment of a product for sale and a simplified view of organic life cycles. The cycle of life for living things can be seen in at least four basic, rough stages: birth, growth, maturity, and eventual decline ending in death. A simple analogy uses this cycle as the model for the stages that a product goes through in a market: introduction, growth, maturity, and then decline into withdrawal from the market. Additional stages can be included in product life cycle theory, such as “saturation” between the periods of maturity and decline.
The basic model used in product life cycle theory is quite simple and is based upon the development of organic life, which begins with birth. After birth, a life form grows and develops, often aging and changing in various ways to move toward maturity. At a certain age, maturity is reached and the life form essentially peaks, sometimes holding that level at a plateau; this period may be brief for some living things. Maturity leads to an inevitable decline toward old age, which ultimately culminates in the death of the life form.
Product life cycle theory follows a very similar pattern, but it is used to refer to a product or good that is developed and offered for sale to customers. The birth of a product is often referred to as its introduction, and this begins when it is first shown to potential users or customers. Growth of a product then follows, as customers start purchasing it and sales begin to swell. This is a time of increased revenue on a regular basis, though it is not the peak of success.
At a certain point, according to product life cycle theory, this growth reaches a zenith and the product moves into maturity. This is the stage at which sales are maximized and the item has effectively reached an upper limit in terms of revenue and user base. At some point, the product moves into decline, however, as sales decrease due to loss of interest or a competing product. Ultimately, this ends in withdrawal as the product is no longer considered profitable or desired and sales come to an end.
Additional steps can be added to the product life cycle theory, depending on the views of an analyst. “Saturation,” for example, is often considered a period of time after a product reaches maturity, but before it begins to decline. This essentially represents a plateau in sales that extends maturity as the market becomes saturated with the product.