The product life cycle describes the stages a product goes through in the marketplace.

1. Introduction Stage

The first stage of the product life cycle is characterized by growing sales and little profit. The marketing objective is to promote awareness and stimulate trial. Price can be high (skimming) or low (penetration). The need in this stage is to develop primary demand, a desire for the product class. Selective demand, a desire for a specific brand, occurs later in the life cycle in the maturity stage.

2. Growth Stage

This stage is characterized by a rapid increase in sales, an increasing rate of growth, and high profitability which tends to interest competitors. At this stage, the brand must begin differentiating itself from competitors. Sufficient production and distribution are important elements of the marketing mix in this stage.

This is also a growth stage with increasing sales, but the rate of growth is decreasing and competition is at its height. During this stage competitors will begin to "shake-out" into the successful and unsuccessful. Strong advertising and promotional activities to differentiate are important elements of the marketing mix. Promotion is geared to creating selective demand

3. Maturity Stage

The maturity stage is characterized by a leveling off of sales revenue. Profit declines as the marginal cost of gaining each new buyer is greater than the resulting revenue. Only the strongest competitors survive and it becomes a zero-sum game - firms can only gain at the expense of other firms. Price strategies combine with segmentation and niche strategies as the most important elements of marketing strategy. The search is on for new users, new uses, increased usage, etc. to try and extend the life cycle.

4. Decline Stage

Sales and profits are steadily dropping. Companies often follow one of two actions in this stage:

- Deletion. Delete or drop the product.

- Harvesting. Harvest the product by reducing support costs.

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