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Product Life Cycle

The product Life-cycle theory was developed by Raymond Vernon in 1966. It is an economic theory that explains the failure of Heckscher-Ohlin economic model and corrects it by explaining the patterns prevailed in international trade. In his theory, Raymond claims that there are four stages in a product’s life cycle; introduction stage, growth stage, maturity stage and finally decline stage. The length of each of these stages is dependent on the type of product and can vary from weeks to decades. Moreover, a product’s life-cycle is highly dependent on its demand and the marketing strategies used.

The introduction stage marks the first time a product gets into the market, either national or international. This stage is characterized by few competitors and low profits. Since the product is new in the market, promotion of the product is intense so as to create awareness to the potential customers. The product enters the next stage automatically as number of sales increases.

The growth stage is characterized by increased profits and reduced production costs, increased awareness amongst the customers and increased competition as more competitors enter the market. Due to increased competition, the sales price decreases but more promotional activities are engaged. Increase in new customers lead to the next stage.

At the maturity stage the product is widely known and there is stiff competition hence its prices are reduced further. The company starts implementing other strategies such as innovation on the product and by-products to counter the competition. In addition, the costs of marketing and promotion become very high.

At the decline stage, the product popularity diminishes due to market saturation as a result of development of substitute products in the market. However, the companies continue to offer the product to the few loyal customers.