As shown graph, the theory suggests that a goods or service goes through four stages.
The aim is to increase the goods value at each stage. In the introductory stage, sales are slow.
The strategy is to create widespread recognition. Costs are invested in building distribution
and increasing recognition through active promotion. It is expected that the investments made
in such product introduction will get back pay and the goods or service will go to the growth
phase.
The company could build market share or rentability in the growth phase. Strategies
here are to make changes that increases value to the product and to find new markets.
Marketing moves away from promotion through personal selling toward more mass media
advertising. Just as predators react to attractive targets, competition begins to build as
recognition increases and sales are gong up. Unit productional costs start to fall as fixed
costs are spread over more production units. The firm is trying to stay in the growth stage as
long as possible.
Sales growth slows at maturity and the company start to defend market position. This
is where marketing department must concentrate the most attention. Promotion costs goes up
significantly. The reduction of cost is crucial as competitors start to decrease prices and
introduce better versions of the goods. With the cheap prices come smaller profits, and
competitors begin to get away. This is the longest lasting pattern, with some market leaders
keeping their share over several years.