Product life cycle is simply the time a product exists from conception to abandonment. Usually product life cycle refers to a product class as a whole such as automobiles but it can also refer to specific forms (such as station wagons) and to specific brands or models (such as a Toyota Camry). Also, by replacing “conception” with “purchase,” we obtain a customer-oriented definition of product life cycle. The producer-oriented definition refers to the life of classes, forms, or brands, whereas the customer-oriented definition refers to the life of a specific unit of product. These producer and customer orientations can be refined by looking at the concepts of revenueproducing life and consumable life. Revenue-producing life is the time a product generates revenue for a company. A product begins its revenue-producing life with the sale of the first product. Consumable life, on the other hand, is the length of time that a product serves the needs of a customer. Revenue-producing life is clearly of most interest to the producer, while consumable life is of most interest to the customer. Consumable life, however, is also of interest to the producer because it can be used as a competitive tool.
Marketing Viewpoint
The producer of goods or services has two viewpoints concerning product life cycle: the marketing viewpoint and the production viewpoint. The marketing viewpoint describes the general sales pattern of a product as it passes through distinct life-cycle stages. Exhibit 11-10 illustrates the general pattern of the marketing view of product life cycle. The distinct stages identified by the exhibit are introduction, growth, maturity, and decline. The introduction stage is characterized by preproduction and startup activities, where the focus is on obtaining a foothold in the market. As the graph indicates, there are no sales for a period of time (the preproduction period) and then slow sales growth as the product is introduced. The growth stage is a period of time when sales increase more quickly. The maturity stage is a period of time when sales increase more slowly. Eventually, the slope (of the sales curve) in the maturity stage becomes neutral and then turns negative. This decline stage is when the product loses market acceptance and sales begin to decrease.
Marketing Viewpoint
The producer of goods or services has two viewpoints concerning product life cycle: the marketing viewpoint and the production viewpoint. The marketing viewpoint describes the general sales pattern of a product as it passes through distinct life-cycle stages. Exhibit 11-10 illustrates the general pattern of the marketing view of product life cycle. The distinct stages identified by the exhibit are introduction, growth, maturity, and decline. The introduction stage is characterized by preproduction and startup activities, where the focus is on obtaining a foothold in the market. As the graph indicates, there are no sales for a period of time (the preproduction period) and then slow sales growth as the product is introduced. The growth stage is a period of time when sales increase more quickly. The maturity stage is a period of time when sales increase more slowly. Eventually, the slope (of the sales curve) in the maturity stage becomes neutral and then turns negative. This decline stage is when the product loses market acceptance and sales begin to decrease.
Production Viewpoint
The production viewpoint of the product life cycle defines stages of the life cycle by changes in the type of activities performed: research and development activities, production activities, and logistical activities. The production viewpoint emphasizes life-cycle costs, whereas the market viewpoint emphasizes sales revenue behavior. Life-cycle costs are all costs associated with the product for its entire life cycle. These costs include research (product conception), development (planning, design, and testing), production (conversion activities), and logistics support (advertising, distribution, warranty, customer service, product servicing, and so on). The product life cycle and the associated cost commitment curve are illustrated in Exhibit 11-11. Notice that 90 percent or more of the costs associated with a product are committed during the development stage of the product’s life cycle. Committed means that most of the costs that will be incurred are predetermined set by the nature of the product design and the processes needed to produce the design.
The production viewpoint of the product life cycle defines stages of the life cycle by changes in the type of activities performed: research and development activities, production activities, and logistical activities. The production viewpoint emphasizes life-cycle costs, whereas the market viewpoint emphasizes sales revenue behavior. Life-cycle costs are all costs associated with the product for its entire life cycle. These costs include research (product conception), development (planning, design, and testing), production (conversion activities), and logistics support (advertising, distribution, warranty, customer service, product servicing, and so on). The product life cycle and the associated cost commitment curve are illustrated in Exhibit 11-11. Notice that 90 percent or more of the costs associated with a product are committed during the development stage of the product’s life cycle. Committed means that most of the costs that will be incurred are predetermined set by the nature of the product design and the processes needed to produce the design.
Consumable Life-Cycle Viewpoint
Like the production life cycle, the consumption life-cycle’s stages are related to activities. These activities define four stages: purchasing, operating, maintaining, and disposal. The consumable life-cycle viewpoint emphasizes product performance for a given price. Price refers to the costs of ownership, which include the following elements: purchase cost, operating costs, maintenance costs, and disposal costs. Thus, total customer satisfaction is affected by both the purchase price and post-purchase costs. Because customer satisfaction is affected by post-purchase costs, producers also have a vital interest in managing the level of these costs. How producers can exploit the linkage of post-purchase activities with producer activities is a key element of product life-cycle cost management.
Like the production life cycle, the consumption life-cycle’s stages are related to activities. These activities define four stages: purchasing, operating, maintaining, and disposal. The consumable life-cycle viewpoint emphasizes product performance for a given price. Price refers to the costs of ownership, which include the following elements: purchase cost, operating costs, maintenance costs, and disposal costs. Thus, total customer satisfaction is affected by both the purchase price and post-purchase costs. Because customer satisfaction is affected by post-purchase costs, producers also have a vital interest in managing the level of these costs. How producers can exploit the linkage of post-purchase activities with producer activities is a key element of product life-cycle cost management.
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