decline stage

Overview

The decline stage of the product life cycle is, in most renderings of the product life cycle, the fourth stage. It also is the final stage of that cycle, the stage in which the product life cycle curve moves downward until, at last, no sales at all are being made.

Some authors use the term “obsolescence stage” rather than “decline stage,” and others depict it as the penultimate rather than the ultimate stage of the cycle with “product death” being the last stage. Further, some render the product life cycle in five or even three stages, rather than the more widely used four-stage formulation of introduction, growth, maturity, and decline.

While decline of a given product’s sales may frequently be traced to innovations from competing industries which make the product obsolete and cause market decline, various factors may play a role.

Fashion is one such factor, as is new product development within an industry. Other shifts in the environment of marketing can also lead to a product’s decline and “death.” Buyers’ concerns about health, the environment, rising costs, and alternative uses of funds are just a few of these.

The decline stage of the product life cycle has many characteristics but among the most easily noted are these.

  1. First, there is an absolute drop in industry sales which may be gradual or abrupt depending on the speed with which the new or alternative product is passing through the earlier stages of its own life cycle. In either case, the drop in sales signals the end of the maturity stage of the product life cycle.
  2. Second, marketing efforts are likely to be diminished overall, but also are likely to become more selective as organizations attempt to hold on to remaining core market buyers.
  3. Third, price is commonly seen to decline as sellers try to hold customers or buy time until more lasting solutions to the problems of decline can be found. Prices are then frequently observed to stabilize, then actually rise, reflecting the inelastic demand of the remaining core buyers.
  4. Fourth, as total industry sales fall the num¬ber of competing firms dwindles. It is common that a few remaining firms, facing a diminished but inelastic demand, reap considerable profit.

Examples

The product life cycle concept was originally intended to reflect industry sales. That is, the product life cycle is a depiction of unit sales for, say, automobiles in toto rather than for particular brands or models of cars.

Many products have declined from once high sales but remain on the market today. Their sales have diminished to a small fraction of what they once were, but they have escaped ’‘death.”

Among these are gas lights, coal stokers for home furnaces, horse-drawn carriages, wind-up record players, and a host of musical instruments such as the sackbut and viola da gamba. Selecting the most familiar of these, the gas light, one can easily trace its decline.

During the 1800s the gas light was the most widely used means of indoor and outdoor lighting. Gas had largely replaced the earlier sources of light, candles and oil lamps, and was a major improvement over these.

Gas lights could burn indefinitely without the need to constantly replenish the fuel. Gas lights were safer than “old fashioned” sources of light. They also cast a steadier glow than the flickering candle or oil lamp.

But a major competitor, Edison’s incandescent lamp, quickly drove the gas light into the decline stage of its product life cycle. The electric light, an innovation and a new competitor, made the gas light obsolete as consumers quickly accepted a product that represented an improvement over gas light just as the gas light had once been an improvement over previous lighting means.

There occurred a clear, unmistakable drop in gas light industry sales. Style changes and other “improvements” offered by makers of gas light fixtures could do nothing to stem the trend. Though some consumers stuck with gas lighting longer than did others, downward adjustments in price and promoting the benefits of gas lights did little to forestall the inevitable near-disappearance of gas lights.

Within a decade of the introduction of Edison’s light the gas fixture was becoming an oddity. Street lights, which had of course also been gas fueled, were converted to electricity and the old lamplighter who strolled the streets at dusk existed exclusively as the subject of nostalgic songs.

There are, however, still gas lamps today, though they are almost never used for indoor home lighting. They are used as camping lights and as decorative post lights outside homes. Few firms manufacture these products, and while the product selection offered by manufacturers is adequate for market needs it is far less than the selection of lights offered when gas lighting was the norm.

The surviving firms that make gas lights address profitable marketing opportunities since their customers (campers and well-to-do home owners) want gas lights and can obtain them from only a few suppliers. Demand is thus relatively inelastic.

Much the same pattern is true of other obsolete products mentioned. Makers of horse-drawn carriages were once found in every hamlet. Now their number is small, but their product is in demand by people who strongly desire, for whatever reason, to drive about in horse-drawn vehicles. Blacksmiths, too, once faced many competitors. Now they have almost none, and the few remaining smiths are well-paid by the comparatively few remaining horse owners.

Though it is something of an abuse of the original product life cycle concept, the pattern of decline noted here can also be seen in the obsolescence and “death” of individual brands of products. For example, the automobile is very much in de¬mand but the Willys, Kaiser, Edsel, Crosley, and many others are long gone from the new car market. Yet, their decline and “death” notwithstanding, there remains a trade in these cars among collectors of unusual autos.

Further, there is healthy business in supplying parts for cars like these. These parts are often rebuilt scrap pieces, but are also made-to-order, small quantity items. The nation needs very few suppliers of parts for Kaiser automobiles, but the few that remain do very well financially because of the existence of inelastic demand and small numbers of competitors.

Can a product ever reverse a pattern of decline or even “come back from the dead?” Numerous example of this phenomenon can be found. Nostalgia accounts for many of these, as does fashion. Candles are obsolete as major sources of light but many are sold to those people who appreciate their warm glow on special occasions.

A product whose life cycle appears to have peaked, then entered its decline phase, may in fact be entering a period of “false decline.” That is, the “decline” may simply be a temporary downturn. A sales drop in the decline stage of the product life cycle is permanent. In the early 1960s, for example, the product life cycle of television sets took a noticeable dive, but the introduction of “perfected” color television soon afterwards buoyed the market again.

Obviously, television was not in its decline stage after all. Like all marketing management tools, the product life cycle is only a guide or framework for thought. The product life cycle curve cannot replace judgment, and should not be used as an absolute guide to strategy formulation.

Benefits

As has been shown, a product entering its decline stage can benefit some organizations. Obviously, the firm whose new products are forcing out the old ones benefits, as do the sellers of obsolete products who remain to cater to a small residual market characterized by inelastic demand.

The last blacksmiths and carriage makers exemplify this group. Yet other firms can benefit from the decline stage of a product life cycle, albeit in a “lefthanded” way. Some firms whose products have reached the decline stage of the product life cycle seek new products on which to build even greater successes.

Some are able to improve their products to slow the continuous market decline. But it is also true that many organizations are unable to cope and are forced out of business.

The decline stage of the product life cycle is, in a way, the base on which the entire product life cycle concept is built. After all, why should a manager attempt to use the product life cycle at all if not to avoid decline and, if this is impossible, to prepare to market other offerings when current products do slip into decline?

In a sense, it is the decline stage that “focuses the manager’s mind’’ on the need for planning. It should be noted that several books have been written suggesting strategies appropriate to the stages of the product life cycle. These strategies are also addressed briefly in virtually every general marketing text.

These dwell largely on “milking” potentially profitable sales to core market members. This is a reasonable course of action if the manager is certain that the product is truly in decline. To follow this course blindly, however, is to make the product life cycle’s intimation of “product death” a self-fulfilling prophecy.

Implementation

In general, marketing managers do not seek to implement or bring about the decline of their products’ life cycles. However, wise managers do prepare to make the best of the decline situation once it actually occurs. Several courses of action are available to managers.

Marketing managers may seek to cater to a residual core market if that market has the economic wherewithal and has demonstrated a relatively inelastic demand for the product. This combination of characteristics has kept many products on the market for decades after their general popularity has waned.

Patent medicines, such as Father John’s or Lydia Pinkham’s, remained available for many years even though most people believed the companies making them were long out of business. The manufacturers, however, kept the products on the drug store shelf, at a premium price, and did no advertising or product improvement at all.

In other words, these companies “milked” the products, selling them, with virtually no effort, to aging buyers who would pay almost any reasonable price for these old stand-by products. When the market finally got too small to justify any marketing effort at all the products were finally allowed to “die.”

Another possibility is to divest, to sell off the declining product while it can still attract buyers. Often the sale is made to a smaller company that can maintain itself on the diminished sales of an elderly product.

Thus, when a large, well-known firm rids itself of one or more products, it often can sell the name to a small, virtually unknown company that can justify maintaining a product no longer attractive to larger organizations.

A third possibility, of course, is to simply withdraw from the marketplace and sell off any assets associated with the manufacture and marketing of the good. Certain products are truly “dead and gone” and no organization would care to attempt to maintain them on the market.

Evaluation

The decline stage of the product life cycle is signaled by a drop in sales volume. Further, if the sales drop is permanent the decline is not “false.” Oddly enough, many managers are not aware of their products’ approach to and entry into the decline stage of the product life cycle.

While some industries may be characterized by companies that keep sales figures secret, total unit sales for most products can be charted using government or other secondary data. In other words, it is usually not difficult to actually draw a “real world” product life cycle since the life cycle is really nothing more than a chart reflecting unit sales.

It is therefore possible to develop and utilize a genuine product life cycle and to plot brand or corporate sales figures against it.

If a marketing manager takes the time to chart a product life cycle he can evaluate the degree of product decline, the permanance of such a decline, and the apparent effects of attempts which have been made to slow, halt, or even reverse it.

Conclusion

The decline stage of the product life cycle is, in a sense, the foundation upon which the entire product life cycle concept is built. It is the inevitability of the decline most products face which justifies all the marketing efforts aimed at avoiding the final stage of the product life cycle.

Further, once the decline stage is encountered the marketing manager must make the important decision of “when to get out of the market.” Made too soon this decision can cost the manager lost sales. Made too late it can leave the manager holding assets that are no longer sellable.

Applications To Small Business

One reason why the approach of the decline stage of the product life cycle often goes unnoticed by marketing managers is the tendency for those managers to spend so much of their time “putting out fires.” Emergencies seem always to develop in marketing’s dynamic environment.

It is often the case that the operator of a small business has as many fires to put out as do the managers of larger organizations while also having fewer resources at his disposal. These circumstances may result in the small business operator having far less time than is necessary to devote to medium and long range planning.

Preparing for the decline of a product is likely, therefore, to be a matter left undone by the small business manager even though the decline of one or more products might easily devastate a smaller operation.

The small business manager, then, must face a familiar problem.

The decline stage of the product life cycle is an important fact of life that must be addressed even though the manager has less time and fewer resources than those piloting larger organizations.

 

Synonyms: obsolescence stage

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