Following the maturity stage of the PLC, many products at some point will enter the decline stage. The decline stage is a significant reduction in sales volumes. Typically this occurs for two main reasons:
- There is a new product category in the market that provides a better solution and has provided enough incentive for consumers to switch on a widespread basis
- There has been a significant change in consumer lifestyles and that particular product is no longer relevant
Most products into the decline phase due to “replacement” products being offered, primarily through enhanced technology or unique design. As mentioned above, the Apple iPod is a good example, where the smart phone technology includes a music player and has easier access to the Internet and is a more visual device. Therefore provides significant usage and relative advantages over the iPod.
An example of where a change in consumer lifestyles would trigger a decline might be a product such as a sewing machine. There was a period of time where women were primarily in the home, looking after their family. As part of this lifestyle, it would not be uncommon for them to make and/or fix clothes and own a sewing machine as a result. However, in today’s world most women pursue work or some career, and have less time to dedicate to home life and also have enhanced income ability to buy close, rather than make them = thereby reducing the demand for sewing machines in the home.
In the decline stage we have a dramatic falling of sales volume. In the early part of the decline stage in particular, the product line can be very profitable to the firm. Keep in mind that sales are reducing each year, although they could still be relatively high. What is also changing is the need to invest in support the product to its previous extent.
For example, a product in the decline stage of the PLC is likely to need far reduced marketing communication investment and it is not likely to need product enhancements and improvements. With the production/removal of these two significant marketing investment costs, the overall profitability of the product set can remain quite high during the decline stage.
Also, as smaller competitors tend to leave the market first, as their sales volumes reduce to the point of breakeven or less, the existing/remaining sales in the marketplace will revert to the larger brands by default. Therefore, the larger players in the market are likely to see an increase in market share during this period. This means that their reduction in sales volume is not as significant as the overall reduction in the marketplace (in percentage terms), which means that they can remain profitable for a longer period.
In order to further assist profitability, it is usual for firms to reduce their product mix of the products in the decline stage. They no longer need to offer so many variations and choices, primarily because the mix and diversity of consumers is also reducing. This more efficient product line helps to retain cost efficiencies and help support profitability levels.
Smaller retailer and distribution channels are also eliminated in a further attempt to maximize profits for the remaining period of time. Clearly online channels become a more efficient possibility, due to their ability to reach large numbers of consumers at a low-cost.