Apr 162017

In the growth stage of the PLC there is a limited degree of customer loyalty. This is because most customers are “first-time consumers” and have no direct experience purchasing the product.

This means that in a growth market, it is common to see the competitors try to obtain as much market share as possible during the growth stage. Typically we find that market shares are far more volatile in a growth market, primarily due to this lack of underlying habitual loyalty.

Many firms will take the view therefore, that if they can win a consumer’s first-time purchase of a new product, then there is a reasonable likelihood that they can hold the consumer for a significant period of time – generally through simple repeat/habitual purchase loyalty. This concept is strongly related to customer lifetime value, where customer loyalty is a significant driver of long-term profitability.

Aggressive competitive rivalry

Because of this incentive to gain as many consumers as possible in the growth stage of the PLC– that is, maximize market share – the growth stage of the product life cycle can tend to be quite aggressive in terms of competitive rivalry. This is a firm’s opportunity to position themselves as a market leader or a dominant player, due to a greater proportion of the market being “available” and being willing to trial new brands and offerings.

Once the market becomes mature, consumers tend to revert back to establish purchase patterns and a certain degree of loyalty, making significant changes in market share quite difficult.

This underlying premise of a market highlights why the Boston Consulting Group model/matrix classifies market leaders in high-growth markets as “stars”, whereas market followers are classified as “question marks”. You can see by the wording difference of a star versus a question mark that most firms would prefer to have stars not just question marks.