At some point in time, sales of the product form slows. Instead of double-digit growth from one period to the next, the industry limps along with low, single digit sales increases or worse. There are two key reasons why this occurs. First, the market has become saturated with a large majority of potential customers having already purchased the product. In the case of products that have a long buy-cycle (i.e., time between repeat purchases), the infrequency of repurchase results in slow sales for some time.
Second, customers have moved on to purchase other products that are seen as replacements for this product form. In this situation, the growth of the product form may have been interrupted with the introduction of a new product form (e.g., standard thermostats being replaced by internet-connected smart thermostats).
Under these conditions marketers can no longer count on the growth in the overall market as the trigger for increased company sales. This can be best explained with an example.
- Period 1 – Market Size 100,000 units Market Share 10% Total Company Sales 10,000 units
- Period 2 – Market Size 200,000 units Market Share 10% Total Company Sales 20,000 units
- Period 3 – Market Size 200,000 units Market Share 10% Total Company Sales 20,000 units
As shown, during the Growth stage (Period 1 to Period 2) a marketer may see product sales increase without the need for an increase in market share (i.e., maintain status quo). In fact, if their market share dropped to 6% in Period 2 they would still realize an overall sales increase (200,000 x 6% = 120,000 units). But once sales have leveled off (Period 3) competitors now find that the only way to increase sales is to either: 1) increase market share, or 2) increase the market size. This, of course, will make things very competitive.
The slowing of market growth is a signal that the product form may have reached the Maturity stage of the PLC. In our discussion, the Maturity stage is divided into two distinct sub-stages: