Most products go through different stages of development, and those stages are reflected in the different growth rates expected at different stages. The important points are the takeoff point and the market saturation points. In the early development stage, growth rates may be high, but very few units are involved. This is a new market just beginning to reach its potential consumers’ minds and is even further from their pocketbooks. At this point, a few magazine articles begin to address this new technology. As Innovators begin to look for the product, the channels of distribution are set up.
Takeoff is when the market turns upward. Pioneer buyers have spread the word and the general public begins to buy. This is what happened when, for example, mall merchandisers began to sell a lot of home computers in 1982, or when color television sets took off in the 1960s. This is the stage all those people who invested in the early market are waiting for. Growth rates are still attractive, and volume has skyrocketed. Growth rates decline when the market approaches saturation. At this point, most of the buyers who want the product have it. The market turns into a low-growth and replacement market, just as the markets for stoves and refrigerators did.
There are three keys to remember in using the product life cycle in your market forecasts:
• First, takeoff resembles a snowball, as it rolls down the hill gaining momentum, and the situation changes enormously.
• Second, once markets get going, saturation will occur.
• Third, each product has a different life cycle, some fast, some slow, and some unlike the normal pattern.