Table of Contents
- What happens during the decline stage
- Why is the product entering the decline stage
- How the company deals with the decline stage
What’s it: A decline stage is the last phase of a product life cycle in which sales volume decreases. The decline may be rapid to death, or it may take a long time, depending on the type of product. At this stage, the market may consist of only a few players because those who lose out compete during the mature phase come out. Thus, the supply will be concentrated on a few players.
What happens during the decline stage
Sales volume decreased. Consumers will usually stop buying this product because they find a newer and more innovative substitute. Of course, companies cannot prevent such a change in taste. They can only keep the decline, at least, long-running. That way, they have time to go into other businesses or enter the substitute market.
In the financial profile, companies face profit pressure. Revenue slumped as sales volume fell, and prices fell. A decrease in the volume of demand increases excess supply in the market, pushing prices down.
Excess supply has begun to appear during the maturity phase. And, it gets more prominent during the downward period, amplifying the price pressure to go down even further.
Why is the product entering the decline stage
Sales have reached all customers in the market. There are no more new customers because all consumers already own and buy the product. Demand only comes from repeated purchases and the replacement of damaged products.
Consumer preferences change. Consumers are bored. No new features have succeeded in luring them to buy back the product. Apart from that, they have also found better alternatives.
Substitutions appear on the market. They offer better experiences and features. For example, the presence of laptops began to replace desktop computers. Apart from similar specifications, laptops are more portable so that they are more attractive to consumers today. Demand for desktops may still exist, but it is slowly starting to decline because it does not suit consumers’ needs who have become increasingly mobile.
Factors affecting the rate of decline
Furthermore, the speed of the decline depends on several aspects. First is the degree of substitutability of new products, especially related to substitute products’ functions. For example, Walkman sales plummeted with the smartphone launch, which embeds the basic Walkman functionality into it. That, in the end, made the Walkman obsolete faster.
Second is the price of the substitute product. For example, if the substitute’s price is low, the faster it stimulates demand and the quicker the current product sales decrease.
Third, the level of innovativeness and perfection of substitute products. As with the introduction stage, substitutes are prone to rejection due to low market awareness. Maybe there are only a few consumers who are willing to buy it. The early development of computers is an excellent example of this. As a substitute for typewriters, the first prototypes of computers were far from perfect, expensive and took up a lot of space. Therefore, when it was launched, the demand was still very limited.
How the company deals with the decline stage
Companies face two choices in this phase, whether to withdraw products or use an extension strategy to maintain sales.
If it is unlikely to reverse this decline, product withdrawals are the more sensible option before losing money. They stopped the product and liquidated the remaining inventory.
Meanwhile, extension strategies include renewing packaging, lowering prices, adding new features, or embedding new technologies.
Another option is to adapt the product to the needs of current consumers or find new uses. In this case, the company can develop the closest substitute product before the primary market falls. For example, a desktop computer manufacturer could not avoid a decline in sales for its product. The safest way to cope with this problem is by developing the closest substitute, namely launching a laptop.