The Marketing Book 5th Edition

Introduction Growth Maturity Decline

Sales (cumulative)

6 The Marketing Book

Building upon the trenchant statement
‘The history of every dead and dying “growth”
industry shows a self-deceiving cycle of bounti-
ful expansion and undetected decay’, Levitt
proposed the thesis that declining or defunct
industries got into such a state because they
were product orientated rather than customer
orientated. As a result, the concept of their
business was defined too narrowly. Thus the
railroads failed to perceive that they were and
are in the transportation business, and so
allowed new forms of transport to woo their
customers away from them. Similarly, the
Hollywood movie moguls ignored the threat of
television until it was almost too late because
they saw themselves as being in the cinema
industry rather than the entertainment
business.
Levitt proposes four factors which make
such a cycle inevitable:

1 A belief in growth as a natural consequence of
an expanding and increasingly affluent
population.
2 A belief that there is no competitive substitute
for the industry’s major product.
3 A pursuit of the economies of scale through
mass production in the belief that lower unit
cost will automatically lead to higher
consumption and bigger overall profits.
4 Preoccupation with the potential of research
and development (R&D) to the neglect of
market needs (i.e. a technology push rather
than market pull approach).

Belief number two has never been true but,
until very recently, there was good reason to
subscribe to the other three propositions.
Despite Malthus’s gloomy prognostications in
the eighteenth century the world’s population
has continued to grow exponentially; most of
the world’s most successful corporations see
the pursuit of market share as their primary
goal, and most radical innovations are the
result of basic R&D rather than product engi-
neering to meet consumer needs. Certainly the
dead and dying industries which Levitt

referred to in his analysis were entitled to

consider these three factors as reasonable

assumptions on which to develop a strategy.

In this, then, Levitt was anticipating rather

than analysing but, in doing so, he was build-

ing upon perhaps the most widely known yet

most misunderstood theoretical construct in

marketing – the concept of the product life

cycle (PLC).

The PLC concept draws an analogy

between biological life cycles and the pattern of

sales growth exhibited by successful products.

In doing so it distinguishes four basic stages in

the life of the product: introduction; growth;

maturity; and decline (see Figure 1.1).

Thus at birth or first introduction to the

market a new product initially makes slow

progress as people have to be made aware of its

existence and only the bold and innovative will

seek to try it as a substitute for the established

product which the new one is seeking to

improve on or displace. Clearly, there will be a

strong relationship between how much better

the new product is, and how easy it is for users

to accept this and the speed at which it will be

taken up. But, as a generalization, progress is

slow.

However, as people take up the new

product they will talk about it and make it more

visible to non-users and reduce the perceived

Figure 1.1 The product life cycle