Growing, Growing, Gone: Cascades, Diffusion, and Turning Points in the Product Life Cycle

Abstract

Research on the product life cycle (PLC) has focused primarily on the role of diffusion. This study takes a broader theoretical perspective on the PLC by incorpuratinx informational cascades and developing testing many new hypotheses based on this theory. On average, across 30 product categories, that authors find that: (i) New consumer durables have a typical pattern of rapid growth of 45% per year over 8 years. (ii) This period of growth is followed by a slowdown when sales decline by 15% and stay below those of the previous peak for 5 years. (iii) Slowdown occurs at 34% population penetration and about 50% of ultimate market penetration. (iv)Products with large sales increases at takeoff tend to have larger sales declines at slowdnwn. (v) Leisure-enhancing products tend to have higher growth rates and shorter growth ,stages than nonleisure-enhcancing products. Time-saving products tend to have lower growth rates and longer growth stages than nontime-saving products. (vi)Lower probability of slowdown is as sociated with steeper price reductions,lower penetration, and higher economic growth. (vii)A hazard model can provide a reasonable predictions of the slowdown as early as the takeoff.

Keywords: product life cycles, sales takeoff, cascades, new pruduct growth, innovation product management, diffusion, high-tech marketing