What’s a dying industry?

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The term product lifecycle describes the various stages of a good’s existence in terms of cost, popularity, and other factors. What stage the product is in usually tells the marketer about its current opportunities and challenges. Introduction, growth, maturity and decline are the four stages of this cycle. Like products, entire industries can go through this cycle, eventually entering the decline stage when consumer demand for the industry’s products wanes and sales stagnate.

When a new item comes to market, the introductory stage can be identified by slow sales growth, few companies offering the product, and low demand as consumers learn about the industry. Then, as some customers buy the product, the growth stage is marked by a period of rapid consumer acceptance and an increase in sales. A mature industry typically experiences a slowdown in growth as sales plateau and more competitors enter the market. Sometimes an industry remains in maturity and never reaches the industry’s declining stage.

Indicators of a declining industry can include declining profitability to the point where the cost of production exceeds the profits from sales. Several companies can withdraw from the declining sector, as was the case with film and still cameras when digital photography took over the market. Other indicators could include a weakening of commercial channels, reduced promotional budgets and a reduction in product prices.

Declining industry often has multiple causes such as market saturation and technological advances. Market saturation means that everyone who would buy the product has already bought it. This often happens with items like microwaves and flat screen televisions. The advancement of technology can also cause industry decline, and an example of this is the way in which word processing software has made typewriters obsolete.

Maintaining a company in a declining industry typically requires a great deal of effort and expense. Products with poor sales require frequent inventory and price adjustments. Products may require more advertising and sales efforts than popular products. Occasionally, the company becomes associated with the declining industry, which can damage the company’s image.

Companies operating in declining industries often have several options for dealing with reduced sales. Industries with low exit barriers often allow companies to ditch the product and focus on more profitable ventures. Executives sometimes reinvest in the industry, researching and developing new product features in an attempt to rejuvenate the industry. Successful industry rejuvenation can lead to a return to industry maturity or even a return to the growth stage of the product lifecycle.

Asset Smart.

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