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What is the trade life cycle?

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Quick Answer

The trade life cycle is the course of events that contribute to the introduction of a new product, then follow its growth in the market and its decline and departure from the market. A trade cycle comprises two main periods: a period of good trade where a product attracts high prices and low unemployment rates and period of bad trade where a product attracts low prices and high unemployment rates.

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Full Answer

A trade life cycle goes through five common cycles. The product development phase is the period for market analysis, conception of the product, design and product testing. The second stage is the market introduction phase, which includes the initial release of the product. This phase is characterized by high levels of advertising. The growth phase is the period that experiences accelerated sales growth, which is marked by increasing sales year after year. An increase in production level leads to a steady decline in gross margins, making the product less profitable on a per unit basis. The growth phase contributes to increased competition. The fourth step of a product cycle is the maturity phase. During this stage, the product reaches the highest level of its demand cycle. Additional spending on advertising has little impact on increasing demand. The final stage of the trade life cycle is the decline/stability phase. It is the time when a product is beyond its point of highest demand. At this point, the demand either remains steady or declines as a result of the introduction of a new product in the market.

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