What is the Product Lifecycle?
Products, just like the people who buy them, have lifecycles. As products age, or are in the market for a long time, they decrease in popularity. The inverse is also true; recently launched products are often in much higher demand and are much more popular.
Understanding the lifecycle of the products you sell is critical to growing your business. Expecting that a flagship product will continue to maintain the same levels of demand and popularity indefinitely is not only unrealistic, but it can have a negative impact on your bottom line.
The timeline and arc of a product’s lifecycle differ depending on the product and the sector. For example, highly competitive sectors shorten the lifespan of a product. Think about how often new smartphones are released.
Regardless of the sector or the product, a product’s lifecycle can be broken into four distinct stages. These stages may be shorter or longer for different products, but all four will always be present and distinct.
The Stages of a Product’s Lifecycle
Understanding the characteristics of each product lifecycle stage is critical to managing the arc of your products as well as planning for growth and change. Not unlike a person’s lifespan, the stages are the introduction stage, growth, maturity, and the decline stage.
The Introduction Stage
The introduction stage is the most expensive of the four. At this point in a product’s life it may be unheard of, or at least people aren’t very aware of it. There are significant costs across the board in the areas of research and development, testing, marketing, and advertising.
At the same time, the market for products in the introduction stage is small, so sales are low.
In highly competitive sectors, each of these factors is amplified.
The Growth Stage
As the name implies, this is the period where sales start to increase. As R&D costs are recouped and advertising becomes more effective (more people are aware of the product at this point) profit margins also increase on sales of the product.
Better margins mean more money to reinvest in the product’s success and the chance to take aim at a larger market share.
The Maturity Stage
The maturity stage is the point at which a product is most competitive with other products in its sector. A market share has been built during the growth stage, and now that market share needs to be maintained and leveraged.
That may mean modifications, improvements, or other measures to generate competitive advantage for maximum profitability before the product’s decline.
The Decline Stage
A product’s decline is inevitable, and it may come about for a number of reasons. The decline stage is marked by a steady decrease in sales while the product’s market shrinks. This market contraction can be caused by market saturation—all of the customers who would buy the product already have—or because of a shift in consumer preferences.
The decline stage is unavoidable, but it doesn’t necessarily signal the discontinuance or retirement of a product.
Saving Products In Decline
Savvy manufacturers and marketers have ways of reenergizing products in the decline stage.
Lowering production costs can make price reductions affordable for manufacturers. Lowering the price of a product is a common way to extend its lifespan, but it won’t stave off decline forever.
Price reductions lead to increases in sales, but if costs aren’t also reduced to match the reduction in price, the remaining margins may not be enough to cover costs.
Adding new features to a product costs money, but it can be a lifesaver for a product in decline. Other value-increasing options include product bundling and new product variants.
Exploring Other Markets
Product variants, different packaging, and fresh marketing strategies can breathe new life into a product in decline. If the product’s initial market is shrinking, then finding and leveraging new markets can effectively reset the product lifecycle for that new market.