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Every product has a life cycle — a set series of phases that every product passes through from its introduction to the end of its commercial viability. During each phase, products are expected to maintain or improve on market share, even if profit margins decline with increased competition.
As a business, it's crucial to understand the life cycle of your product. Product life cycles vary when you take into consideration the many factors that influence their development and subsequent decline. With the growth of technology, the need for differentiation has never been greater — meaning that differentiating products are faced with quicker declines and shorter lifespans than ever before.
Here’s a breakdown of the product life cycle, and how it can help you manage your business;
The product life cycle is a model used to describe the progression of a product from its initial development and introduction to the market, through its maturity, and finally, its decline as it is replaced by a newer innovation. The cycle typically consists of four phases — development, introduction, growth, and saturation — with several substages within each phase.
To determine which actions to take at any given time, you should look at the lifecycle stage of your product. For example, when a product is in the growth stage, you can increase advertising to create more demand, or decrease the price to attract new customers. If your product is in stagnation, you can change your packaging or adjust your messaging to lure back old customers.
A product moves through several stages in its life cycle, from its initial development to the time it eventually is replaced by a newer model. Different products move through these stages at different rates, but most products follow a similar curve. Some companies argue that there are four stages: development, growth, maturity, and decline. Other companies say there are five stages: development, introduction, growth, maturity, and decline.
The product development stage is the research phase before a product launch. Its goal is to identify an understanding of how consumers will respond to your new offering. The process involves researching market conditions and consumer profile, and gathering feedback to provide insights into the viability of a new product or service. By looking at sales trends and identifying potential obstacles before your official launch, you ensure that your newly developed offering has all the information it needs to succeed.
At this stage, costs are piling up, but with no corresponding revenue. Many products require extensive development and marketing costs that will stretch existing capital — and that's before a single sale occurs. Because risk is high, this stage is not for the faint of heart.
Businesses that develop new products often fund research and development with revenue generated by current products. New startup businesses typically run on the resources of their founders — either as a personal investment or as outside funding from private investors. While this is an effective method, it's important to land on a minimum viable product (MVP) as early as possible — a simple representation of your product that you can iterate fast on while still collecting valuable user data.
The plan, mock-up, or prototype is a visual representation of your early-stage idea. It helps to articulate to investors and customers the potential your business has. The earlier you validate your ideas and its market potential, the more likely you’ll be to land investment and launch.
The introduction stage is an important step in the product development process, designed to establish a market for your product and build awareness through the marketing channels you've identified. During this period, you determine who your target market is, and how your business plans to reach them. While you might not be making sales during this stage, it's crucial that you are prepared with a product that has been tested and refined to ensure it will resonate with your intended audience.
Marketing costs are higher at this stage because promotional efforts need to be more concentrated on specific channels and audiences. Testing distribution channels is extremely important. The best way to do this is by targeting your audience through media that they're used to and that work for your industry. It's time to start thinking about the long-haul, not just your immediate return on investment.
Intellectual property protection is also important during this stage. The need for protection can vary by market and product type. In some industries, it is essential to defend patents, trademarks, and copyrights while in others, it isn't required — but a good idea. One thing is certain — companies of all sizes can benefit from IP protection measures. It will help you remain competitive and be able to acquire the funds you may need to continue with your idea.
When you're in the growth stage, it's crucial to have a plan to maintain steady growth. This gives you a higher chance at beating out your competitors and making a larger impact on the market. Your goal here is to increase sales and revenue and build your product sales cycle into a predictable routine.
When entering a crowded market, it's important to keep one thing in mind: you're not the only fish in the sea. If you're entering a market that has little-to-no competition, new products will likely be marketed to those who have yet to hear about your niche. If your product is an improvement on a competitor's, you're likely to see some competitors remarketing for customers who might be interested in their product.
As a brand grows, its messaging can become more nuanced and granular. It's in this phase of growth that brands must adjust their messaging to reflect how the brand is perceived by customers. Look for opportunities to expand your brand presence on social media, add new distribution channels, branch into new products, and offer additional services to support and further differentiate your product.
When you reach the mature stage of a product's lifecycle, you might see an overall decrease in sales. However, this doesn't mean that your business has reached the saturation point. It just means that your company will have to make some adjustments to stay competitive among other brands.
At its fourth stage of life, your business has become more profitable than ever before. However, there is a caveat: the path to profitability is no longer the same as it once was. While you may not be growing in volume, you're gaining in productivity and efficiency. The result is a more refined business model that continues to develop over time — an asset that will only continue to grow in value as you reach your next growth stage.
Although your product may have pioneered the field, you now have competitors that have begun to compete for market share. The initial excitement and buzz surrounding your product has died down, leading to more competitors joining the fray. This competition prevents you from gaining larger market share.
It's time to consider other aspects of your product. If you've made any changes, whether they're in the product itself or the services that support it, this is the time when you should dust off your messaging and introduce it to the market. Even if you've decided not to make any adjustments, then your existing messaging, services, and add-ons should take centre stage.
When a product begins to approach the end of its life cycle, it can be tempting to try and push it harder and harder. But most businesses at the decline stage aren't there because they've failed — they're there because they stagnated.
As the market begins to saturate, a declining product's revenue typically follows suit. Thus owners must decide whether to continue manufacturing and marketing their goods, or to find new ways to make money off the same product.
Product discontinuation is rarely the best option, since it means abandoning a brand with loyal customers who will have difficulty finding another product that matches theirs. Alternatively, businesses can keep their products alive by selling manufacturing rights to another company, finding new uses for them, or tapping into new markets like international buyers.
Since product development stages are fluid, there isn't a guarantee about how long a product will stay in any one stage. This may make it difficult to know which stage your product is in and when you've entered the next one.
Knowing the characteristics of each stage can help you better determine where your business currently stands. You can do this by looking back and analysing reports or by leveraging actual financial data to compare to your projections. This exercise will give you insight into your current position, and it can be a useful way to determine where you're headed as well.
This process will help you see the big picture and put product releases into perspective. It will also prevent you from taking hasty decisions and avoiding bad strategic moves. In addition, it will allow you to understand better what research stage implies for your idea, and how to apply the same methodology to other products in development.
Knowing what stage you’re in can effectively help you develop a strategy for your product. As we explored above, the stage has just as much influence over your decisions as it does sales performance. Here’s how you can leverage your understanding of the product life cycle to manage and grow your business.
Establish authority - Your introduction stage should focus on establishing your brand as the alternative to all of the current market players. Your value proposition is what will establish your business as a trustworthy brand and generate initial sales — from here, you can begin to branch out into more product offerings and marketing strategies.
Create a marketing strategy - Marketing is a series of stages that each need to be thought through and tested extensively before being implemented. In the introduction stage, marketers are exploring different channels and mediums to find their target audience. The growth stage is where they take what they learned from the introduction stage and fine tune their product's performance. There are three stages to every marketer's job: Introduction, Growth, and Maturity. Each stage requires its own marketing strategy.
Set a pricing strategy - Pricing is paramount throughout an product's lifecycle. Pricing strategies and tactics are different during the introduction stage, when a company needs to position itself against competitors and offset development costs. Understanding how price changes affect customer perception is also important — the growth stage can go any number of ways depending on availability, additional features, support, and other benefits. Businesses shouldn't assume that prices will change during saturation — maturity and saturation may be directly impacted by competitors, too.
There's no doubt that how you choose to market and sell your product has a huge impact on whether or not it will be successful. But there are a lot of factors that are beyond your control. The demand for a product, the ever-changing preferences of consumers, and the trends in the marketplace are all important issues that can influence how well your product performs.
Ease of entry - The greater the number of competitors, the more difficult it is to get a piece of the pie — especially in saturated markets. But that doesn’t mean it's impossible; companies like Uber, which entered into a market with huge pockets of competition, have thrived and grown exceptionally.
Rate of acceptance - The cycle of new technology takes many years to complete. It's only been in the past few years, for example, that 4K televisions have become a standard, whereas 4K cameras have been around for two decades. This is because it takes major companies like Sony, LG, and Samsung to make significant investments into R&D, as well as time to develop new products and to convince consumers to get on board.
Economic forces - The state of the economy is a huge factor in how long a product will survive in the market. A fluctuation in the economy, brought on by a crisis or disaster, can cause people to spend less or to spend selectively. In contrast, the recovery of a financial collapse can cause people to spend more freely.
Advancements in technology - There are various ways to approach the development of a new product, which can be determined by several different factors. The type of industry you're in, the target demographic, and the volume of your sales are all elements that can have a huge impact on your overall development strategy.
In the tech industry, a product’s life cycle can be very short. The popularity of a smartphone drops off rapidly when the next model is released. However, in industries like food service or retail, it will take a lot longer for a similar type of product to become obsolete.
To make wise decisions, you need a full understanding of your business. This means knowing where it's headed, being aware of potential pitfalls, and recognising the right opportunities. Products go through cycles just like businesses do: they're conceived, tested, grown, and finally retired. Understanding the product life cycle gives you an added advantage when determining how to approach your product line — and can help you avoid common mistakes that lead to end-of-life scenarios.
Businesses should regularly take a look at their product's market position to ensure that they are successfully standing out and reaching their customers. Market position is the foundation of a business — it lets you know if you're moving towards or away from success. When a company takes the time to think about its position, marketing strategies can be tailored to reach the right customers and increase growth rates.
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