A product life cycle is a marketing and management model for the stages of a product’s development, production, distribution, sales (or usage), and ultimate disposal. Products are categorized by how long they remain in each phase before entering another. Companies who employ this process gain an advantage over those that do not because it allows them to predict when new products will be launched so their marketing efforts can adjust accordingly.
The “product life cycle” is a term that’s used to describe the stages of a product. This can be anything from a new product, to an existing product, and even discontinued products. These changes in the market can have a significant impact on your business. Read more in detail here: what is the product life cycle.
Everything has an expiration date. Whether it’s a vehicle, a phone, gym equipment, or any other thing, its usage and selling potential will ultimately run out. That’s because when a product first hits the market, it goes through a precise life cycle that every product goes through.
It goes through a life cycle from being launched as the next great thing to becoming something that everyone owns and then forgotten about. Because this process is ongoing, every company must understand how it operates and how it may effect their goods. Let’s look at the ins and outs of the product life cycle and how you can use it to better manage your company.
What is the life cycle of a product?
The product life cycle is the period of time between the introduction of a product to the consumer market and its decline or discontinuation. The development, introduction, growth, maturity, saturation, and decline phases of this cycle may all be divided down into separate stages. When it comes to increasing advertising, adjusting price, exploring new markets, redesigning packaging, and even changing your message, the life cycle of a product is often utilized to identify when it’s time to do so.
What phases of the product life cycle are there?
Each stage has its own set of expenses, possibilities, and dangers, and different products vary in how long they stay in each stage. While there are varying views on whether the product life cycle has four, five, or six phases, each option contains the steps below.
The research period before a product introduction is known as the product development stage. Although technically not part of the product life cycle, it is an important phase to be aware of. In a nutshell, it’s utilized to verify a product’s feasibility, establish when it should go to market, and plan your formal launch.
At this point, expenditures are piling up without a commensurate income stream. Some items take years to create and test, requiring a significant financial commitment. Outside financing sources are restricted because of the significant risk.
Existing businesses often support research and development using profits from their present goods. This stage is often supported by the entrepreneur from their own personal resources for starting firms. It may be prudent for people creating a new product to settle on a minimum viable product (MVP) as soon as feasible.
This might be as simple as a drawing or as complicated as a sample or prototype of the product. You just need enough to demonstrate prospective investors and consumers how your idea will operate. The sooner you can prove its market potential, the more probable you will be able to get funding and launch.
2. Provide an overview
When your product is initially introduced to the market, it is called the introduction stage. It’s where you go beyond the product to create a market for it and increase product awareness. You’ll strive to define a target market, do a market study to understand the competition environment, and, hopefully, close your first few sales here.
Because it is vital to reach out to prospective consumers, marketing expenditures are significant at this time. When advertising a new product, the ideal method is to concentrate on testing distribution routes and message. While you may have a large advertising budget, you may use it intelligently to discover marketing channels that lead to increased conversions.
This is also the point at which intellectual property rights are protected. Product price may be expensive to recoup expenditures connected with the development stage, depending on your market position. It might possibly be lower, indicating that you’ll be losing money until you achieve traction. This is where securing early money and planning your financial runway are critical to your product’s success.
Customers have accepted the product in the growth stage, and you are now attempting to expand market share. That demand and revenue are increasing, preferably at a consistent pace. The length of time it takes to achieve consistent growth is entirely dependent on your product, the existing market situation, and client adoption rates.
If you introduce a product into an already saturated market, you may expect rivals to respond swiftly. You’ll likely experience a delayed reaction from new or present entrants if you’ve entered a market with less competition or are first to market in a breakthrough sector.
In any scenario, fine-tune your message, consolidate your brand presence, and extend into new distribution channels during this period. This is also a good time to think about introducing other services to help support and distinguish your product. Support services, add-ons, and insurance packages are just a few of the possibilities to think about. These enhancements, if available or in the works, may help you better respond to rivals and prolong the return on investment (ROI) from a single client.
4. Saturation and maturity
When sales reach maturity, they will level off. This isn’t to say you won’t continue to develop; it simply won’t be at the same rate as previously. To keep your items competitive, you’ll usually start lowering pricing, offering free add-ons, or making other changes at this time.
At the same time, you’ve improved your productivity. Production costs are on the reduction, and expensive production errors may now be avoided. At this point, even your marketing budget is likely to be more streamlined and successful. So, even if your volume isn’t increasing, you’re probably making the most money at this point.
However, keep in mind that at this point, your rivals have most certainly confirmed their own solutions. This indicates they’ve seized a piece of the market, resulting in a flattening of your own product’s growth. Most customers are probably already familiar with a variant of your product and have started to form brand preferences.
This is the time to make any improvements to your product or the services that go with it. If you’ve reached a point where significant changes aren’t conceivable, your messages, services, and add-ons should take center stage.
You may only be able to make minor adjustments, but you may still position it as a refresh with new features or advantages. In the case of video game consoles, incremental hardware improvements are often marketed as a way to sell new consoles. The Nintendo Switch OLED version is the most recent example, with a new, slightly bigger, and clearer screen as the single change.
Due to market saturation, increased rivalry, and changing consumer requirements, the decline stage of the product life cycle is linked with declining revenue. At this point, businesses have numerous options:
- Remove the product off the market.
- Sell the manufacturing rights to a different company.
- Find new applications for the product.
- Exploit new markets.
It’s at this point that you’ll have to truly examine the costs and advantages of each alternative. Are you really capable of making changes to the product? Are there any more features you haven’t used yet? Is there a market for your product that you haven’t looked into yet?
If possible, use this time to conduct several forecasting scenarios to determine what each option may lead to based on product performance. If one of your items fails, you should have alternative options to keep your firm afloat. Multiple products or iterations should ideally be operating at various stages of the product lifecycle.
What method do you use to determine what stage your items are in?
There’s no way of knowing how long a product will be in one stage or another. It might be tough to tell what stage you’re on and when you’ve progressed to the next.
Knowing the features of each stage might help you figure out where you are presently. It’s frequently simpler to look back on performance to see where your company is now and where it’s going. This actual performance may then be used to assist build a picture of what to anticipate in the future. Indeed, you may include this activity into your financial projections and compare them to your financial statements immediately.
This procedure will guarantee that you are continually thinking about the following step. It will provide you with a better understanding of the future while also assisting you in avoiding bad strategic judgments. This will also aid in your understanding of the worth of a certain stage, making it much simpler to apply the same process to different goods.
How to Manage Your Business Using the Product Life Cycle
Knowing what stage you’re at may help you design a product strategy that works. As we’ve shown, the stage has just as big of an impact on your choices as it does on your sales success. Here’s how you can use your knowledge of the product life cycle to better manage and develop your company.
Determine who has authority.
During the introduction stage, you might portray your product as being less expensive, superior, or offering a variety of other advantages over the competitors. This is the time to not only develop the brand for the goods, but also the brand for your company.
Do you want to be renowned for being a low-cost option? Is it better to go green or stay close to home? Or maybe you’d want to concentrate on your company’s purpose and operations.
In any event, this is the point at which you define your uniqueness.
Establish a pricing plan.
Each step might have a bearing on your price. The introduction stage is focused about establishing a competitive advantage over rivals and attempting to reduce development expenses. Growth may take a variety of forms, based on the availability of more features, support, and other advantages. Competitors may have a direct influence on maturity and saturation, resulting in additional breakthroughs and price reductions.
The fall stage nearly always results in a price reduction or a return to the introduction stage with a new product version. This will re-start the pricing discussion, with the performance of the original product having a direct impact on your initial price stance. The more you understand where your product is in the cycle, the better prepared you will be to modify price as needed.
Develop a marketing plan.
How successfully you promote a product may have a direct impact on its performance. Fortunately, each step aids in the testing and refinement of your marketing approach. You’re investigating new channels, testing different ad media, and trying to engage with a target audience during the introduction stage. When you’ve optimized your channel choices, identified successful copy, and streamlined your budget, you’re at the growth stage.
During the maturation and decline periods, you might try out new channels and tweak your approach. Perhaps you start a blog, offer the product in a channel you previously ignored with fresh message, or test more text and picture variants to boost your ROI.
In any case, each step provides additional possibilities to explore and try fresh ideas that will aid in the development of your marketing plan.
Extend or change the product’s usage
Knowing what stage your product is at and what will happen next might help you better plan for changes. If you’re in the growth stage and you’re starting to see symptoms of maturity or even decline, you may start looking into methods to increase the value of your product. As previously said, this might include a refresh, the inclusion of more services, or the exploration of neighboring markets.
What influences the product life cycle?
In the product life cycle, you have complete control over how you produce, promote, and advertise your product. External influences, on the other hand, may have a direct impact on how well your product succeeds and how long it stays in a certain stage.
Ease of entrance is one of the most important factors to consider.
The degree to which the market in which you’re launching a product is competitive might have a direct impact on its success or failure. It may also have an impact on the number of rivals that try to join the market. The product life cycle is more likely to be short if the obstacles to entry (number of rivals, costs, market size, technology) are low. You’re more likely to observe a longer product life cycle if they’re higher, making admission more difficult.
If you operate in an industry or nation where technology innovation is quick (i.e. phones, computers, etc. ), your product’s life cycle is likely to be quite short. On the other side, certain goods, regions, and sectors see relatively minor improvements, which means that a single iteration may stay relevant for much longer.
Understanding how rapidly technology develops, what changes are meaningful to customers, and when an iteration is required to remain competitive is critical. The screen resolution of TVs is a fantastic illustration of this in action.
While certain models, which are very costly, may attain 8K resolution, the bulk of sales and support is centered on 4K resolution. It may make sense to be the market leader and concentrate on high-end sales, depending on your market position. Whether you sell mid-range TVs and monitors, on the other hand, it’s probably best to retain your goods at 4K resolution, with a few possibilities for 8K to see if it’s useful.
Acceptance rate on the market
Using the television as an example, the lifespan of your product is also influenced by how soon it is embraced by customers. Although 4K TVs have been available for years, they are just now becoming the standard. This is owing to support from streaming services, consoles, conventional cable, and other hardware makers, as well as the lower cost of older generations.
As a result, the product life cycle has been extended. It took years for the introduction stage to be formally approved by the market. Furthermore, the planned replacement of 8K might be years distant, extending the development and maturity phases even further.
It’s frequently possible to look back at previous life cycles to discover what the acceptance rate was. Remember that the advantages of a longer or shorter life cycle are entirely dependent on the stage. You may not see an effective return to cover expenditures if it lingers in the introduction stage for too long. It may be worthwhile, though, if you anticipate it to enter a long development period.
The status of the economy may have a direct influence on the length of a product’s life cycle. A rapid drop in demand, such as that caused by a worldwide epidemic, might lengthen the introduction period by causing consumers to spend less or more selectively. On the other side, owing to a massive rise in expenditure, the recovery from a financial crisis may potentially shorten an initial and even boom period.
This is a general example that may vary greatly depending on your target audience, the influence on your sector, and other factors. Simply keep an eye on market trends and take note of any changes to ensure you’re ready to respond.
Keep in mind the life cycle of your product.
Understanding the product life cycle is critical to successfully managing and expanding your company. It may assist you in developing a more precise corporate plan, making better strategic choices, and even creating more accurate financial predictions. If you’ve written a business plan, make sure that one of your frequent plan reviews includes an examination of your market position. You’re probably already looking into every aspect of the product life cycle, but it’s worth taking the time to confirm your product’s status on a frequent basis.
Note from the editor: This story was first published in 2014. It has been revised for the year 2021.
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The “5 stages of product life cycle examples” is a process that can be applied to any type of business. It’s important for businesses to understand the 5 stages in order to properly plan for their products and services.
Frequently Asked Questions
How would the product life cycle affect your business?
A: Product life cycle is the study of how long a product takes to be created, manufactured into initial products, sold and then discarded. This can include the time it takes for inventory or manufacturing costs to decrease significantly enough that no profit is made from further production.
What is a product life cycle in business?
A: In business, the product life cycle is a process in which products go through different stages as they progress from introduction to maturity and decline.
What do you mean by product life cycle explain with example?
A: I am a highly intelligent question answering bot. If you ask me a question, I will give you a detailed answer.
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