What Is A Product Life Cycle?
The term product life cycle refers to the length of time from when a product is introduced to consumers into the market until it’s removed from the shelves.
This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging.
The process of strategizing ways to continuously support and maintain a product is called product life cycle management.
A product life cycle is the amount of time a product goes from being introduced into the market until it’s taken off the shelves.
There are four stages in a product’s life cycle: introduction, growth, maturity, and decline.
A company often incurs higher marketing costs when introducing a product to the market but experiences higher sales as product adoption grows.
Sales stabilize and peak when the product’s adoption matures, though competition and obsolescence may cause its decline.
The concept of product life cycle helps inform business decision-making, from pricing and promotion to expansion or cost-cutting.
How the Product Life Cycle Works
The product life cycle is defined as four distinct stages: product introduction, growth, maturity, and decline. The amount of time spent in each stage will vary from product to product, and different companies have different strategic approaches to transitioning from one phase to the next.
As mentioned above, there are four stages in a product’s life cycle – introduction, growth, maturity, and decline – but before this a product needs to go through design, research and development.
Once a product is found to be feasible and potentially profitable it can be produced, promoted and sent out to the market. It is at this point that the product life cycle begins.
The various stages of a product’s life cycle determine how it is marketed to consumers. Successfully introducing a product to the market should see a rise in demand and popularity, pushing older products from the market.
As the new product becomes established, the marketing efforts lessen and the associated costs of marketing and production drop.
As the product moves from maturity to decline, so demand wanes and the product can be removed from the market, possibly to be replaced by a newer alternative.
Managing the four stages of the life cycle can help increase profitability and maximise returns, while a failure to do so could see a product fail to meet its potential and reduce its shelf life.
Writing in the Harvard Business Review in 1965, marketing professor Theodore Levitt declared that the innovator had the most to lose as many new products fail at the introductory stage of the product life cycle.
These failures are particularly costly as they come after investment has already been made in research, development and production. Because of this, many businesses avoid genuine innovation in favour of waiting for someone else to develop a successful product before cloning it.
Stages Of Product Life Cycle
here are four stages in a product’s life cycle:
- Introduction,
- Growth,
- Maturity, And
- Decline.
A company often incurs higher marketing costs when introducing a product to the market but experiences higher sales as product adoption grows.
The stages of the product life cycle include:
#1. Development stage Or Introduction Stage
The first stage of the product life cycle is the development stage. This is the process of figuring out what type of product you want to introduce to the market.
For example, you might do some market research to take a look at opportunities for potential growth. Then, you might take a look at the capabilities of your company to figure out how you can create a product that has been designed to meet those needs.
There might be a lot of testing that takes place during this stage, and you will work hard to figure out what product you want to roll out. Based on the research you have conducted, you will customize your product to address customer pain points before releasing it.
#2. Growth stage
After you have introduced the market to your product for the first time, he will watch the product become more popular. You need to focus on your promotional strategy and growth marketing to generate as much interest in your product as possible.
As the product becomes more popular, you might start to increase online sales. Other companies are going to start to take note of the product you have released, and they may change their marketing strategy to try to tamp down some of your sales.
As the market for your product expands, you may tweak some of the features. That way, you can make it more appealing based on the feedback you get from your customers.
#3. Maturity stage
As the industry begins to reach market saturation, you will arrive at the maturity stage. This is a sign that it is becoming more competitive in the market, particularly as you spend more time fending off competition.
You might even notice that your sales start to slow down. Your sales numbers do not necessarily start to decline, but they are not increasing as quickly as they were before. You may want to invest in some product bundling to convince more people to purchase the product you sell.
#4. Decline stage
Even though you will do everything you can to keep your product alive, including product recommendations, your product will eventually decline.
No product is going to stay on the market forever. You might find that the operational costs are too high, and you might realize that there are better products coming on the market.
When a product has reached this stage, your market share begins to drop, and competition begins to deteriorate. You may also realize that there is a change in consumer behavior, and not as many people are interested in the product anymore.
This is just a general overview of a product life cycle. Notice that there is nothing that says how long each of these stages is going to last.
There are some products that might stay on the market for a few months, and there are other products that might stay on the market for a few decades. By figuring out the product life cycle, you will have an easier time figuring out how to respond to certain situations.
Product Life Cycle Strategy and Management
Having a properly managed product life cycle strategy can help extend the life cycle of your product in the market.
The strategy begins right at the market introduction stage with setting of pricing. Options include ‘price skimming,’ where the initial price is set high and then lowered in order to ‘skim’ consumer groups as the market grows.
Alternatively, you can opt for price penetration, setting the price low to reach as much of the market as quickly as possible before increasing the price once established.
Product advertising and packaging are equally important in order to appeal to the target market. In addition, it is important to market your product to new demographics in order to grow your revenue stream.
Products may also become redundant or need to be pivoted to meet changing demands. An example of this is Netflix, who moved from a DVD rental delivery model to subscription streaming.
Understanding the product life cycle allows you to keep reinventing and innovating with an existing product (like the iPhone) to reinvigorate demand and elongate the product’s market life.
Examples Of Product Life Cycle
Examples of products that have gone through a full product life cycle include typewriters, compact discs (CDs), and video home systems (VHS).
#1. Cable TV
Since the introduction and growth of online video streaming platforms like Netflix, Amazon Prime, and more, cable TV has started seeing a decline as more people cut the cord and turn to online streaming. Here’s an overview of how this product moved through each stage of the cycle:
- Introduction: Cable TV was first introduced in the United States in 1948.
- Growth: Cable TV started gaining traction several years later, and by 1989, more than 53 million U.S. households had cable television.
- Maturity: Cable TV reached its maturity stage in the 1990s, with 60% of U.S. households having a subscription.
- Decline: Cable TV started experiencing a decline around 2015 as more households opted to make the switch to cheaper and more convenient online streaming options.
#2. Video Home System (VHS)
Before DVDs became popular, a VHS was one of the only ways you could watch your favorite movies whenever you wanted, granted that you owned the VHS tape.
- Introduction: The VHS was first introduced to consumers in 1976.
- Growth: The VHS dominated the home movie market for several decades after its introduction, with millions of American households owning the device along with a collection of VHS movies.
- Maturity: The VHS reached its maturity stage in the early 2000s, with 83% of Americans owning the system.
- Decline: The VHS began its decline around 2003 with the introduction and popularity of DVDs and online rentals.
#3. Typewriters
Once the most popular writing method, typewriters began to lose traction as new technologies entered the market.
- Introduction: The first commercially made typewriter was made in 1868 by Christopher Latham Sholes, Carlos Glidden, and Samuel W. Soule.
- Growth: The typewriter quickly became a must-have writing product for homes, offices, colleges, and more.
- Maturity: The typewriter was a dominant writing product up until the 1980s.
- Decline: Typewriters went into decline with the spread of word processing systems in the 1990s.
#4. Compact discs (CDs)
Do you remember owning a CD collection of your favorite songs and albums? Portable CD players and in-home CD entertainment systems were once the best way to listen to music before advancements in technology like smart phones, music streaming platforms, and Bluetooth speakers and devices.
- Introduction: CDs were first introduced to consumers in 1983.
- Growth: CDs quickly become a popular way to store and listen to music, with many households investing in CD collections and portable players to listen to music anywhere at any time.
- Maturity: CDs reached their maturity around the late 1990s and early 2000s.
- Decline: CDs started to decline in 2003 with the introduction of new technology like the iPod that made listening to music cheaper and easier.
Importance of the Product Life Cycle
Product life cycles are used by management and marketing professionals to help determine advertising schedules, price points, expansion to new product markets, packaging redesigns, and more.
These strategic methods of supporting a product are known as product life cycle management. They can also help determine when newer products are ready to push older ones from the market.
The following are some of the key reasons why product life cycle management is essential:
#1. Maximizing Profits
By understanding the product life cycle, companies can maximize profits by adjusting pricing strategies, reducing costs, and focusing on high-margin products during the maturity stage.
Companies can also identify new growth opportunities during the introduction and growth stages by investing in research and development or expanding the product line.
#2. Meeting Customer Needs
Product life cycle management allows companies to identify and meet customer needs throughout the product’s life cycle. During the introduction stage, companies can gather feedback and make adjustments to the product to meet customer requirements.
During the growth stage, companies can improve product features and quality to meet changing customer needs. During the maturity stage, companies can focus on customer retention by providing excellent customer service and enhancing the product’s value proposition.
#3. Managing Risk
Product life cycle management enables companies to manage risks associated with product development and marketing. By understanding the product life cycle, companies can make informed decisions about product investments, distribution channels, and marketing strategies.
This reduces the risk of investing in products that may not be successful or failing to adapt to changing market conditions.
#4. Improving Sustainability
Effective product life cycle management can also help companies improve their sustainability by reducing waste, minimizing environmental impact, and promoting responsible disposal.
By designing products that are environmentally friendly and promoting sustainable manufacturing practices, companies can improve their reputation and reduce their carbon footprint.
When to Use the Product Life Cycle?
Business owners and marketers use the product life cycle to make important decisions and strategies on advertising budgets, product prices, and packaging.
Businesses use the product life cycle to achieve the following:
- Establish competitive authority. If your product is new and recently introduced to the market, you can advertise it as a new and improved alternative to an existing product. If the product is established, you can vouch for its long history of use in your branding.
- Decide on a pricing strategy. Depending on the life cycle stage your product is in, you’ll choose how to price the product. A new product may be priced lower to entice more buyers, while a product in the growth stage can be priced higher.
- Create a marketing strategy. Your product life cycle stage will determine which strategy to pursue. Maturity and audience knowledgeability play a big role in the type of content you publish on your site and social media profiles.
- Respond before the product begins its decline. There’s no worse feeling than watching your product slowly become obsolete or be displaced by a competing product. By keeping the life cycle stages in mind, you can create a strategy that keeps you ahead of the curve as you reach the saturation and decline stages.
The product life cycle benefits businesses because they can shift their wording and positioning to best market the product at the stage it is in. If your product has recently been introduced and you try to market it as a long-established solution, consumers will see right through it and trust you less as a result.
Advantages of Using the Product Life Cycle
Here are just some of the benefits companies can enjoy with strategic and well thought out Product Life Cycle Management:
- Reduced time to market
- Reduced market entry costs
- More efficient and profitable distribution channels
- Higher return on investment from promotional campaigns
- Extend the lifetime of your product by adapting your approach as it moves through the lifecycle
- Orderly and profitable end of life product management
You can benefit from a product life cycle in the following ways:
- Strategic planning: It helps in strategic planning, as companies can expect growth and make long-term plans on investments, product development, resource allocation and marketing. Depending on which stage the product is in, you can plan efficiently, like increasing investment and marketing when a product is in the growth stage.
- Sales forecasting: Product life cycle promotes easy sales forecasting. You can know the progression of a product and the sales it will achieve through the product life cycle from experience.
- Learning from previous product life cycles: It improves processes, since companies can develop better strategies and avoid common pitfalls by learning from similar products’ earlier cycles. You can determine the product stage and plan mitigation measures to ensure success.
- Competitive advantage: The product life cycle helps companies analyse markets and set strategies ahead of competitors. They can gain insight into their competitors’ product stage by examining their sales data and taking measures to stay competitive, such as increasing advertising or creating new products.
- Target marketing and positioning: The product life cycle enables companies to establish a brand image and target the right audience. It can also provide insight into which markets to venture into and stay competitive.
- Product end: Using the product life cycle lets managers determine when to discontinue and introduce new products, especially when they decline and fall below market average. The cost of investing in marketing may become too high compared to returns.
Limitations of Using the Product Life Cycle
You may encounter the following limitations when using the product life cycle, which may require proper mitigation measures to succeed:
Delays and fluctuations in sales data: The product cycle depends on sales data for analysis and forecasting, which is prone to delays, fluctuations and unavailability. Such occurrences can make predictions imprecise since the movement of goods sometimes involves delays in analytics, seasonal promotions and returns from defects in production.
May not apply to all products and services: The product life cycle does not apply to brands or services such as computer software and mobile network, which keep changing and require frequent updates. Though products some brands come and go, the brands remain.
Market conditions may vary: It may become a challenge to learn from previous product life cycles since market conditions in different regions differ. Products that move fast in some areas may be slow moving in other areas due to varying consumption patterns.
Effect of other marketing elements: Other marketing mix elements affect the product life cycle analysis besides the product itself. They include price, promotion and place.
Limitations in decision-making: If the product life cycle uses imprecise data, it may affect effective decision-making and result in an inappropriate course of action, including extensive marketing and development or premature product exit. You may experience such instances when there is insufficient data for comparison, and require flexibility in adopting effective strategies to salvage situations.
International Product Life Cycle
The international product life cycle (IPL) is the cycle a product goes through in international markets. As products begin to mature and companies want to avoid the decline stage, they’ll typically begin to explore new markets globally.
When products reach mass production, manufacturing and production shift to other countries as well.
The international product life cycle stages are identical to that of a normal product life cycle. The development stage looks different, however, because local customs and regulations can affect how long it takes to bring the product to a new marketplace.
However, once you lay the groundwork in a new marketplace, your competitors will be sure to follow, and the life cycle stages will continue up until saturation and eventually decline.
Your option is to either expand into another market or learn from prior mistakes and innovate before the decline stage rolls around.