As consumers, we purchase millions of products each year. These products, like us, have a life cycle. Older, more established products eventually lose favor, whereas demand for newer, more modern goods typically rises quickly after they are introduced.
Because most businesses understand the different stages of the product life cycle and that the products they sell all have a limited lifespan, the majority of them will invest heavily in new product development to ensure that their businesses continue to grow.
The Product Life Cycle refers to the time span between when a product is introduced to consumers and when it is removed from the market. The life cycle of a product is divided into four stages: introduction, growth, maturity, and decline.
This concept is used by management and marketing professionals to determine when it is appropriate to increase advertising, reduce prices, expand into new markets, or redesign packaging. The process of planning ways to continuously support and maintain a product is referred to as product life cycle management.
Products, like our friend the frog, go through various stages of development. The path they take through those stages is referred to as the product life cycle. It begins when a product is first made available for purchase and ends when it is removed from the - real or virtual - shelves.
Each product line has its own product life cycle. The entire process, as well as the individual steps, are never consistent. Some will be more durable than others. Certain items may appear to be stuck in a particular stage indefinitely. Some products, on the other hand, will have very short cycles.
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Once a product is developed, it typically progresses through the four stages of the product life cycle from introduction to decline before being phased out of the market.
Stages of Product Life Cycle
The product development stage is the research phase preceding the launch of a product. Technically, this is not part of the product life cycle, but it is an important step to be aware of.
In a nutshell, it's used to determine a product's viability, confirm when it should go to market, and plan your official launch. At this point, costs are piling up with no corresponding revenue.
Some products require years of development and large capital investment before they can be tested for effectiveness. Because the risk is high, external funding sources are limited. Existing businesses frequently fund R&D with revenue generated by their current products.
It may be prudent for those developing a new product to establish a minimum viable product (MVP) as soon as possible. You only need enough to demonstrate to potential investors and customers how your product will work. The sooner you can validate its market potential, the more likely it is that you will receive investment and launch.
Once a product has been developed, the PLC's introduction stage begins. The product is introduced to the market for the first time at this stage. The release of a product is frequently a high-stakes time in the product's life cycle, though it does not always determine the product's ultimate success.
Marketing and promotion are at their peak during the introduction stage, and the company frequently invests a significant amount of effort and capital in promoting the product and getting it into the hands of consumers. It is, however, frequently a high-spending period for the company, with no guarantee that the product will pay for itself through sales.
The product has been accepted by customers during the growth stage, and you are now attempting to increase market share. That means demand and revenue are increasing, ideally at a consistent rate.
The length of time it takes to achieve consistent growth is entirely dependent on your product, the current market landscape, and the rate of customer adoption. If you introduce a product into an already crowded market, expect competitors to react quickly.
If you enter a market with less competition or are the first to market in a new industry, you can expect a slower response from new or current entrants. In either case, your response during this phase should be to fine-tune your messaging, strengthen your brand's presence, and expand into new distribution channels.
This is also a good time to think about adding additional services to support and differentiate your product. Support services, add-ons, and insurance packages are just a few of the options to consider. Having these additions ready, or at least in the works, can help you better respond to competitors and extend the return on investment (ROI) from a given customer.
When a product reaches maturity, its sales tend to slow, indicating that the market is largely saturated. At this point, sales may begin to decline. At this point, pricing tends to become competitive, and profit margins begin to shrink as prices begin to fall due to the weight of outside pressures such as increased competition and lower demand.
At this point, marketing is primarily concerned with avoiding competition, and businesses frequently develop new or modified products in order to reach different market segments.
Because the market is so crowded, less successful competitors are frequently pushed out of the competition during the maturity stage. This is known as the "shake-out point." At this point, saturation has occurred, and sales volume has peaked.
Companies frequently start innovating in order to maintain or increase their market share, changing or developing their product to meet the needs of new demographics or to keep up with emerging technologies.
The maturity stage can last a long time or a short time depending on the product. For some brands and products, such as Coca-Cola (KO) - the maturity stage is lengthy and drawn out.
During the decline stage, the product's sales and profitability begin to decline. This is primarily because other innovative or substitute products that meet customer needs better than the current product have entered the market. Several strategies can be used during the decline stage, for example:
Reduce marketing efforts and try to extend the product's life as long as possible (called milking or harvesting). Reduce distribution channels gradually and pull products from underperforming geographic areas.
A strategy like this allows the company to pull the product and try to introduce a replacement product. Selling the product to a specialized operator or subcontractor This allows the company to get rid of a low-profit product while keeping its loyal customers.
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From Typewriter, VCRs, AI products to Electrical vehicles, there are many examples where we get to see the Product Life Cycle unfold :
The typewriter is a classic example of the product life cycle in action. Typewriters quickly gained popularity when they were first introduced in the late 1800s as a technology that improved the ease and efficiency of writing.
However, once new electronic technologies such as computers, laptops, and even smartphones were introduced, they quickly replaced typewriters, causing typewriter demand and revenues to fall.
Overtaken by companies such as Microsoft (MSFT) - typewriters are nearing the end of their decline phase, with minimal (if any) sales and drastically reduced demand.
To type in the modern world, almost everyone uses a desktop computer, a laptop, a tablet, or a smartphone. As a result, these products are in the growth and maturity stages of their product life cycle.
Electric vehicle product life cycles are still in their early stages. For years, companies like Tesla (TSLA) have capitalized on rising demand, but recent challenges may signal a shift in that company's strategy.
While the electric car is not necessarily new, the innovations made in recent years by companies such as Tesla to adapt to new changes in the electric car market indicate that the product is still in its early stages.
While AI (artificial intelligence) has been in development (and application) for many years, the industry is constantly pushing the envelope and developing new products that are nearing the PLC introduction stage.
Existing products, such as AI-infused sex robots or self-driving cars, are still in development. Those that have been released to the market are still in their infancy, as they are still being tested and adopted by consumers.
Many of us grew up watching videotapes on VCRs (videocassette recorders for any Gen-Z readers), but you'd be hard-pressed to find one in anyone's home these days. With the rise of streaming services such as Netflix and Amazon, VCRs have been effectively phased out and are in the final stages of decline.
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We’ve given two real life examples where the concept of Product Life Cycle is evident below :
Development: Little is known about the history of Coca-Cola and how the mysterious formula was created.
Introduction: By 1886, the year of its establishment, the brand appeared to have found the right project. Coca-Cola was consumed in all 50 states less than ten years after its introduction.
Maturity: It's impossible to say when the brand reached maturity, but it's safe to say that it has spent the majority of its history up to this point.
Decline: Coca-net Cola's operating revenue has been decreasing since 2012; while a small decrease is expected for the maturity stage, investments in marketing and new products must continue.
Traditional flip flops were inspired by Japanese sandals made of wood or straw; in Brazil, rubber was chosen as the material because it was thought to have the highest audience acceptance.
Introduction: Whether on purpose or not, its market debut with classes C, D, and E was a huge success. Growth: For the majority of their existence, Havaianas flip flops were in the growth stage, eventually dominating over 90% of the flip flop market.
Maturity: Maturity came only in the 1990s, with new product design aimed at a different audience and significant marketing investment, particularly with the now-classic TV commercials that were fun and always starred famous actors. There are currently no indications that Havaianas flip-flops are on the decline.
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We’ve listed some significant factors that affect the Product Life Cycle below :
The competitiveness of the market into which you are launching a product can have a direct impact on its success or failure. It can also have an impact on the number of competitors who try to enter the market.
The product life cycle is more likely to be short if the barriers to entry (number of competitors, expenses, market size, technology) are low. If they are higher, making entry more difficult, you can expect a longer product life cycle.
Continuing with the television analogy, the lifecycle of your product is also determined by how quickly it is accepted by consumers. 4K televisions have been available for years, but are only now becoming the norm. This has resulted in a somewhat extended product life cycle.
It is frequently possible to investigate historical life cycles to determine the acceptance rate. Also, keep in mind that the advantages of a longer or shorter life cycle are entirely dependent on the stage. However, if you anticipate it entering a long growth stage, it may be worthwhile.
If you work in an industry or country where technology advances at a rapid pace (for example, phones, computers, etc.), the life cycle of your product will most likely be very short. The key here is to understand how quickly technology changes, what changes are important to consumers, and when an iteration is required to remain competitive.
While some extremely expensive models can achieve 8K resolution, the vast majority of sales and support are centered on 4K resolution. Depending on your market position, being the market leader and focusing on high-end sales may make sense.
The current state of the economy can have a direct impact on the length of a product's life cycle. A sudden drop, such as that caused by a global pandemic, may lengthen the introduction phase due to less or selective consumer spending.
However, the recovery from a financial crisis can also shorten an initial and even growth phase due to a massive increase in spending. This is a broad example, and it is entirely dependent on your target audience, the impact on your industry, and so on. Simply keep an eye on market trends and take note of any changes to ensure you're ready to adjust as needed.
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The product-life cycle guides a company as it moves a product from introduction to growth and maturity, and finally to decline. It is not intended to be a rigid tool, and it is critical that common sense and a general understanding of the market be used in conjunction with the life cycle.
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