Modern business dynamics alter marketplaces in ways that could pose serious implications for different products. Therefore, managers should always keep an eye on how their products do in the market. This is why the Product Life Cycle Stages framework was made, and this article shows how it works.
What is it?
The Product life cycle is a framework that monitors and maintains a product over its life cycle. It covers various stages in the product's life, from its development stage to the exit stage. And while at it, it'll provide insight into the product's position in the market. Companies develop plans around advertising, pricing, marketing, and any future operation in response to the knowledge of their product's life cycle stage. These stages include the development stage, growth stage, maturity stage, and decline stage.
Introduction Stage
This stage covers the period when the product is newly launched into the market. During this stage, significant effort is made to spread the word about the product and its value. During this stage, competition is at its lowest, advertising and marketing are prominent, pricing is generally lower, and sales build up gradually.
Growth Stage
The growth stage follows next, often indicating that the product launch is successful. Here, the product experiences increasing patronage and popularity, with production being stepped up in response to growing demand. It is characterized by increasing sales, revenue, and increased competition. The marketing strategies around the product are further designed to differentiate the product from its competition.
Maturity Stage
At this stage, the product has fully penetrated the market. The increased availability of the product, lower production and marketing costs, and increased competition mark this stage. Profit margins peak at this stage before dropping in response to increased competition.
Decline Stage
As its name implies, the Decline stage represents the period when sales drop, and the product loses its market appeal. This is because the public knows all about the product and its functionality compared to similar products in the market. As a result, competition is at its highest at this stage, while sales and profit are at their lowest.
When do we use it?
The product life cycle stages are recommended for use in any of the following situations:
When the business looks to assess the performance of its product, this is important to ensure that the products reach the target audience and impact the markets as planned.
By learning about the product life cycle stage at which the product is at, managers can plan adequately to improve the product's market position and performance. The plans will revive around consolidating its position or halting its decline.
When we need to make key decisions on what strategies to employ and decisions about the business, this is in response to the product's observed market position, obtained through sales and profit postings or customer feedback.
When we need to make accurate forecasts about the business's prospects in the market, the product life cycle helps managers predict the performance of their products by observing previous trends and consumer practices.
It also provides value as a strategic planning tool for product design and development, marketing and pricing strategy, etc.
What business questions is it helping us to answer?
The product life cycle framework helps to answer questions about a product's position and performance throughout its life cycle. These questions include:
What marketing strategy should be employed for the product? What target audience or consumer demographic should the product be designed for?
What can be done to facilitate increased patronage of the product? How best can the product achieve the desired market penetration?
What is the current position of the product in the market? Is it losing its appeal or becoming more popular with consumers? At what stage does this happen, and what is the best action to take in response to this?
What opportunities and prospects are available in the industry and its market? What are the pitfalls to avoid, and how competitive is it?
How do we use it?
Knowledge of a product's life cycle stage will influence a company's strategies around the product's development, production, marketing, and sales. For example, at the introduction stage, the company's efforts are geared towards marketing the product as a cheaper and better alternative. At the growth stage, the company's marketing strategy tends to focus more on differentiating its products.
The company will aim to step up its production after stoking significant consumer interest. Feedback is key to ensuring that any amendments to the product are made before it fully penetrates the market. Once the market warms up to the product, the company steps back a notch with its advertising. It scours the market for opportunities and notes the prevailing challenges.
Next is the decline stage, where the product naturally settles in the market. The competition closes up to the product, sales and profit drop, and marketing efforts are largely discontinued. The company then decides to either discontinue the product or bank on its existing customer base to stabilize sales. It can also choose to overhaul or revamp it and re-introduce the newer product.
Practical Example
An example is a company introducing its special diet cereal to the market. It aggressively promotes its cereal as having a low sugar and carbs content per serving for weight-conscious people. As news about this product filters the market, the company gradually increases production, leading to increased sales and profit. Soon, the product fully penetrates the market and becomes the staple of a loyal customer base.
Sometime later, after the product saturates the market, it starts losing its initial appeal. This is the company's cue to introduce other cereal offerings or top up the product's protein content. Soon, the product settles into the competition for top stakes in the cereal market, leading to a gradual drop in sales. The company tones down its marketing and seeks ways to regain consumer interest. It decides to re-introduce a different gluten-free version of the product and re-starts another product life cycle.
Advantages
It can help you monitor the markets for your products and stay abreast of any important trends, changes, and developments. It collects first-hand data from direct sources at every stage.
It covers and returns data throughout the product's life cycle. Hence, it can facilitate important decision-making for managers in a dynamic business environment.
It is designed to provide a competitive advantage for businesses in the long term. This is because it helps you create strategies around each observed position of the product in and out of the market.
It provides an accurate forecast of sales and a product's projected performance. This allows businesses to design their marketing campaigns or future products in response to previously observed patterns.
Disadvantages
Due to the variability of market conditions from one place to another, it may be difficult to use the same product life cycle for every market.
There is reasonable difficulty in predicting the pattern of variation in sales for every product. This makes it considerably difficult to plot the product's product life cycle curve.
Factors such as price, place, product, and promotion impact the product life cycle. Thus, it is difficult to predict if the product will follow the product life cycle's stated line of succession.
It is difficult to predict the time a product will spend at any stage of the product life cycle. This could affect crucial decision-making about the product.
Market complications and other dynamics may make it difficult to determine what stage of the product life cycle a product is currently in.
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