What is a product life cycle? – table of contents:
- What is a product life cycle?
- Stages of a product life cycle
- Factors affecting a product life cycle
- The BCG matrix vs. the Ansoff matrix
- 4 key benefits of product life cycle management
- A product life cycle in examples
What is a product life cycle?
The term product life cycle is used to describe the stages that a product goes through. It begins with the creation of the concept and its implementation in the market, and ends with its withdrawal from it. Depending on the specific industry and the type of the offered goods, this period can last from a few weeks to many years. Being aware of the various phases of the cycle helps you adjust the product management strategy to use the product to its full potential and achieve maximum profits.
Stages of a product life cycle
The stages of a product life cycle determine what actions you should take at a particular time. We can single out 5 typical phases:
Before including any product in your offer, you must check whether the concept you’ve come up with has a chance to be implemented and remain competitive. Spending time and money on research, testing, and developing a strategy is essential to respond efficiently to the rapidly changing economic environment in the subsequent phases.
The beginnings can be difficult because, despite the costs involved, you are not yet in a position to generate profits. Therefore, you must take into account the risk of failure. However, learning about the needs and opinions of your target audience will allow you to make changes that can bring tangible benefits in the future.
The idea of the introduction stage is to attract the potential customers’ attention, to encourage them to try the product, and to make your presence felt in the market. Initially, sales will be low, which is why it is so important to invest in your marketing campaign.
In order to improve your results, you can offer discounts, free samples, a trial period or a refund in case customers are not satisfied with your offer. In this way, they will believe that they are not taking much of a risk when deciding to make a purchase. Moreover, you can use one of the pricing strategies:
- Price skimming, also known as skim pricing – it involves setting a high price to create a prestigious brand image, and then lowering it as the market share increases.
- Penetration pricing – in order to quickly take a dominant competitive position, you can set low prices for your product.
At this stage, your offer has gained consumers’ recognition – profits, demand, but also competition are getting bigger. Your rivals may be entering the market with similar products, so in order to sell your product you have to stand out and highlight the benefits of choosing your services. You can do this by improving your customer service, enhancing or adding new product features.
After rapid growth, the market becomes saturated at some point. Your sales levels are stabilized. In order to boost sales, it is necessary to focus on diversifying the offer, increasing awareness and loyalty to the brand, and improving the functionality of a product. The competition is still fierce, therefore weaker players may not be able to withstand the pressure and leave the market.
There comes a moment when the life cycle of your product is coming to an end. New innovations, solutions, and substitutes may appear. Other companies will offer better prices or alternatives to the existing offer. It is no longer profitable to invest in your product, so you need to reduce its production gradually so that it does not start making losses.
Factors affecting a product life cycle
- Economic situation – the state of the economy and prevailing trends shape many industries, as well as the demand and supply for particular products. A thriving market can facilitate the product launch and extend its growth stage.
- Barriers to market entry – the more difficult it is to enter the market, the longer the product life cycle may be, and vice versa. It depends on the level of competition in the industry.
- Technological progress – intense technology development can result in a shorter product life cycle, so it is important to constantly improve your products.
- Consumers’ attitudes – the length of each stage depends on how quickly consumers will accept your product and what opinions they have about it.
The BCG matrix vs. the Ansoff matrix
Knowing the individual phases of the product life cycle and determining which phase your product is currently in, you can further use the BCG matrix or the Ansoff matrix. They provide information on market saturation and growth, and make it easier to plan your strategy. Combining these methods with each other will fill any information gaps and give you a more complete picture of the current situation.
4 key benefits of product life cycle management
Keeping a close eye on the product life cycle and responding to changes accordingly can bring a lot of benefits. By managing the product life cycle, you can:
- Align marketing messages to your audience,
- Make smart and informed strategic decisions based on the various stages of the product life cycle,
- Gain loyal customers and make your product more attractive in the market, Increase profits and ROI of the company.
A product life cycle in examples
The machine gained recognition in the late 19th century, as it significantly improved the writing process. However, with the development of technology, it quickly went from the growth stage to the decline stage, which generated little profit. Computers and telephones, etc. became its competitors, dominating the modern market and, at that point, being at the maturity stage in the product life cycle.
F.W. Woolworth Co.
Founded in 1979, Woolworth was a retailer of low-priced items and one of the pioneers of the so-called dime stores, or stores that sell most of their goods for 5-10 cents. It was among the most successful U.S. companies in the industry, setting trends and creating the retail model that is used around the world today.
However, due to the growing competitive pressure, the company decided to diversify its offer. It decided to implement various single-line stores with, among others, sports shoes, jewelry, outerwear, which were to be located in shopping malls. Eventually, this solution did not last in the prevailing market conditions, and in 2001 the company changed its name into Foot Locker, which sells a sports assortment to this day.
Understanding the individual stages of the product life cycle is a key aspect of creating an effective management strategy. Analyzing the components of a company’s portfolio allows you to take an objective look at your market position and keep it strong for a long time. Moreover, it can protect you from possible financial losses when the product becomes less popular and other competitive solutions appear in the market.
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