Every phase of the product life cycle has its risks, opportunities, costs, which vary from one product to another. Each product has a difference in duration in which it stays in a particular life cycle stage. Few products may take more time to get into the growth and maturity stage than other products depending on the need and the marketing of the product. There are various opinions on whether there are four, five, or six stages of a product life cycle. Here we discuss the five stages of the product life cycle which begin from product development and end in the decline of the product.
1 . Development
Before a product is built, the Developers and creators research the product and find out the requirements of the product. In this stage, the team creating the product knows about the viability of the product. It also gives an idea about whether the product should go to the market and how the team should approach the official launch. This stage requires a large amount of funding, and there are more costs than corresponding revenue. Some products require a large amount of capital for research and development which makes the risk high and outside funding limited.
However, many companies often give importance to research and development as this helps the company to innovate new features and prevent the product from declining. They fund the development process from the revenue from the current products. An entrepreneur who starts a company typically funds the business from their resources. It is always advisable to develop a minimum viable product (MVP) as early as possible for any product creators who are building new products. MVP refers to the prototype, sketch, sample version of the product itself which is enough for the potential investors and customers to understand the product. The earlier the startup or the organization can validate the market potential of the product, the sooner they can land on investment and launch the product.
2 . Introduction
The introduction is the second stage of the product life cycle where the developed product is launched in the market. The product launch is a high-stakes time in the product's life cycle although it does not solely determine the product's eventual success. Marketing and promotion of the product are at their peak during the introduction stage. The company invests more in promoting the product and getting it into the hands of the customers. This may be through free sampling, offers, discounts, or formal launch events such as Apple's new product launches where they highlight new features of their new devices which will be released soon. The companies also get their intellectual property rights protection at this stage.
Companies make a note of the feedback of the consumers and get a sense of how the customers are responding to the product. They understand whether the users like it and how successful it may be in the future. However, the introduction stage is a phase of a product life cycle that has the most expenses and the company does not have any guarantee that the product will cover the costs incurred through its sales. The primary goal of the introduction stage is to build a demand for the product and introduce it to the consumers. In this phase, the company hopes that the product will later cash in as it grows popular among consumers.
3 . Growth
This stage occurs once the product has been accepted by the customers and now the company is striving to expand its sales and increase its market share. The demand for the product and the revenue generated by the sales of the product grows at a steady rate. The length of the steady-state of growth entirely depends on the product, the adoption rate of the customers, and the current market landscape. If you are launching a product that already has competition in the market, you would see your competitors reacting quickly. Likewise, if you have entered a market that has lesser competition or you have a unique product that has never been introduced, you will see a slower response from the consumers.
The primary aim of the growth stage is to fine-tune the messaging and create a brand presence in the market. The company aims to expand its sales through new distribution channels. In this stage, the company also considers adding new features and services in their products to differentiate its products from others in the market. Add-ons, support services, insurance packages, etc are a few additional services that a company considers. These additions would be a great help to compete with the other competitors and extend the return of investment from a given customer.
4 . Maturity and Saturation
In this stage, the product has established itself in the market and the sales will level off. This does not mean that there are no sales taking place. This stage implies that the sales and growth are not similarly taking place as that of the growth stage. If you have launched your product at higher prices, you would lower the prices, offer free additions, and make similar adjustments such that your products are competitive. By now the company has understood the mistakes they made in the manufacturing and other processes and can effectively avoid them and save costs in each department. The cost of a product tends to decline as the overall expenses of the product also decline. The expenses of marketing the product are also more efficient as by this stage the company has understood the ways they can reach a larger number of consumers. At this stage, it may not look like there are not more sales occurring and the company is not growing in volume; however, likely, the company is the most profitable at this stage.
It is worth remembering that the competitors of the company have also solidified their ground and have been offering additional services at this stage. They have taken a portion of the market which would lead to flattening of the curve of your product life cycle. Most of the consumers are already using a version of the product you have to offer and have already developed a brand preference. At this stage, adjustments to your products or services that accompany the product should be a priority. If the product has reached a stage where there cannot be any more adjustments, then the services, messaging, and add-ons of the product should be focused entirely. Small or incremental changes in the product would also make a large difference when accompanied by new features or benefits. Video game consoles such as the new Nintendo Switch OLED edition are the best example where the only update is that the screen is slightly larger and crisper.
5 . Decline
If your product does not become a preferred product in the market, then it will eventually decline in the market. The decline stage is associated with decreasing revenue which occurs due to high competition, market saturation, and changing customer needs. At this stage, the company follows any of the below options.
- Sell the product's manufacturing rights to another business
- Find new uses for the product
- Discontinue the product
- Tap into new markets.
The company has to estimate the costs and benefits associated with each option. The company has to look at all the options possible such as revising the product, adding new features, exploring new markets where the product is not introduced, etc. Based on the product performance, you have to run different forecasting scenarios. Hopefully, your company builds other products to sustain and support your business when this product declines. Ideally, a company will have different products which have different product life cycles at a given interval.
Examples of Product Life Cycle
1 . Typewriter
When the typewriter was released in the late 19th century, it grew in popularity as a technology that improved the efficiency of writing. However, new technology such as computers, laptops, and even smartphones have replaced typewriters which caused their demand and revenue to drop off. Although typewriters are still available today, they are at the end of their decline phase. In the late 90s where technology was introduced, the typewriter was experiencing a growth and maturity phase. Companies like Microsoft introduced computers, desktops, laptops, etc. which caused the decline of the typewriters. The desktop, laptops, and computers are experiencing a growth and maturity stage at present.
2 . Video Cassette Recorders
VCRs were at the peak of sales almost a decade ago but now they have almost vanished from everyone's home. With the rise of popular streaming services such as Netflix, Amazon Prime, etc. VCR is at the end of its decline stage. Once, VCR was a groundbreaking product but now it is in very low demand and does not bring as much revenue to sustain the business.
3 . Electric Vehicles
As inflation hikes up petrol prices, many people are turning towards electric vehicles which are at the growth stage of the product life cycle. Companies like Tesla have been dominating the market and capitalizing on the growing product for years. The new changes in the electric car are according to the needs of the consumers which signals that the product is in its growth phase.
Every product has its product lifecycle; it becomes crucial for companies to know which stage of the product life cycle their products stand such that they adopt the changes accordingly. Knowing about the product life cycle is essential whether you are developing a new product or working with a mature one. The life cycle could be used for marketing campaigns and will help you dictate how you inform the audience about the product. It also helps you to position yourself appropriately in the marketplace. Also, the company can understand that they are approaching the decline stage and can find ways to avoid it. Hence, by keeping the product life cycle in mind, companies can spend their revenue on better marketing campaigns which will help them increase their return on investment.