Product life cycle — everything you need to know about it
Every product that enters the market always has a certain lifespan. At some point, it becomes obsolete and is replaced by a more modern and convenient analog. This process is called the product life cycle. In the article, we will consider the concept of LC, its main stages and types, as well as analyze its advantages and disadvantages.
What is the product life cycle?
The product's life cycle is the period during which the product is on the market: the product's introduction, the market saturation, and the sale's end.
In other words, the life cycle is the period of a product's existence on the market.
The essence of the concept: sooner or later, every product will be forced out of the market by other, more advanced products. These terms apply to the product's kind, type, class, and specific model and brand.
The life cycle of all products is different - it depends on the product type and the market where it is placed. In the modern world, one can notice such a trend of accelerating the lifespan of a product. Every day, new products that are cheaper or better than their predecessor enter the market.
A simple example is smartphones, whose specifications are improving yearly.
The classic curve of product development stages looks like this: below - is the life timeline of the product, and on the left - is the sales volume. There are two levels on this chart - sales and profit, as well as their ratio at each stage. In the following sections, we will discuss each step in more detail.
The Importance of the Product Life Cycle in Marketing
Knowledge of the life cycle helps to understand how best to present a product at different stages, ensure its long existence, identify signs of a glut in the market and build a promotion strategy correctly.
Also, the concept will help:
- Understand how a particular product fits into the life cycle diagram.
- Determine the level of sales and profit at what stage your product is.
- Identify the first signs of the transition to a new stage and take the necessary measures to manage the product in time.
- Determine the competitiveness of the product.
- Predict the dynamics of sales.
- Identify the strengths and weaknesses of the company.
- Manage inventory - how to use production capacity at a particular time.
Stages of the life cycle
Now let's take a closer look at all stages of the product life cycle - from the idea of a product to its withdrawal from the market.
The first phase is product development. It includes the idea of a product and research work: studying a niche for a business, market, target audience, and competitive environment.
Your task at this stage is to identify the development potential of the product, test it in a focus group, justify beneficial characteristics and analyze weaknesses using a SWOT analysis. It will help to think over marketing strategies and options for further promotion.
The second phase is the implementation and implementation of the product. The product is presented to the audience, and its usefulness is shown and actively promoted on the market using marketing tools: advertising campaigns on search, social media, email newsletters, valuable posts and videos, offline promotion - banners, articles in print media, and booklets.
The company monitors the behavior of consumers and their ways of getting to know the brand and needs, studies the actions of competitors, and responds to market changes promptly. And also monitors the channels of communication with customers and improves them.
At the start, the following promotion strategies are often used:
- Penetration strategy. They make a high price, which they reduce over time. It is beneficial if there are few competitors in the market and the target audience is ready to consider more expensive alternatives.
- Skimming - a gradual increase in the cost of goods. This strategy is suitable for a niche with many competitors - a brand, at the start, can benefit by lowering the average market price.
The income of the organization directly depends on the effectiveness of advertising campaigns. At the same time, the volume of products produced is small - the main thing is to organize business processes and not overload production capacities properly. Otherwise, the company will go bankrupt and will not have time to achieve its goal.
The third phase is growth. If your product has successfully occupied a niche, demand will begin to grow steadily, as will the organization's income. The company increases production capacity and produces more effectively. Due to this, it will be possible to reduce the unit cost of goods for the final and wholesale consumers.
Growth is possible when a brand attracts new customers and retains old customers. Competition is increasing, so the company needs to respond to the actions of rivals: seasonal discounts, promotions, sweepstakes, personal offers, and bonus cards.
The fourth phase is the saturation of the market with a product. The manufacturer covers most of the market. Demand stops growing; goods are produced large quantities, and profits remain high.
Loyal consumers and regular customers surround the company. At this stage, there is a sales peak, and the life cycle graph curve becomes straight.
Here, reviewing the product's characteristics and returning to the development stage to improve the product or change the promotion strategy will be relevant.
You can return to the growth phase:
- New product properties.
- Large-scale advertising campaigns and collaborations.
- Connecting new distribution channels.
- Access to the international level.
- Real customer reviews.
- Product improvement.
- Rising prices.
- Improving the quality of goods.
- Interaction with opinion leaders.
Also, in this phase, the reaction of competitors increases, so it is essential for the company to keep the attention of consumers and quickly respond to market changes: reduce costs, develop a loyalty program, and modify the product.
The fifth phase is the attenuation of the product life cycle. Consumers lose interest in the product, demand falls, and the manufacturer fails in sales. The company may still spend energy on producing goods or selling off the leftovers.
Exit from the market
Profit drops to zero, or the company goes negative. The manufacturer withdraws the product from the market - and there are two ways: he redesigns the business or completely closes the direction.
The laws of the product life cycle
In this section, we looked at the laws that affect the life cycle of a product.
Law of Social Development
This law is based on the fact that development has accelerated - and every day, a new product enters the market, which in some ways is better than its predecessors. The idea is this: companies at the product development stage must consider all the options for improving the product and its promotion on the market.
Product Life Cycle Types: Base Curves
We have already covered the classic life cycle curve above, but this is not the only way a product can develop. In this section, we will look at five primary angles that you may encounter in practice.
Shows a long period of the growth phase - high demand for the product, stable growth in profits and sales.
This curve is typical for popular products with long and stable production, distribution, and sales processes. Similar indicators can be achieved by market leaders, for example, Coca-Cola.
It is also called the "growth-decline" curve. The product shows rapid growth and the same decline in dynamics and, at the same time, achieves further stability. It means that the product becomes hype for a certain period but subsequently loses popularity, and users no longer see the need to purchase the product.
Examples. Such a curve is typical for clothing brands when a new item enters the trend stage, but not everyone is ready to wear it - and only brand fans buy the product. It can also be attributed to goods not included in the mass market: tape recorders, spinners, MP3 players, and e-books, now bought only by fans.
It is also called a recycle curve. The model shows the demand for a product renewed after a specific time.
The curve is typical for seasonal goods, fashion trends, and trends: in summer - mosquito spray; in winter - snowboarding; in spring - jeans fashion as well as the interest in fan service from popular franchises when updates and reboots happen, like Pokémon, The Lord of the Rings, and Star Wars.
How to extend the product life cycle
Above, we have already considered options for how one or another stage of the life cycle can be extended. In this section, we have collected all the ways:
- Changing the characteristics of the goods.
- Development of a new design - rebranding.
For example, Procter & Gamble rebranded to appeal to a new audience and create a different image of the Old Spice brand - "deodorant not for old people."
- Launch of a large-scale promotion.
- Organization of commercial or social events.
- Introduction of additional services or goods to the main product.
For example, Apple's current novelty is tracker key fobs that help track the location of Apple devices, wallets, and keys and see the area of your friends and relatives.