The Important Role of Manufacturing in Economic Development (+gone wrong)
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Read More »The Importance of a Product Lifecycle Strategy (+examples)
If you want to learn how to develop a product lifecycle strategy, you have come to the right place.
That’s because in this article we are going to explain the importance of a product lifecycle strategy and give you some examples.
After all, this important principle affects virtually every business that sells products and services.
A product lifecycle strategy is important for a business to gain a competitive advantage and increase sales revenue. The four phases of a product lifecycle are: 1. Introduction, 2. Growth, 3. Maturity, 4. Decline, and a product’s position in the cycle is key to developing the product lifecycle strategy.
For example, people in Generation Z (Zoomers) who primarily used iTunes may have believed that CDs are a strange idea.
While CDs may be virtually obsolete today and in a declining product lifecycle, CDs once enjoyed a growth and maturity stage in their product lifecycle.
And as another example, before the introduction of CDs, audio tape cassettes once enjoyed a growth phase after they were introduced.
Whether a product enjoys success over decades or begins a decline in sales after a few years in the market is a function of the product lifecycle strategy.
Let’s now review the product life cycle and help you develop this important strategy.
What Is a Product Lifecycle Strategy?
No one enjoys seeing their products become irrelevant or phased out of the market.
But without proper plans and strategies, the success of any product may be short-lived.
That’s why the management, sales and marketing team, and designers must understand the lifecycle of their products to strategize adequately and maintain market relevance.
A good product life cycle strategy is essential for lengthening its relevance, preventing decline, and boosting revenue.
The product lifecycle is a vital management tool outlining the stages a product goes through, from developmental to withdrawal from the market. Although this concept has been around for decades, it is only recently that marketers and management teams have begun exploiting the approach for competitive advantage and revenue enhancement.
Generally, a product is considered to go through four phases in the market- introduction, growth, maturity, and decline.
But some models consider product development part of the lifecycle even though the item or service has not reached the consumers at this stage.
Businesses can use product lifecycles to strategize on marketing, pricing, packaging, redesigning, and expanding into new markets. Essentially, a product’s position in the cycle informs the business strategy.
Here’s a visual from Our World in Data, showing the incredible growth of the population using the Internet, since it was introduced in the 1990’s.
As an example, there are many ways to interpret this for your business. For one, if your business is reliant upon the Internet to gain and or keep customers, this growth curve is highly important to you. Not just in tools your company uses, but also in Internet related products and services you can innovate in order to continue to gain and keep your customers.
Additionally, another great example of a growth phase is the use of mobile phone usage around the world. Here is an example of a growth curve from statistica showing the growth in smartphone subscriptions from 2016 with a growing forecast thru 2027.
It’s this kind of forecast that may help your marketing team to focus on mobile friendly websites and related ways to educate the customer, which is all part of the product life cycle.
But when these numbers start to level off or decline, this is the time for your marketing team to make pivots on their introduction, growth, maturity and product decline plans.
The Four Product Life Cycle Stages
1. Introduction
Consumers encounter the product for the first time. Typically, the company invests extensively in marketing, creating awareness of the product and its benefits. Competition is usually minimal as most competitors focus on existing rival products. Despite lack of competition, the business experiences a negative financial outcome, as the sales are lower and prices are often promotional.
2. Growth
Once the product gains considerable acceptance, it enters the growth stage. Demand and production grow, leading to increased product availability. As the sales volume increases, the product generates higher revenue.
During this phase, a company might invest further in advertising to keep ahead of the competition. Unlike the initial stage, advertising emphasizes the product features that set it apart from its rivals. The development team can also use customer feedback to fine-tune the product.
3. Maturity
A phase whereby the product’s profitability is maximum. The cost of production and marketing decline while sales are at their peak. Similarly, competition is at the highest level, and the company must innovate to secure a significant market presence. Data such as customer demographics and needs play a vital role in strategizing to keep the product in this phase for the longest period possible.
4. Decline
Competitors have had enough time to duplicate a product’s success, leading to market saturation with alternatives. Consequently, the product loses market share, but the business does not respond with more advertising. Instead, the company might revamp the product and re-introduce it to the market or stop production and venture into other products.
What Affects the Product Life Cycle?
The performance and time a product spends in each stage of the life cycle rely on numerous factors. These include market acceptance, ease of competitive entry, variation of customer preferences, and industry innovation level.
Besides your internal metrics, one of the first outside tools to keep an eye on is Google Trends.
Google Trends can help you get a high level view on the overall market trends for your category, product or specific market you compete within.
In this example, we watch “men’s supplements”.
This is one of the categories where we hold a market position. In this case, we notice that the market is fairly steady. While the search seems volatile over the last 5 years, it has a fairly flat and consistent baseline if we were to add a trendline.
Compared to “halloween costumes, you can get a sense for the fluctuations in seasonality and market search trend.
When the market adoption rate is low, the product spends a prolonged time between the introduction and growth stages of the life cycle.
Likewise, easy entry for competitors implies the markets become saturated quickly with a higher probability of consumers changing their preferences.
Such factors shorten the life cycle of products significantly.
Some Product Life Cycle Examples
Every industry is ripe with products and brands in the different stages of the product life cycle. For some, like the new Coke of 1985, their life cycles were complete in days, while others have remained in the maturity phase for decades.
The food industry is a great place to review endless examples of food products in various stages of their lifecycle.
For example, by 1985, Coca-Cola’s lead in the beverage industry was under threat, with many rival products entering the market. To salvage the market share for its beverage, Coca-Cola introduced “new Coke” with a new formula. However, the new Coke was met with numerous protests, and it was only 79 days after its launch that the product’s production halted, ending its life cycle.
Here’s another example of two food products created by a company (which will go unnamed) in the organic foods niche.
This company has two products (out of 1’000’s) that we are watching very closely for their product life cycle.
Both products are successfully serving a core base of happy customers, although these two products are in different life cycle phases.
For your review and for example, here is an analysis of the performance for these two products over the last 3 years to analyze their product life cycle.
As another example, similar to CDs in the entertainment industry, Oldsmobile is another brand currently out of the market. Having produced the first car in I897, the Oldsmobile merged with General Motors in 1908 and built its millionth car by 1935.
The sales of Oldsmobile cars peaked in 1984 when it entered the decline phase, and by April 2004, the production had stopped, taking the car out of the market.
Unlike other antiquated products whose market presence has dwindled and died, Nintendo stands out even with the products from the 80s.
The company employs a vibrant product life cycle strategy by updating its products with the latest technology. It’s for this reason consumers can still enjoy games originally released three decades ago.
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