Today a lot of people know about the concept of the product life cycle and understand what it is, but hardly anybody seemed to use this concept in any effective or productive way. The life story of the most successful product is presented and analyzed by the marketers as a history of its passing through a certain number of recognizable stages. Product Lifecycle is the process that represents how a product goes through when it is first introduced into the market until it declines over a certain period of time or is rejected by its customer from the market. The life cycle has four stages in it, the introduction stage, growth stage, maturity stage, and decline stage.
While some products stay in a prolonged maturity state in the market like Microsoft, Apple, Amazon, etc, the majority of the number of products eventually phase-out of the market, and the reasons depend on several factors including saturation in the market, increased competition, decreased demand, not enough diversification and dropping sale.
Stage 1. Introduction Stage
- This is when a new product is first introduced to the market before there is a proven demand for that particular product. In this stage, the product is being released into the market, and it is often at high-stakes in the product’s life cycle and usually takes a little longer before it settles down and is accepted in the market.
- At this stage, costs for different operations are accumulating with no corresponding revenue generation. Some products require years and large capital investment to develop and penetrate into the market and then test their effectiveness.
- The risk incurred is high as funding and loan sources are limited, so in this stage, the owner or the team is typically funding the development of the product from their own personal resources, but the idea of the product and the approach may differ.
- For example, Self-driving cars are still at the development stage, but there is a possibility that several firms hope to be able to sell these cars to early adopters.
Stage 2. Market Growth
- Demand begins to accelerate and the size of the total customer base expands rapidly for this product. The marketer also called this stage the “Takeoff Stage.”
- By this market growth stage, consumers are already considering the product and started buying and using it thus results in increased sales. Other companies or competitors in the market become aware of the product and its space, which results in drawing attention to the market and increasingly pull in the shared revenue of that particular segment.
- If the product gains major competition the company will invest heavily in advertising and promotion of the product to beat out the competitors. As a result of the product growing, the market itself tends to expand.
- In this stage, as the product has been accepted by customers so companies used to be eager to increase the market share. For innovative products like electric cars, there is limited competition at this stage, so pricing can remain at a higher level.
- Funding for this stage is generally still through lenders or from personal investment or in some cases through the increase in sales revenue.
- For example, the Tesla Model S is in its growth phase. Electric cars still need to convince many people to drive and that it will work and be practical. As more and more people start getting adapted to this technology, it becomes easier to sell to those who are more skeptical of new technology like electric cars.
Stage 3. Market Maturity
- When a product reaches the market maturity stage, its sales tend to slow down or in some cases even stop — signaling a largely saturated market. At this point in time, sales can even start to drop gradually.
- Pricing at this stage can tend to get competitive, as prices of the product start to fall due to the weight of external pressures like the increasing number of new and existing competition or due to lower demand.
- Marketing and PR activity a company does at this point is completely targeted at fending off competition, and in many cases, it has been observed that companies develop new or altered products to reach different market segments. While unit sales are at their highest at this stage, actual prices tend to decline to stay competitive in the market.
- Production costs also tend to decline at this stage because of more efficiency in the manufacturing process. Companies usually incurring high profits and thus do not need additional funding at this stage.
- For example, The Ford Focus is a well-established car with a good brand reputation and has reached its peak level of market penetration and thus right now it is in the Maturity stage.
Stage 4. Market Decline
- Although companies will generally attempt every way to keep the product alive in the maturity stage as long as possible, every product has to face the market decline phase.
- In the decline stage, the sale of the product drops significantly, and consumer behavior changes as there is less demand for the product in the market.
- The company’s product continues to lose more and more market share, with that the competition tends to cause sales to deteriorate. To cite an example with respect to the given topic, television program distribution has related products in all stages of the product life cycle.
- As of 2020, flat-screen Televisions are in the mature phase of the product cycle, programming-on-demand is in the growth stage, DVDs are in the decline stage, and the videocassette and CDs are in the extinct stage.
- For example, Diesel cars are right now in the decline stage, the reason behind this decline is that governments have expressed concern at the increasing level of pollution caused by diesel cars. Some cities like Delhi have threatened to ban diesel cars within a few years. Sales have fallen considerably and the market for diesel cars may be in terminal decline.
The Usefulness of Product Life Cycle
In the Introduction stage companies should target raising product awareness through advertising/word of mouth, offer the product at discount to tempt the customers to try the product. Apart from this, they should target early adopters and influential market leaders. For example, some firms offer free product reviews to influential bloggers in the market to attract more customers.
In the growth stage, Firms need to capitalize on growth and focus on the increase in revenue to extend product sales from small retailers to big supermarkets. Firms can change marketing from basic areas to a more mass market.
In maturity, With peak market penetration, the firm may follow a plan to increase prices to increase profitability. However, in case if the market is very competitive like the electronic industry, the firm may feel the need to keep prices low to defend market share.
In the decline phase, the firm sometimes may feel it is best to let the product go because of various reasons. For the above example of diesel cars, it leads to the issues of pollution and results in damage to its brand reputation, like with an iPhone, Apple lets old models go, to be replaced by the next model.
Conducting Product Lifecycle analysis can help companies to determine whether their products are servicing the market and the customer target efficiently, and when they might need to shift focus and execute newer sets of plans.
By examining their product performance in the market, on the whole, understanding competitor analysis, sales, and expenses, companies can better decide how to change the overall plan and develop their product for longevity in the marketplace.
