What is a product life cycle?

Have you ever wondered why certain products suddenly disappear from store shelves, while others seem to stick around forever? The answer lies in the product life cycle (PLC) and, more importantly, the market research carried out before the product is developed.

At its core, the product life cycle is a model that describes the various stages a product goes through, from its introduction to its eventual decline. It is a fundamental principle of marketing that plays a vital role in the success of a product.

Market research is done first to help businesses make informed decisions about when to invest in a product, scale back production, and introduce new products to the market. By understanding the results of market research, businesses can stay ahead of the curve and ensure their products remain relevant and profitable.

This article will dive deep into the product life cycle and explore everything you need to know about this essential concept. We'll help you understand how products evolve, cover the four key stages of the product life cycle, and explain strategies you can use to navigate each stage. In addition, we’ll show you how and when market research plays a key role in decisions throughout the process.

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A product goes through four distinct phases over its lifetime:

• Introduction

• Growth

• Maturity

• Decline

Before you introduce a product to the market, it’s essential to research that market. Put simply, market research is done as a step before the product cycle. Let’s look at each of the four stages of the product life cycle in detail, plus the pre-stage of market research.

Market research

When companies have a new concept they want to produce and sell, it’s rare for them to simply develop it and send it to market without carrying out research.

This research involves:

• Looking into competitors

• Reviewing market history

• Identifying opportunities

• Developing prototypes to test with real-life would-be customers.

The goal of this research step is to verify whether there is ample opportunity for success, eliminate risk as much as possible, and go into the product life cycle with a degree of confidence.

Introduction stage

During this crucial stage, the product is first introduced to potential customers. The company must work to generate interest, build brand awareness, and establish a market presence. The introduction stage focuses on educating consumers about the product and its benefits while establishing distribution channels to make it easily accessible.

One of the most important elements of the introduction stage is pricing. Companies must set an introductory price that balances attracting sales with recouping costs of product development, research, and marketing.

Pricing can benefit from work done in the market research phase by understanding how competitors are pricing similar products. It's also crucial to ensure the price is competitive and reflects the product's exclusivity or novelty. A high price may deter potential customers, while a low price may create the impression of low quality or value.

Marketing and promotion are essential during the introduction stage. Companies must develop marketing strategies that create buzz and generate interest in the product, such as social media campaigns, influencer marketing, and product demonstrations. With careful planning and execution, the introduction stage can set the product on a path to success, laying the foundation for growth and profitability in the later stages of the product life cycle.

Examples of products at the introduction stage include:

• Electric cars

• Virtual reality headsets

• Smart home assistants like Amazon Echo and Google Home

Growth stage

The growth stage is characterized by an increase in sales and profits. During this stage, the product gains wider market acceptance, and consumer awareness and interest continue to grow. Following histories of similar products identified in the market research phase can help establish realistic expectations. The company may also introduce new variations or improved versions of the product to meet customer needs and preferences.

Marketing and promotion remain important during the growth stage, but the focus shifts to increasing market share and brand loyalty. The company may increase production and distribution efforts to meet rising demand and expand the product's availability. The pricing strategy during the growth stage may be adjusted to capitalize on the product's success, with the company increasing or decreasing prices depending on market conditions.

As the product gains wider acceptance, competition may increase, and the company may face challenges from new entrants or established competitors. Market research can come back into play to help the company to learn how best to differentiate the product further or improve its features and benefits to stay ahead of the competition.

Overall, the growth stage is a positive period for the product and the company, but it is also a time of increased competition and evolving customer needs. The company must continue to:

• Invest in market research, marketing, and promotion

• Innovate the product

• Adjust pricing strategies to maximize profits and maintain growth

Examples of products at the growth stage include:

• Smartphones like Apple's iPhone and Samsung’s Galaxy series

• Fitness trackers like Fitbit and Garmin

• Streaming services like Netflix and Disney+

Maturity stage

The maturity stage is the third stage of the product life cycle, which follows the introduction and growth stages. The product has gained wide acceptance, and sales growth has slowed. Competitors have entered the market, and the focus has shifted at this stage from market penetration to defending market share.

During the maturity stage, the company usually aims to maintain market share and extend the product life cycle as long as possible. They achieve this through marketing efforts such as:

• Advertising

• Sales promotion

• Price competition

Maintaining market share would be impossible without constant analysis of the market itself. The company may also differentiate its product from competitors' offerings by introducing new features or improvements.

The production and distribution processes are usually well-established and streamlined at this stage. The company has developed relationships with suppliers and distributors, and economies of scale have been achieved. This results in lower costs and higher profits for the company.

However, the maturity stage also poses challenges. The market becomes saturated, and the product may no longer be able to command premium prices. The company may face increasing competition, and consumers may start looking for alternatives. If the company fails to innovate and differentiate, sales may decline, and the product may enter the decline stage of the product life cycle.

Examples of products at the maturity stage include:

• Laptop computers like Dell and Lenovo

• Soft drinks like Coca-Cola and Pepsi

• Cars like Toyota Camry and Honda Accord

• Tech companies like Apple, Amazon, and Xbox

Decline stage

The decline stage is the fourth and final stage of the product life cycle. During this stage, the product experiences a decline in sales and may eventually become obsolete. There are several reasons for the decline stage, including:

• Changing consumer preferences

• Increased competition

• Technological advancements

As sales decline, the company may choose to discontinue the product or reduce marketing efforts. They may also choose to liquidate the remaining inventory, sell the product to another company, or license it for a fee. Alternatively, the company may attempt to reposition or revitalize the product through product modifications, price reductions, or targeted marketing campaigns.

However, it is often difficult to reverse the decline of a product, especially if the product has become outdated or faces strong competition from newer, more innovative products. Based on market research, the company must decide whether to continue investing in the product or cut its losses and allocate resources to other products or markets.

Not all products go through the decline stage. Some products, especially those in the technology industry, may be replaced by newer, more advanced versions before reaching the decline stage. Other products, such as necessities like food and clothing, may have a relatively stable demand over time and not experience a decline stage.

Examples of products at the decline stage include:

• Film cameras

• VHS players and tapes

• Blackberry phones

Just like the product life cycle, the Boston Consulting Group (BCG) matrix is a popular framework used in market research to analyze and manage products in a company's portfolio. While both models focus on product performance, they differ in their approach and purpose.

As we’ve seen, the PLC model divides a product's life into four stages:

• Introduction

• Growth

• Maturity

• Decline

The BCG Matrix categorizes a company's products based on their market share and growth rate. The four categories are:

• Stars: products with high market share and high growth rates

• Cash cows: products with a high market share and low growth rates

• Question marks: products with low market share and high growth rates

• Dogs: products with a low market share and low growth rates

Both frameworks offer valuable insights into a company's product strategy. The PLC model can help marketers identify when to:

• Introduce new products

• Invest in marketing

• Retire a product

The BCG Matrix can help companies allocate resources based on the potential of their products. Products in the ‘star’ category require continued investment to maintain their growth, while cash cows generate profits that can be used to fund other products.

Understanding the product life cycle is crucial for businesses to manage their product offerings and optimize their marketing efforts. Here are some specific reasons why the product life cycle is important:

Better understanding of product performance

The product life cycle provides a framework for understanding the performance of a product over time, including its introduction, growth, maturity, and decline. This understanding can help businesses make informed decisions about the product's future.

Strategic planning

Understanding the product life cycle allows businesses to plan their marketing and promotional strategies. Companies can use this framework to identify the appropriate marketing mix for each stage of the product life cycle.

Cost-effective resource allocation

By understanding the product life cycle, businesses can allocate their resources more efficiently. They can focus their efforts on products in the growth or maturity phase, and decide whether to invest in new products or retire existing ones.

Benchmark for comparison

Running market research based on the product life cycle gives businesses a benchmark for comparing the performance of different products. This can help them identify market trends and make strategic decisions about product development.

Identifying opportunities

The product life cycle can help businesses identify new opportunities. They may discover new markets for mature products or recognize the need for innovation to extend the product's life cycle.

While the product life cycle model is a useful framework for understanding the typical trajectory of a product in the marketplace, it is not without its limitations.

The good news is that, when done well, market research can fill these gaps. In fact, once you hit a limitation with the product life cycle, this is often a cue to frame the questions you’ll want answered from your market research. The two work in perfect harmony to align your company within the market while building out predictable futures based on data-backed strategies.

Here are some of the key limitations of the product life cycle model:

Not all products follow the same life cycle

While the PLC model provides a general framework for understanding the stages of a product's life cycle, not all products follow the same trajectory. Some products have a much longer or shorter life cycle than others, and some may not experience a decline phase at all.

Limited predictive power

The PLC model can be useful for predicting trends in sales and profits over the short term, but it is less reliable for predicting long-term trends or the success of new products. Other factors, such as changes in technology, consumer behavior, and competition, can significantly impact a product's success.

Ignores external factors

The PLC model focuses on the internal factors that influence a product's life cycle, such as changes in marketing and product features. However, it does not consider external factors that can significantly impact a product's success, such as:

• Changes in the economy

• Social trends

• Regulatory environments

Limited practical application

While the PLC model can provide a high-level understanding of a product's life cycle, it may not provide the detailed insights necessary for making strategic business decisions. Other models and tools, such as market research and customer feedback, may be necessary to fully understand a product's potential and its customers' needs.

Several factors can alter a product's performance and position in the product life cycle, all of which can be monitored with market research. These include:

• Market competition: A highly competitive market with many similar products can shorten a product's life cycle as consumers have more options and may switch to a competitor's product.

• Technological advancements: Technology plays a vital role in shaping the product landscape. As new technologies emerge, they can render existing products obsolete or less desirable, shortening the product life cycle. However, technological advancements can enable new product features and functionalities, which can extend a product's life cycle.

• Consumer preferences: Consumer preferences and needs change over time, impacting a product's life cycle. A popular product that meets consumer needs today may become irrelevant tomorrow, resulting in a shorter life cycle.

• Economic factors: Economic factors, such as changes in disposable income, inflation, and market conditions, or global pandemics can impact a product's life cycle. During an economic downturn, consumers may reduce spending, causing a decline in demand for certain products and resulting in a shorter life cycle.

• Product quality: A high-quality product that meets customer needs and provides an excellent user experience can extend the product's life cycle, while a low-quality one can significantly shorten it.

• Product innovation: Product innovation, including new features, functionality, and design, can extend a product's life cycle by increasing its relevance and meeting changing consumer needs.

• Marketing and branding: Effective marketing and branding can help to extend a product's life cycle by increasing brand awareness and customer loyalty.

Understanding these factors and their impact on a product's life cycle can help businesses make informed decisions about product development, marketing, and pricing strategies.

In today's highly competitive market, businesses face the challenge of keeping their products relevant and profitable for as long as possible. One way to achieve this is by lengthening the product life cycle. Here are some ways to stretch out your PLC:

• Continuously innovate: Continuously improving features, functionality, or design can help maintain its relevance in the market and keep up with the changing needs of consumers. It also helps to address any issues that arise with the product over time.

• Expand product line: Expanding the product line by introducing new products or variants can help to keep the product fresh and relevant in the market. This also allows the company to target different consumer segments and address their specific needs.

• Improve marketing and promotion: Enhancing marketing and promotion efforts can increase brand awareness and product visibility, making it more likely you’ll attract new customers and retain existing ones.

• Build a loyal customer base: Building a loyal customer base through exceptional customer service, product quality, and support can increase the likelihood of repeat business and positive word-of-mouth recommendations, which can help to extend the product's life cycle.

• Offer incentives and rewards: Offering incentives and rewards such as discounts, loyalty programs, or product bundles can encourage customers to continue buying the product, which can help to extend the product's life cycle.

• Expand distribution channels: Expanding distribution channels to new markets and regions can increase your product's reach and introduce it to new customers, which can help to extend its life cycle.

• Embrace sustainability: Focusing on sustainability can position the product as environmentally friendly and socially responsible, appealing to consumers who value these attributes and, in turn, help extend its life cycle.

Lengthening a product's life cycle is an essential strategy for businesses looking to maximize their profits and maintain a competitive edge.

Using market research to understand the product life cycle is essential for any business that wants to remain competitive and profitable in today's market. By recognizing the different stages of a product's life cycle and adapting strategies accordingly, businesses can prolong the life of successful products and minimize losses for unsuccessful ones.

Moreover, by focusing on the needs and preferences of consumers at each stage of the life cycle, companies can create products that meet evolving demand and stay relevant in a rapidly changing marketplace.

Ultimately, a thorough understanding of the product life cycle can help businesses make more informed decisions about product development, marketing, and distribution, leading to greater success and sustainability in the long run.

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