The Product Life Cycle

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Use the product life cycle to maximize your profits by identifying which life stage your product is at.

Why do some products have quick lifespans, while others never seem to lose appeal?

The answer can be found in the product life cycle. This refers to the length of time a product hits the shelves and gains popularity, to the time it starts to decline and is removed from the market.

It's used by product developers and marketers to ensure that products stay fresh and current to consumers, and resilient to market forces. Think, for example, about the many iterations that smartphones go through. New generations of smartphone are launched almost every year to ensure that the features being offered stay fresh and still apeal to modern-day consumers.

In this article, we'll take a closer look at the five stages of the product life cycle, and how you can use to carefully manage your marketing strategy as your product hits each stage of the cycle.

The Four Stages of the Product Lifecycle

Just as people go through infancy, childhood, adulthood and old age, so too do products and brands. The product life cycle essentially refers to the lifespan of a product – from the moment it launches to consumers to the moment it's removed from the shelves.

The life cycle historically includes four key phases:

• Introduction.
• Growth.
• Maturity.
• Decline.

During the earlier parts of the product life cycle, the cost of promoting the product may be larger than the revenue it brings in. However, for successful products that are marketed effectively, the product will become increasingly profitable during the Growth and Maturity phases.

A typical life cycle for a well-managed product is shown in figure 1, below.

As products move from life cycle phase to life cycle phase, the elements of the marketing mix   used to promote them change. With this in mind, let's take a closer look at what happens to a product at each stage of the life cycle.

The Introduction Phase

During this phase, profits tend to be low, while product investment and marketing spend is high. There will most likely be heavy promotional and advertising activity designed to raise awareness of the new product, and to seek sales amongst early adopters   – adventurous consumers who like to own cutting-edge products.

Depending on the nature of the product, it will either have a premium price, so that its development costs can be recouped quickly (this is the approach used with most high-tech products), or be priced low to encourage widespread adoption – what marketers call "market penetration".

The Growth Phase

If a product is successful, it will move to the growth phase. During this stage it will experience growing demand, increased production, and wider availability.

Promotional activities during this phase tend to focus on expanding the market for the product into new segments   – usually either geographic or demographic. This is often supported by diversifying the product family, for example with new flavors or sizes (cartons of fruit drinks specifically sized for kids lunch boxes, for instance).

The Maturity Phase

The Maturity Phase tends to be the most profitable. The product is now widely available, production costs are low and less is being spent on marketing.

By the time a product reaches this phase, the company producing it needs to reap considerable rewards for the time and money spent developing the product so far.

The product's features may continue to be refreshed from time to time, and there will still be some promotion to differentiate the product from the competition and increase market share. However, marketing activity and expenditure levels may be much lower than earlier on in the life cycle.

The Decline Phase

During this phase, the product's popularity is starting to wane, due to increased competition from other, similar products, and market saturation.

Although some marketing promotions may still be occurring, and some sales may still be achieved through price drops, the product is now in decline. Eventuallly, marketing support may be withdrawn completely, and sales will entirely be the result of the product's residual reputation amongst a small market sector. (Elderly people, for example, may go on buying brands that they started using forty or even fifty years earlier.)

By this stage, the most important decision that needs to be made is when to take the product off the market completely. It can be tempting to leave a declining product on the market – especially if it served the company well in its time, and there's a certain sentimental attachment to it. However, it is essential that the product is not allowed to start costing its producer money, and this can easily happen if production costs increase as volumes drop.

More importantly, the old product's very existence can absorb managers' time and energy, and can discourage or delay the development of a new, potentially more profitable replacement product.

Using the Product Lifecycle to Manage Product Strategy

The duration of each life cycle phase can be controlled, to a certain extent. This is particularly true of the Maturity phase. This is the most important one to extend from a financial point of view because this is the period when the product is at its most profitable.

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Typical tactics designed to extend the maturity phase include:

• Increasing the amount of the product used by existing customers (this is why food producers issue recipe cards that use their ingredients).
• Adding or updating product features.
• Price promotions to attract customers who use a rival brand.
• Advertising to target other consumer demographics and markets where uptake is still small.

Limitations of the Product Life Cycle

One criticism of the product life cycle concept is that it in no way predicts the length of each phase, nor can it be used to forecast sales with any accuracy.

Another is that the model can be self-fulfilling: if a marketer decides that a product is approaching its Decline phase, and so stops actively marketing it, the product's sales will almost inevitably decline. This might not have happened had it been managed as if it was still in its Maturity phase.

Furthermore, it's possible that by improving a product aggressively on an ongoing basis, growth can continue for a long time. Just think of the market for smartphones, computers and tablets: successful manufacturers continue to launch new and better products year after year.

Successful marketers need to draw on a wide range of data and analysis to help them decide which phase a product is in, and whether that phase can be extended. And while this model is useful and thought-provoking, they need to base their decisions on a good understanding of the wider market, market demands, and current trends in supply and demand.