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Understanding Stages of Product Lifecycle
It's not just mankind that goes through different life stages. So do new products. Each has its own life span, and the better you understand this life span, the more likely it is that your product will achieve success in the market.
So what is this product life cycle? What are the stages of the product life cycle? What are the benefits of understanding the product life cycle?
In this article, we'll explore what you need to know about the product life cycle and why.
The product life cycle: definition
A product life cycle is a path every product goes on, which begins with its development and market introduction and ends through its removal from market shelves.
It is a constant process and one through which a product's characteristics will change. Knowledge of these particular stages, therefore, is key to making the most accurate business decisions.
Here, the life cycle of a product is presented on a chart showing how sales levels change over time. The most common approach divides the product life cycle into 4 stages:
But at Startup Development House, we support the whole product life cycle.
Before a new product is introduced to the market, it first must be generated -- a significant factor in determining the course of its future.
Stages of product life cycle
No 1: The development stage
This stage is about making a new product ready for market launch. There is much financial contribution required here, and with no income expectations. Which can be tricky.
Some companies spend far too much time creating 'the perfect product', whereas they should instead consider Product Discovery or creating an MVP at the development stage to thereby test the market ASAP.
Learn more about MVP from one of our previous blog posts -> What is a minimum viable product and how is it built?
This way, a company can save funds in this and in later phases. It may turn out to be crucial for any start-up that finances product development through bootstrapping or investor funds.
Growing companies have much more flexibility in this field since they usually finance the development of a new product from revenues that are generated from the products already available on the market.
The development stage in a nutshell:
high costs of research and development
No 2: The introduction stage
This stage is about creating the marketplace. Your product is entering the market for the first time, and so your main goal here is to establish customer awareness of your offer.
The introduction stage is demanding in terms of marketing budget requirements and therefore it's necessary to create a marketing strategy, distribution channels and marketing communications.
We believe success at this point is very much dependent on the development stage since the more the product is tailored to user needs, the more in-demand it will be.
So again, we see how investing in an MVP pays off. If you make your product (MVP version) available for tests at the development stage, the sooner you start building a market.
This way, you avoid starting the introduction stage from scratch and instead create a brand image by which to gain your first customers.
These first customers will thereby become your product promoters.
The introduction stage in a nutshell:
high marketing and operational costs
prioritize creating demand and identifying the target audience
initial sales generation
no/very low profit
No 3: The growth stage
Products in the growth stage are accepted by customers; your goal now is to increase market share. You enjoy an initial growth in sales.
But it's not only customers who have discovered your product. So has the competition, which is now becoming a threat.
So, your challenge is to satisfy demand by increasing both your product's manufacture and its competitiveness (e.g. adding additional features, providing support, expanding distribution channels).
The scale of the threat from competition depends largely on the degree of market competition. If you are entering a market where there is little, you will enjoy more rapid growth.
Learn more about entering markets with different levels of competitiveness from one of our previous blog posts -> What is blue ocean strategy?
The growth stage in a nutshell:
a decrease in costs (due to economies of scale)
a rise in sales and profitability
increase in brand awareness
No 4: The maturity stage
In the next stage of the life cycle, your established product's revenue level stabilizes. You will still benefit from growing sales, however, their growth rate will no longer be so rapid.
As a whole, your company is maturing and becoming more effective – particularly from an operational point of view. There are fewer errors in the production process, with manufacturing and marketing costs diminishing. Your team grows stronger. Now you need to develop customer service.
Not only does your business mature, but so must your competitiveness intensify. The competition is also well established in the marketplace, so the need for product differentiation soon becomes a priority.
This is particularly the case when taking into account a saturated marketplace where many customers have already fulfilled their needs with the initial version of your product.
Here's where maintaining interest is becoming a challenge. This is where you must invest in your branding and experiment in various pricing and product strategies.
The maturity stage in a nutshell:
costs continue to decline
sales are maximized whilst profitability diminishes
No 5: The decline stage
It is the last stage of the product life cycle. Revenues drop in a saturated market, where the competition is too fierce and customers' needs have changed.
When a product is in the decline stage, key decisions about its future are imperative.
One of the more common policies is to withdraw the product from the market. This is an easier decision to implement for a company having more than one product in its portfolio.
Otherwise, a company may consider other strategies such as identifying a new target audience, moving to other markets or selling the business altogether.
There is no one-size-fits-all solution. The final decision must be made based on thorough analyses whilst addressing the company's financial condition, its market landscape and the changing needs of customers.
Those who choose not to remove their product from the market may still survive, but must also ready themselves for lower demand, lower margins, and lower profit.
A strategy that can help you stay in business again refers to an MVP at the development stages of the product.
Once you've created an MVP, you must focus on its most important features. At the same time, you mustn’t neglect any ideas which may be useful in the later expansion phase.
These ideas should be set on a backlog list from which they can be chosen when the time is right. And that time will be for maintaining your customers' interest and strengthening their attachment to your product.
Engaging the product development process with a 'big picture' vision can significantly leverage benefits from particular stages in the product life cycle.
The decline stage in a nutshell:
increased challenge of optimizing costs
decline in sales
strategic decision-making: stay in or leave the market?
Understanding the product life cycle
Key benefits of a product life cycle
The product life cycle is a very useful model for management, product designers, marketing staff, and others who make key business decisions about a given product.
Among them, such decisions mostly concern whether to introduce or withdraw a product from the market.
The product life cycle is invaluable in terms of:
setting pricing and advertising strategies
determining distribution and communication channels
choosing target markets and audiences
having more control over results
improving process management
But only when used as a guideline and not as a template for each and every product. Some products may have a short life cycle whereas others remain on the market for years (e.g. Coca Cola).
Product life cycle curves are a very individual matter -- something very much worth bearing in mind.
When we do so, we recognize that the overriding benefit of consciously managing these stages (development, introduction, growth, maturity and decline) will be to extend the product life cycle and provide greater product longevity, profit maximization, and the reinvention of the product for meeting customers' needs.
Management of the product life cycle
Product life cycle management integrates different business elements that work together so that the product is successful. This applies to functions such as:
research and development
Involving all of them in the management of the product life cycle can contribute to:
optimization of R&D costs
better product quality that meets the customers' needs
shorter time to market
successful marketing strategy
potential to reinvent and innovate
differentiation of the offering
Unfortunately, this will not afford accurate sales predictions nor the forecasting of how long a product will spend in each stage.
Even so, its potential benefits work in favor of the implementation of the product life cycle management process with a conscious and multidisciplinary approach.
All products have a limited life span. However, understanding the stages of the product life cycle makes for better strategic decisions and the extension of that product's time on the market.
At Startup Development House we turn ideas into real-life products. We understand the stages of the product life cycle and recognize the true significance of the development stage.
Our experience proves that an early definition of the value proposition is essential for market success. That's why we assist our clients in the process of Product Discovery and MVP development, including market fit testing.
Do you have an idea for an application or other digital product? Contact us when you’re ready to establish your product life cycle.
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