Pager before 2000, was cited as the most effective communication medium until mobile phones came into existence and completely replaced it. Today, you won't find a pager being used simply because we have a much better and more efficient alternative. This is a classic example of occurring product life cycle magic.
Everything that surrounds us has a lifespan. For example, the couch you sit on has a life span, and the plants that are taken care of have a lifespan. Every product has a lifespan in the marketplace, meaning it enters the market with full force (thanks to its marketing) and leaves completely (mainly due to better alternatives). Opt for the best Project Management certifications course and improve your learning.
What is Product Life Cycle?
When it comes to the question of what you mean by product life cycle, in layman's language, a product life cycle simply refers to any product's 'life span' or the time when the product hits the market and is given out to the world to the time when it is removed from market shelves and completely removed from the market. A PMP course and certification is an easier way to understand the fundamentals and guarantee success in project management.
The product life cycle is used by senior most marketing professionals to forecast and get a view of advertising schedules of a product, redesign the product's packaging, plan the expansion of the product to new potential product markets, and determine its pricing points, among many other things.
These are calculative methods to support a product and are called product life cycle's management. The marketer should be aware of the standing of their product, that is, what stage your product is in so that you can do much better marketing of it and make excellent business decisions.
One of the most crucial tasks this product life cycle performs is determining whether and when the new products are ready to replace the older products in the market. If they are not yet ready to replace the old products, the product life cycle can help us figure out when it will be. Now that you have understood what product life cycle means, let us understand its meaning and how it works.
How Product Life Cycle Works?
The product life cycle usually has four main stages- Introduction, growth, Maturity, and decline. Of course, no single marketer would want their product to have a short life span. So, If you are a marketer, you need to uniquely understand the undue importance of every stage, for it can hugely affect your product's life cycle.
The entire concept of the product life cycle is like the Bermuda triangle mystery, a lot of people know about it, but hardly anyone does anything about it. In all four stages of the product life cycle, every stage is equally as important and useful in either reviving the product or making it more popular than it already has.
4. Market Decline
To better understand what you mean by product life cycle, we should learn about all four stages in more detail.
1. Introduction Stage
When a fairly new product is launched in the market, not much is known about it to the general public. As a result, it takes immense hard work and Tons of successful marketing strategies to gain product traction in the marketplace.
Before introducing a new product to the market, there is a lot of risk, money, brainstorming, and hard work involved. In addition, unknown external risks will pop up from time to time and could threaten the product's demand and popularity.
Also, no single product currently available in the market got natural demand. A popular saying in the marketing world goes like this, "A demand has to be created." It is no cliffhanger that creating the right demand is directly proportional to the product lifecycle longevity. Therefore, when you plan to bring a product to the market, you must create the right marketing strategy, which will work well for the product and generate demand. This is done when a product is fairly new to the market and in its 'Introduction' stage.
As we know, this is the first one among the stages of the product life cycle. The duration of how long the product will be in the introductory stage depends on several factors, including;
- How new is this Product- Are there other products similar to this one available in the market?
- Consumer Awareness- Is the consumer and the market aware of this product, its advantages, use, disadvantages, etc.?
- Product Complexity- How complex or easy is this product for common consumers?
- Consumer Needs- Does the consumer need it? If they don't, market the product, which is deemed important to the consumer.
- Presence of Substitutes in the Markets- What are the substitutes in the market? If they do, then market your product differently than others.
- Unique Selling Proposition- Does your product have a unique selling point? Get your product a unique selling point if it does not have one.
- Identify the Type and Urgency of your Product- Is your product a life-saving drug or a normal but new, unique toy for kids? If it's the former, you will need no marketing for it, and its product life cycle will simply end when we have a much more effective and efficient drug as its alternative. On the other hand, if it's the latter, you'll have to market the product extensively until it becomes a household name and will replace it when kids find a better toy.
It is a well-known fact that every product that hits the jackpot of massive profit margins due to its immense popularity and huge demand in the market is the result of risks taken and huge money involved, among other factors. One thing to keep in mind, though, is that all new products that hit the market have more chances of dying as soon as they become available to the consumers than it has about being hit product. The right marketing and the above two factors are crucial for the product to take off. We can also say that the product will fail if it does not get the right marketing.
When a product is new and the first of its type, it usually takes time, energy, and resources to take off. Most of them generally fail or face a huge dent. So, to avoid this, companies dodge the first mover advantage so that they do not get to be the one who has to face sacrifice. Instead, they become second, so they have let someone else test the market and create awareness.
2. Growth Stage
If the first stage is successful, you will see a sharp rise in the second stage. This is the growth stage. You can witness a huge spike in the growth curve as you have successfully passed the first stage with flying colors. As a result, you will see a rise (hopefully a huge one) in the popularity and demand for the product.
The demand for that particular product starts to witness a slow and gradual rise in the market. Also termed the 'takeoff stage,' the market area of the products also starts to increase by manifolds. The moment we start to witness growth, no matter the scale of it, we can safely say that we have entered the second stage, the Growth Stage. Remember the companies we discussed earlier that avoid being the first ones to make a move into the market? Now, they go all in after witnessing the product going into a positive demand and popularity cycle. They, too, want a piece of the cake.
Here, we generally have two categories. The first ones are those who bring their product into the market with USP (unique selling point) and a lot of other modifications. Here, we can witness product and brand differentiation. The other ones offer a duplicate copy to the market without modification or changes.
Now that several other products of the same type are floating around in the market, it is all a game of getting consumers' attention. In the first stage, companies were posed with the problem of awareness. There was a need to create awareness so that the consumers knew and ultimately used their products.
Several other companies have hopped onto the bandwagon in the second growth stage. As a result, there is cutthroat competition among these companies, which has shifted the initial company's focus from "how can I get my product popularity?" to "how can I make the consumers choose my product and brand over another, over and over again?"
Since there is a shift in the product cycle, there should be strategies and techniques in marketing from the company's end. Apart from the obvious change in strategy, the company also faces restrictions on how it should move about the current scenario. During the first stage, they can experiment and see what the consumer likes about their product. Now that the consumer has liked a particular feature in their product, they have to abide by the consumer's choices and preferences. They have to 'maintain' the brand. Also, there are other competitors, which makes room for creative freedom even thinner.
This period can also be referred to as the golden period for companies. Due to increased sales, there is an opportunity to open many more new distribution channels and retail outlets. So when you are constantly fulfilling the market's demand, you're constantly producing new products too. This could result in increased profits, attracting new competitors with cheaper rates and sometimes new technological advancements.
3. Maturity Stage
In every graphical chart, you must have seen a point where the graph goes to its maximum and slowly starts to decline. In terms of the product life cycle, you always witness it when the market has been saturated. The early signs of market saturation are said to be this third stage of every product life cycle, the maturity stage. Here, the product has already enjoyed enough popularity and demand and is now at its peak. After it hits its maximum demand and popularity, it slowly starts to level off.
Here, it generally means that most consumers are already the product owner or possess it. Then, as we know it, the demand starts to be at a standstill, if not decline. This stage is the decider of the product's future in the market. The main way to fight for its existence is by the infamous price competition. You will have to provide better, enhanced versions of the product to the consumers at a cheap enough price, or else they can simply switch to any of the alternatives available to your product.
There is a constant tussle to fight for consumers' undivided attention to your product and brand. So you would have to make your consumers a loyalist by this stage so that your product does not see a sharp decline. Take Apple, for example. They always develop the best marketing strategy, new and advanced products, and user experience. This made its consumer base pretty strong and loyal.
One important thing to notice is that, during this period, the producer company's other main focus is to secure its distribution outlets or distributors. Of course, this can only be done if they see any profit from the deal. This stage is more or less accompanied by the fourth and final decline stage, which is avoidable but not completely inevitable due to the constant change in technology and the consumer preference that follows it.
4. Decline Stage
After reaching its maximum potential, the product slowly loses its charm. Now, you'll notice a downward trend in popularity, especially the product demand.
Usually, when the product is at its decline stage, you, a conscious marketer who noticed the decline of the product, should ask yourself two questions- "What are the alternatives of this product?" and "How can we revive this particular product?"
When the market Maturity turns into market decline, that is when you know that the product has officially entered the decline stage. It is the final stage in the product life cycle. This is the fiercest stage in a product's life as there may be newer alternatives with better pricing that the product has to fight and sustain.
This usually happens to companies unable to withstand the intense competition from competitors mainly by non-impactful marketing, awareness, technological advancements, or other factors.
Now, there is usually no way to revive a product or brand. Take blackberry mobiles, for example - they were insanely popular a decade ago, and almost everyone used one. At that time, it pioneered technological advancements for a compact mobile phone. You could see many loyalists out there, but when better alternatives started to appear, like touch screen phones with a better interface, the blackberry simply took a backseat and slowly plunged into the decline stage.
Advantages of Product Life Cycle
The product life cycle has many advantages, which is exactly why senior marketers in the industry closely analyze them. Some of its advantages are:
1. Increased Life Span
The quality of the product's life span depends on how it is marketed in the market and the consumer's interest in the product which is to be developed. Thus, with the right steps and measures, you can take your product and brand for as long as you desire. In short, the product's life solely depends on you, the marketer. So make sure it's a long one.
2. Putting Higher Quality Product on Market Shelves
A product that is new in the market has its disadvantages. For one, it is in its experimental and selling stage altogether. Some companies observe the bad things in the already existing product, enhance it, and then bring their brand-new product to the market. The customer will be attracted to it due to the enhanced quality, and it will turn out to be a boon for the brand and its new product.
3. Quick Identification of More Sales Opportunities and Revenue Contribution
A big advantage of a product life cycle and its time management is that you easily notice the sales opportunities and the consequent revenue contribution (example, promotions during growth phase). This helps the brand in growing the product and expanding its life cycle. They can do it after identifying more hotspots for sales and generating profit, which directly points to the product's success in the market.
4. Allows Companies to Understand the Product
It provides marketers and business developers better insight into how different products can go within a company's portfolio. This allows the brands to shift the resources internally to allocate them to other products, depending on their position in the product life cycle. For example, a product that has just been launched needs different resources, while a product at its growth stage might not need that resources. Hence, The product life cycle helps us to identify them and allocate the resources accordingly.
5. Economic Growth
The product life cycle has a largely positive economic growth because it promotes innovation, which manifests into cut-throat competition for the consumer's attention and marketplace standing. When companies advance or age in the product life cycle, companies have the opportunity to realize and act in the best interest of the product's age, popularity, and demand.
6. Safer Successful Product
When companies realize various things about their product through the product life cycle, they can simply work on making their products more effective, safer, efficient, faster, cheaper, or modified according to popular demand.
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Disadvantages of Product Life Cycle
1. It does not Apply to Products in Every Industry
It is true. While the product life cycle is great, it cannot be used in all industries and most definitely not on all products. A most definite example of this point can be the beverage industry.
There's a high possibility that You have been consuming the same beverage from the same brand. Several brands have entered the market after witnessing such tremendous success due to the high demand for these drinks. For obvious reasons to the public, they failed mainly due to the brand building, taste, and popularity of the former brand. They have been in the maturity stage for quite a long and are not going into their decline stage anytime soon.
2. Product's Planned Replacement
When companies notice that a brand is slowly plunging into its decline stage, they think of its replacement. They do not think about its unique selling point, the benefits it provides to the public and the work done on this product by dozens of people. The product's planned replacement is hazardous since the brands are aware of its declining stage and do nothing to safeguard it.
3. We can Never Predict the Period
A major disadvantage of the product life cycle is that while it sounds all good and safe, there is uncertainty in certainty. We can never accurately guess or forecast the time of each stage of a product. Also, many products dive into the decline stage before it saturates the market and hit maturity. Finally, for any product like any business – social, political, geographical environment factors play a major role in the lifecycle.
4. Product Life Cycle is Unreliable at Times
Due to the product life cycle, marketers make wrong decisions, or the product life cycle produces wrong insights and impressions. Again, let us take an example. Sometimes the product gets an increase in sales and soon gets an unexpectedly sharp decline. Here, the company might think that the product has entered the maturity stage and will soon be replaced on the market shelves.
5. External Forces Might Provide Wrong Data
Sometimes, the product life cycle gives the marketers unknowingly wrong insights and data due to several external forces. These might include government interference, a huge competitor, climatic conditions, or other external factors. This can result in the wrong strategy being enforced, which is dangerous for the product and can plunge it into the decline stage, even if it has not hit the maturity period causing a dent in the popularity and demand of the product.
Examples of Product Life Cycle
Every product available in the market has a life cycle and is at different stages of the product life cycle. Products that have previously ruled the market and are nowhere in sight nowadays have been through all four product life cycle stages. Let us have a look at product life cycle stages examples:
Remember Cable TV, Our best childhood friend? We spent hours glued to our television, switching channels, and finally finding the one we love. The good ol' days. So, what are the stages of the product life cycle? Let us have a look below:
- Introduction Stage: Cable TV was introduced to the world in the early twentieth century. When the prices became economical and the middle class could afford it, it finally became a thing in 1962.
- Growth Stage: Due to economic and regulatory restrictions, the technology increased in popularity and demand. People of all ages- kids and adults- were fans of cable TV and started to purchase it.
- Maturity Stage: In the late 1990s, around seven in ten households had cable facilities. It became a necessity rather than a luxury. That is when it had saturated the market and now only had to retain the market instead of expanding it. Now, it had to compete with other technological advancements in the industry.
- Decline Stage: In this stage, cable tv started to decline. Unfortunately, tough competition from better-marketed alternatives such as Amazon prime and Netflix started slowly taking place. Also, cable tv is in decline, and there's no stopping it. On the other hand, OTT platforms are on the rise and are currently in their growth stage.
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The product life cycle is a tremendous way of figuring out where a product lies in the market and how much life span it has. It accurately describes the process a product goes through in the market. Every product in the market has a life cycle and is currently in one of the four stages. The products that have let the markets have completed the product life cycle. It is mainly made of four stages- The introduction stage, growth stage, Maturity stage, and decline stage (according to some studies, a fifth i.e. a prior development phase also plays a key role in the product lifecycle).
For an organization to correctly act upon the product and allocate resources accordingly, its marketers must identify which stage it is at. It prepares the company to face intense competition beforehand. Also, it prepares the company about when to expect an increase and decrease in sales. In the introduction stage, they do not expect much sales, but in the decline stage, they can see why the sales and profits are decreasing. Want to learn more? KnowledgeHut courses for Project Management have got you covered.
Frequently Asked Questions
Q1) Why is the product life cycle important?
The product life cycle is important because it offers guidance and insights into the product and it is performance in the market. Based on the performance (demand and popularity), we can figure out the stage in which the product currently is. It offers guidance for developing strategies to allocate employees and resources for the most optimum usage of that stage. Also, it can help in overall success in the marketplace.
Q2) What factors affect the product life cycle?
Several factors affect the product life cycle. They include:
- Rate of Technical Changes- The life cycle of a product heavily depends on the technological changes taking place in the country. If the technical changes are extremely rapid, then the life cycle of a product will be short-lived. On the other hand, if the advancements are slow, then the product life cycle is big.
- Rate of Market Acceptance- If the market usually welcomes new products and tries them voluntarily, it is good for the product. The market Acceptance of the product makes a huge impact.
- Ease of Competitive Entry- How easy is it for competitors to enter the market? If it is fairly easy, the existing product is at a high risk of competition.
- Risk Bearing Capacity- Companies with more risk-bearing capacity can keep their products in the market for longer to test the market.
- Economic and Managerial Forces- They can hugely determine the product and brand's success.
- Protection by Patent- If the patent of any product is being registered legally, then the life cycle will be longer than usual. If it is not registered, then its life will be cut short.
Q3) What are the main reasons that new products fail?
New products fail mainly because of external factors like market timing, incorrect market analysis, government interference or bad marketing, lack of awareness, and tough competition.
Q4) What are the characteristics of a product life cycle?
Some characteristics of a product life cycle are:
- Every product in the market has its product life cycle.
- The life cycle of a product starts at the introduction stage and subsequently experiences tremendous growth and saturates the market when there is no scope left to expand. After this, the decline period begins.
- Different products have different product life cycles.
- Profits depend heavily on what stage the product is in.