Sales and Profits Generally Decrease Continually Throughout the Product Life Cycle

Businesses, especially the ones offering SaaS products, need a good understanding of a Product Life Cycle. From business leaders to marketing executives and the CX teams, they must have a fair idea of a Product Life Cycle and plan their activities accordingly. The knowledge helps them make important decisions associated with product design, features, price points, advertisement schedules, market expansion, packaging, etc.

Lacking the knowledge of a Product Life Cycle is among the top reasons why several crucial business decisions fall into limbo. For instance, if the product manager is unaware of the product lifecycle, she will not be able to develop strategies to improvise the product. As a result of this, the product might go on to become irrelevant to the customers.

Similarly, if a marketing professional does not know a product's life cycle, the executive could fail to schedule advertisements.

Considering these imperatives, it is important for professionals, especially those in managerial roles, to have a holistic understanding of the Product Life Cycle.

Like always, we are here to help you understand and/or improve your knowledge of the product lifecycle. This blog will help you learn everything about the product lifecycle, from stages, and examples to product lifecycle diagrams.

What is a Product Life Cycle?

A Product Life Cycle, in simplest terms, is the time frame between the introduction of a product to its removal from the market. Every product is introduced to its customers at some point in time. Similarly, the product undergoes several stages, finally reaching a stage where it must be removed from the market. Take the example of a SaaS product – aa software, for instance. When the software is introduced to the market, it is appreciated through the adoption, but it is eventually removed or replaced by another version or product.

While the stress is more on the product introduction and removal, the other stages in the product life cycle have the same importance. The real-life of a product lies between these two extreme points. However, in between these stages, the product undergoes stages of growth and maturity.

To make it easy for you, we have listed the four stages of the product life cycle –

• Introduction
• Growth
• Maturity
• Decline

Please understand that the introduction of a product is not the absolute beginning.  Several important activities take place before the product is launched into the market.

Before introducing or launching the product into the market, the internal stakeholders spend a decent amount of time on research, development, and product design. The groundwork before the product serves as the base for the product's final outcome. For instance, the product development team must understand customers' need and plan their features accordingly. Similarly, the target audience and market segmentation must be planned at this stage. At these stages the product's profitability is also determined. In case the product does not meet the profitability expectations, it is neither introduced nor scaled for the market.

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Stages of Product Life Cycle

As discussed above, the Product Life Cycle is divided into four broad stages. Dividing the product's lifecycle into these stages makes it much easier to make marketing and management decisions. A well-managed product life cycle maximizes returns and profitability on a product. At the same time, ill management of the lifecycle may fail the product or reduce its shelf-life in the market.

Let us now discuss the four stages and see how they impact marketing and management.

The Introduction Stage

You have conducted market research, identified market segments, and also designed and developed a product that addresses a specific pain point. What comes next is the introduction of the product in the market. When talking from the customer experience perspective, this is not only the most expensive stage, but it is also the most crucial one. This is also the stage where a lot of marketing and advertising activities are happening. Thus, the expenditure is also high.

This is the stage where customers must be made aware of the product's existence. The marketing and CX teams should work together to communicate clearly about the product and its value. When not done right, there are chances that the product will fail even before reaching the second stage.

Advertisements, at this stage, must focus on customers' pain points and introduce the product as a solution. Sales tend to be slow. But, it is important to ensure that demands are increasing gradually. This stage can take a long time, especially if the product is very innovative. If a company introduces a unique product that is vastly different from existing products in the market, it will take time to attract customers.The marketing executives then must convince customers about the product's usability. Once a product survives this stage, the chances of its success increase multi-folds.

Note: The marketing activities can decide the success or failure of the product at this stage. The marketing executives must project the product's value and position it as 'the solution.' At the same time, the CX team must ensure that the customers see and get the value promised. The focus here should be on delivering value rather than on sales.

The Growth Stage

Once the product successfully sails through the introduction stage, it enters the growth stage. This is the stage where the product is accepted and is in demand. The increase in demand would push up production and widen the product's availability in the market. Therefore, the development teams are on their toes.

The first stage of the product life cycle may do with a slow but consistent increase in demand. However, the growth stage needs a sharp increase in product demand. If there is no steep increase in the product demand at this stage, the product may fail or become less profitable.

This stage can also be termed the stage of the competition. You can expect competitors to emerge in the market. They may come up with similar products or products that are better. To sustain this, you must differentiate your product from the competitors.' You will have to focus on maintaining the quality of the product and/or adding new features to the product. Additionally, the availability of the product in the market and its pricing too need special attention.

Note: You should aim to increase your market share and focus on enhancing your product during the growth phase. This is the key to staying ahead in the market.

The Maturity Stage

Products that survive the competition at the growth stage enter the maturity stage. At this stage, the product has actually made its position in the market. This is the stage where advertisement, as well as production cost, goes significantly down. This increases the profitability rate of the business.

The maturity stage is where the product starts to move towards market saturation. This means that demand for the product reaches a level where it tends to be stable. Things might seem settled at this stage, but they are not. Branding, product differentiation, and pricing become even more important because the competitors continually try to grab your market share.

Note: This is the stage where you should focus on marketing activities to differentiate the product from the rest. Product differentiation at this stage is how you increase your market share.

The Decline Stage

Nothing is eternal. Everything that enters the market must go away someday. When competitors develop a more innovative product, your product relevance may decline. Sometimes it may be due to upgrades in technologies.

Companies with great vision typically start to prepare for new product launches as soon as they realize market saturation. A saturated market indicates that there is no growth opportunity in the existing product at the existing price. A company may survive the decline stage and continue offering its product at reduced profit margins.

At this stage, businesses typically have two alternatives – continue offering the product at a reduced profit margin or move onto different ventures.

Note: In industries such as fashion and accessories, the decline phase may reverse with a trend reversal. But for the SaaS industry, the only option for a product after this stage is to go obsolete.

Product Lifecycle Diagram

The following is a diagram of product lifecycle

From the diagram, it can be seen how the demand for the product is slow during the introduction. It reaches a high during the growth stage. The demand remains balanced during the maturity stage and started dropping in the decline stage.

Examples of Products that Completed their Product Life Cycle

Now that you understand the four stages of a product life cycle, let us clarify the understanding with a few examples.

The Introduction Stage

Autonomous/ Driverless Vehicles – AI-operated vehicles that would not require any driver is in their introduction phase. They are currently not running on the roads with other vehicles. But, customers are talking about it. Marketers are building market demand for this product through advertisements.

Smart Homes – Again, AI-powered homes where everything is automated is still not a common thing. But we are being introduced to the concept that such a thing will be a reality in the near future. Customers are getting ready mentally for such an innovative product. So, smart homes to are in the introduction stage.

The Growth Stage

Internet – The internet, as a product, can be said to be in its growth stage. It has been introduced well, and everybody knows about it. Internet service providers are now trying their best to penetrate the market and widen their consumer base as much as possible. The demand is high, and the number of customers is growing rapidly.

The Maturity Stage

Smart Phones – today, almost everybody has a smartphone in their hands. This product has outgrown the introduction and growth stages. Companies providing smartphones are now on their toes to provide competitive prices, create product differentiation and maintain their brand identity. The declining phase may be far, but this product has travelled quite a distance in the maturity stage.

The Decline Stage

Typewriters – When introduced in the 19th century, typewriters were an innovative product. They sailed through the introduction and growth stage and became popular in the market. With the introduction of electronic word processors and computers, typewriters had to undergo their declining phase. Today they are obsolete.

Big Screen Computers – The computers that phased out typewriters were not like the laptops and flat-screen desktops we use today. The earlier big screen computers too passed through all the four stages of the product life cycle, and today their production and sale have declined. There is no market for big-screen computers.40

Final Words

A clear understanding of the product life cycle helps management and marketing executives make the right decisions at the right time. Different stages require different marketing strategies. Hence, it is important to evaluate the current stage at which a company's product stands. A product at the introduction stage requires different marketing tactics than a product at the growth stage. A product at the growth stage will need different production planning than a product at the maturity stage. So, we need to understand and evaluate different stages of the product life cycle.

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Rohan has over 11 years of experience in client services, marketing and hospitality field. Previously, he was head of digital marketing for a hi-tech mobile application. Rohan is driven by new challenges and the possibility of making an impact on individuals and businesses.

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Source: https://www.smartkarrot.com/resources/blog/product-lifecycle/