What is the life cycle of a product?
In marketing, we understand the life cycle of a product as all the stages through which a product goes from entering a market until it is withdrawn from the market itself.
This term is an analogy that arises from the evolution of living beings, who have a life cycle that also goes through different stages, from the birth of the living being to death.
As with living beings, products must consider the peculiarities and characteristics of each product, and the market in which it is to be entered since all products are not the same.
Why is it important to know the life cycle of a product? It is very relevant to be able to implement the appropriate strategies and therefore, you must know each of the phases. We will tell you about them in the next section of the post!
Phases in the life cycle of a product
The stages or phases of the life cycle of a product are as follows:
The introduction of the product is the phase that corresponds to the launch of said product to the market. During this first phase of the product's life cycle, sales are extremely low and therefore, profits are almost non-existent.
In the introduction, the profit that the product brings to the company is not the main thing because the objective is another: to publicize the product and expand it in the market through advertising strategies, promotions, etc.
At this stage, normally, the trajectory that the product will have is not known yet, it can be foreseen, but it is not known with certainty, and that is ... The product can be a success or a failure and it remains to be seen after it passes the next stages.
The product is already available for sales. But who will be the first buyers? How to show the market that the novelty is worth trying?
Here communication has a strategic role. Even if entrepreneurs know that sales aren't going to explode first, it won't make sense to expect potential customers to magically discover the product.
The introduction phase is the right time to define the KPIs (main performance indicators) of the product throughout its life cycle. However, the customer base is not yet sufficient to guide new acquisition actions and changes in offerings.
The growth phase or stage corresponds to the acceptance of the product by consumers. During this stage sales begin to skyrocket and profits begin to increase.
Besides, production shoots up, and therefore (due to the economy of scale) costs are reduced. It is also a stage in which we can begin to see new competitors who will try to differentiate themselves from your product and build their brand image.
What is the most important thing during this stage? The main objective that any company pursues during this stage is, without a doubt, to adapt the product to the demand and position it in the market.
In the previous stage, we saw an exponential growth of the product. However, during maturity, the growth of product sales begins to slow down and stabilize. We already have a consolidated product on the market and although sales are not growing so fast... the benefits of the product continue to be high!
The arrival of maturity imposes intense tests on the persistence of the product. The experience accumulated by the company in the previous stages gives it the ability to withstand possible economic crises or the emergence of new contenders.
Staying at the forefront of consumer purchasing options is, however, a very difficult task. This is proven by sales statistics, which are no longer growing steadily and stabilizing.
Entrepreneurs often break their heads in this phase, as the market already knows their product well and is adapting to its use. Paying attention to the new demands that arose is essential so that the product proves its ability to fulfill more than one function.
When it comes to measuring results, ROI (return on investment), and CAC (customer acquisition cost) are highlighted. In the end, ensuring the loyalty of already captured customers is more prudent than targeting a whole new market share.
This is undoubtedly the most feared moment for any product-focused company. Even if you make many attempts to postpone it, at some point it will become unavoidable.
The needs of consumers begin to change and that affects the product. During the decline stage, consumers change, they are saturated with the product and prefer to consume other products.
It is the stage in which sales drop considerably and with it the profits of the company.
Identifying this phase of the life cycle of a product is not difficult since it is seen, as we have mentioned in sales, but also in the impossibility of retaining customers.
At what stage in the product life cycle does the price start to drop?
Are you wondering at what stage of the product life cycle it is convenient to lower the price? Certainly, during the decline phase. It is in this phase that pricing strategies can be used to see if they work, just before ‘killing’ the product. It is the stage in which you can test with promotions that include sales, discounts, etc. Any of the strategies implemented in this phase should be aimed at reducing the price to try to increase sales and with it the benefits of the company.
Can the product life cycle be lengthened?
Products normally have a limited life. This is because consumers tend to get tired of such a product when it has been on the market for a while. We can say that... They are saturated with the product! Furthermore, technology-related products tend to get out of date and the most innovative products start to gain ground.
However, in many other products, it is possible to extend the life cycle. How can we get it? Some strategies can help you.
These strategies are as follows:
- Renew the product: Renewing the product is a good way to extend the life cycle. You can do it by improving the product, changing the packaging, and so on.
- Replacing the product: replacing that product with another with improvements can sometimes be cheaper than trying to renew the product and give it a new life.
- Expand the range: Expanding the range is another great option. It consists of launching a new product on the market that complements the existing product. This usually has the direct effect of lengthening the life of the product that was beginning to saturate the consumer.
It is worth clarifying that the life cycles of each product change according to many factors, such as these:
Certain products can be very useful in just one year, which shortens their time on the market. A cap released in a predominantly hot country will have less longevity than if it were offered in polar lands.
The curiosity caused by a product that debuts a market category can cause sales to grow very fast after launch. If it becomes fashionable but does not effectively meet the demands of the market, you risk falling too fast.
In a TED talk, American investor Bill Gross presented the reasons why a startup achieves success and consolidates in its category.
His research of more than 100 companies concluded that the main key to conquering the market is to deliver what you need at the perfect time.
As we said before, new demands arise with each generation, and companies have to accompany them in this process.
A good example of this successful synchronization is the USB device. When they emerged, there was a global need to increase the capacity to store data. The floppy disk and compact discs were no longer sufficient for the volume of information that was generated.
As the best option for the demand of the moment, the USB memory spread throughout the world and stimulated the arrival of many new manufacturers.
What strategies work at each phase of the cycle?
Now that we have dealt with the cycle in its entirety, we can venture to present the most satisfactory and appropriate actions for each moment.
- The effort to extend the relevance and usefulness of the product requires an integration of the various sectors of the company that manages it.
- The Sales team pitch, for example, should ensure that prospects are aware of innovations made by IT professionals in the product.
- To ensure that transition, the Marketing team has a very valuable position. It is essential that this department closely monitor the life cycle of the product, since the message that it will send to the market changes according to each stage.
Why do products have cycles?
If today you had to choose between a typewriter and a computer to write content, which would you choose? Unless you collect relics, I imagine the computer would sound much better to you.
The comparison between these two products tells us something about their cyclical nature. Until computers emerged, the typewriter was the main device for writing documents, messages, and texts of all kinds.
The dynamism of technology caused the typewriter to be naturally replaced by electronic information devices. Little by little, consumers got used to the new, more efficient, and sophisticated products.
The example makes it clear that a product is not something eternal. Even if it is of high quality and charms its consumers, there is always the possibility that another will emerge and win their trust.
There is an arsenal of causes that can lead a product to lose its vitality in the market. Here are some examples:
- Lack of investment in new functionalities or features;
- Loss of quality concerning a new competitive launch;
- Price immobility over the years;
- Restriction to a single type of offer;
- Lack of a good narrative for the product.
It is important to know how to manage the stage in which your product is, since the decisions to be made in each one, vary and are different. Therefore, it is vital to carry out appropriate actions for each circumstance, to overcome the challenges that arise at an early each stage of each cycle. The marketing strategies of a company must adapt to the fluctuations which the products go through over time, to optimize decision-making in the best possible way. Identifying what stage your product is in will help you define your strategy and boost your marketing efforts. As you have seen throughout the article, it is important to study and work on the life cycle of a product, since it can directly affect the survival of a company.