Product Life Cycle

Product Development Life Cycle Stages

Product development begins when a company turns an idea or a design into a product that will soon hit the market.

The life cycle of a product is divided into four stages: the introduction stage, the growth stage, the maturity stage, and the decline stage.

Fig. 1 - Product Life Cycle Model

However, before a product can reach these stages, it must go through the design, research, and development processes. After determining that a product can be manufactured, advertised, and sold successfully, the business can distribute the product on the market.

When a product is introduced to the market effectively, there should be an increase in demand and popularity, which should cause previous items to be phased out of the market.

As the new product gains market share, the marketing efforts put into promoting it become less intensive, and the expenditures involved with marketing and manufacturing decrease.

As the product reaches its peak usefulness and begins to decrease in popularity, removing the product from the market might be necessary to make way for a more cutting-edge substitute.

Introduction Stage of Product Life Cycle

The introduction stage of the product life cycle is characterized by a brand new product on the market and sluggish sales. For the firm to increase sales, it will need to spend a significant amount of money advertising the product so that consumers find it enticing.

Because of the low sales and the significant expenditures associated with distribution and advertising, the earnings at this stage are negative or low compared to the profits in subsequent phases. A substantial amount of capital is required to entice distributors and build their stockpiles.

The amount spent on promotion is also noteworthy. Businesses must educate consumers about the new product and convince them to try it. At this point, the market is not prepared for product enhancements; therefore, the business, along with its few other rivals, produces the product in its most basic form.

When the business has generated sufficient awareness about the product, either via advertising or through branding efforts, it will be able to turn its attention to other elements, like price and distribution.

Establishing a price for a product while it is still in the launch stage is highly significant for gaining market share.

Growth Stage of Product Life Cycle

If a product has survived the introduction stage, meaning that consumers liked it and the company could keep producing sustainably, it enters the growth stage.

Early adopters will continue buying the product, and later other consumers will start following their example, particularly if they hear positive word-of-mouth from early adopters. New rivals will join the market because the possibility of making a profit entices them. They will offer new product features, expanding the market for said product.

A rise in the number of rivals increases the number of distribution outlets, which in turn causes a build-up of inventory among resellers.

A rise in the number of rivals increases the number of distribution outlets.

During the growth stage, educating the market is still one of the company's primary goals, but it must now also focus on being competitive. The company employs several different techniques to stay ahead of the competition. It enhances the overall product quality and introduces new product versions and features.

Maturity Stage of Product Life Cycle

The increase in a product's sales will eventually level off, marking the beginning of the stage known as 'maturity'. The maturity stage of the product life cycle often lasts longer than the phases that come before it, and it presents significant difficulties to marketing management.

Due to the deceleration in sales, many manufacturers have a surplus of items. This excess capacity, in turn, increases the level of competition.

During the maturity stage, competitors begin lowering their prices, increasing the amount of advertising and sales promotions they run, and increasing the budgets they allocate to research and development of new and improved versions of the product. These actions will result in a decrease in earnings.

Although it may seem that many mature products continue to operate in the same manner for extended periods, the reality is that most successful products are constantly adapting to satisfy the ever-evolving requirements of their target markets.

Altering aspects of the product, such as its quality, features, design, packaging, or technological platforms, might be another strategy the firm uses to keep the customers it already has or win over new customers.

Additionally, during the maturity stage of the product life cycle, businesses experiment with tweaking the marketing mix, which may lead to increased sales by altering one or more components of the marketing mix.

Decline Stage of Product Life Cycle

The product life cycle's decline stage is the product's final stage. Due to various reasons, a product reaches a point where it no longer sells. It may be due to new product developments that replace the existing ones.

Fig. 2 - CD Example

The decline stage may be gradual or quick and sharp. Sales may decrease to zero or drop to a level where they will remain low for several years.

The decrease in sales may be attributed to several factors, including technological developments, changes in customer preferences, and more market rivalry.

Some businesses decide to leave the market as their sales and profitability continue to fall. Those who remain could reduce the number of products they provide. In addition, companies could leave smaller market segments and abandon channels that have a minimal impact on their business. Alternatively, they might decrease their advertising budget and lower their prices even more.

Keeping a product on the market that is not up to par may be highly expensive for a business, not only in terms of lost profits but due to other expenses and costs.

A poor product often necessitates regular revisions to both the prices and the inventory. It demands marketing and attention from the sales team. Instead, these teams should focus on increasing the profitability of the "healthy" product for which there is high demand.

Because of these factors, businesses have to determine whether products are entering a declining stage and then choose whether to continue producing them, harvesting them, or discontinuing them altogether.

Often, the management team may conclude that it is in the company's best interest to keep the brand intact while either repositioning it or reinvigorating it in the hopes of bringing it back into the growth stage of the product life cycle. If these strategies are not viable, a company can choose to discontinue the product altogether.