Product life cycle
The product life cycle is a tool, usually in the form of a graph, which explains how a product will perform over time.
The model assumes that every product has a lifecycle which will change and develop over time. The stages are
- Introduction – the product is being introduced to the market; a significant investment will be required and the product will not bring in sufficient returns to recover these
- Growth – the product moves into this phase when market demand rises; the product should move into profit at this point
- Maturity – the market demand stabilises, marking the end of the rise in profit and market demand and the start of decline; profits will be stable or will start to decrease
- Decline – at this stage, both sales and profits decline.
What is it used for?
The model is used to assess at which phase in its life cycle a given product now stands and what is likely to happen in the near future. It can be used to determine product strategies at any time. It could also be utilised to analyse the state of a marketing strategy or business process.
How do I use it?
To determine product strategy, consider the following at each phase:
At this stage in the lifecycle you need to be thinking about pricing strategies. You need to decide whether to price low to build up a consumer base, or to price high to cover your development costs.
Other decisions that need to be taken at this point include branding and distribution channels. You need to think about where you will market your product, plus how to educate consumers and attract early adopters.
During this period, you may want to add more distribution channels and promote your product more widely. You may also need to add new features to your product.
By the time you reach this phase, you may have a number of competitors. You will need to protect your spot in the market while still making profits. Ways in which you may do this are by pricing lower, adding new features and distributing in ways that differentiate you from your competition and promoting your product for its differences to the other options in the marketplace.
During the later stages, sales of your product will decline. To combat this, you can follow a few different strategies, examples of which might be to market your product for different uses or to stop selling the product.
What are its limitations?
One problem with the product lifecycle is that not every product follows the same set pattern. There are products that come in and out of fashion and that have numerous growth and decline phases.
A second issue is that the time span of the product life cycle can vary considerably from product to product. For example, a household appliance, such as a washing machine, will have a long product life cycle, perhaps lasting for many years, whereas a toy for children that was created to be launched with a film may have a very short life cycle and may be in decline after just a few weeks or months.
How the product is marketed and developed can also affect the product life cycle. Companies might aim for a rapid market entry or to enter many markets at once. This will most likely have a very different impact on the product life cycle compared with a product that is slowly developed and improved and entered into particular markets at different stages.
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