A product’s life cycle refers to the stages every product goes through from the moment it is created until it perishes and can no longer be sold in stores. Understanding this model will help you determine the best ways to move your product throughout its life to maximise profits and address issues that may arise as it ages.
What is the product life cycle?
The product life cycle is the natural progression of a product from its launch to being discontinued. There are four stages in a product’s life cycle: growth, maturity, saturation, and decline. Each stage has challenges and opportunities that businesses must be aware of to succeed. Take a look at the stages and their significance in the cycle:
1) Growth Phase
The growth phase is when your product starts to gain traction. You may see a surge in sales and an increase in customers. This is an exciting time for your business, but it is also when you must be careful. You need to ensure that you can keep up with the demand and that your product is high quality. Otherwise, you may lose customers just as quickly as you gained them. If this happens, your company will start to decline in this stage of the product life cycle. If you notice that orders are slowing down or not meeting expectations, you must take action immediately by expanding production or changing how much inventory you have on hand.
2) Maturity Phase
In the maturity phase, your product is established in the market and will likely generate healthy profits. But don’t get complacent. This is also when competitors are most likely to enter the market. So, it is important to continue innovating and marketing your product aggressively. If you fail to do this, you will lose a significant market share as other companies move in.
On the other hand, if you are entering a mature market with an innovative product that solves an unmet need, you can reap huge rewards during this phase. Make sure your company has enough resources to sustain growth and stay competitive over time.
3) Saturation Phase
Once a product has reached saturation, its sales reach saturation. Sales may begin to decline due to increased competition, new technology, or changing consumer tastes.
As a business owner, you must be aware of these changes and adapt your marketing and sales strategies accordingly. Otherwise, you risk seeing your profits decline along with your product’s sales.
4) Decline Phase
The decline phase of the product life cycle is when sales start to decrease. It can happen due to changes in consumer tastes or the introduction of new products.
As sales decline, you may have to cut costs by reducing advertising or discontinuing production altogether. The decline phase can be difficult, but it is important to remember that all products eventually go through this phase.
The product life cycle is the natural progression of a product from launch to withdrawal from the market. Each stage offers different business opportunities and challenges, so it is crucial to understand how the product life cycle affects your business at each stage.
For example, during the growth stage, you must focus on scaling operations to meet increasing demand. During the maturity stage, you should focus on maintaining market share and profitability in the face of declining demand. And so on.
What it means for you
Here are some scenarios that show how the product life cycle can impact your business.
1) As the number of competitors in your market decreases due to natural attrition, you may be able to charge higher prices for your products and services.
2) As sales decline and competitors exit the market, you may be left with excess or insufficient inventory.
3) You may need new management as members of your original team retire or leave for other jobs.
4) When demand declines and manufacturers stop producing products to avoid losses, availability becomes an issue as stocks deplete.
Case study – Hybrid cars
The product life cycle of a hybrid car begins with research and development. Companies create prototypes and test them to see if they are viable products. If the prototypes are successful, the product moves into the production phase. During production, companies mass-produce the product and make it available to consumers. Once consumers start using the product, it enters the market phase. This is where companies track sales and assess customer feedback. Based on this feedback, they may make changes to the product. Eventually, demand for the product declines and enters the final stage: obsolescence. At this point, companies discontinue production and focus on developing new products.
Things to consider during a product’s life cycle
Evaluate your product or service. Is it still selling? If not, why? This information can help you decide whether to continue investing in the product or service or cut your losses and move on.
Examine your target market. Has it changed? Are there new opportunities that you can take advantage of?
Review your marketing strategy. Is it still effective? If not, what needs to be changed?
Take a look at your competition. Have they changed their strategies? If yes, what can you learn from them?
Analyze your costs. Have they gone up or down? Are there any areas where you can save money?
Assess your team’s performance.
The product life cycle can be divided into four distinct phases, each of which has meaning and implications for your business. Since the product life cycle affects so many aspects of business, it is important to understand how it works and how it can influence your business strategy and decisions as an entrepreneur or small business owner.
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