Product Life Cycle: Importance for Business

Understanding the Product Life Cycle is essential for businesses because it helps them to plan and manage their products effectively. By understanding which stages a product is in, businesses can make informed decisions about marketing, pricing, and product development. They can also anticipate changes in the market and plan accordingly.

Advantages

PLC offers numerous advantages, impacting the marketing strategy and financial performance. By implementing this approach, you can reap these benefits.

• Make informed decisions according to the life cycle stage
• Boost Return on Investment (ROI) on product launches
• Profitable growth of the company
• Adapt your marketing messages pro-actively to stay relevant to your target audience
• Retain and improve customer loyalty, reputation, and product appeal

Disadvantages

On the other hand, a poorly managed product life cycle will result in the following:

• The product fails to meet its potential
• Reduced shelf life
• An excess of inventory
• A decrease in profits
• Entering the market decline stage too early

Limitations

One limitation is that the length of each stage can vary greatly depending on the product and industry. Some products may have a short introduction phase, while others may have a long growth phase. Additionally, the product life cycle does not account for external factors such as consumer trends, economic conditions, or competition changes.

The model assumes that the product is steady throughout its lifecycle and that there are no significant changes to the product or market. However, in reality, businesses may need to adjust their products or marketing strategies in response to changes in the market.

PLC vs. BCG Matrix

Boston Consulting Group (BCG) Matrix is another analytical tool for assessing the market positioning of a product. It categorizes products by their market growth and market.

And unlike PLC, which has five stages, BCG Matrix has four.

• Stars – products with a high growth rate and a high market share.
• Cash cows – products with a low growth rate and a high market share.
• Question marks – often called “problem children,” these products have a high growth rate and low market share.
• Dogs – products with a low growth rate and market share.

Stages of PLC

Development

The product life cycle starts with development. It’s where market research begins. Before launching your product, you’ll refine your concept, test your product, and create a launch strategy. Concept testing with potential users is crucial in this step. It helps you understand your target market’s reaction to your concept and make changes based on their feedback before creating the product.

When launching a new product, there will be costs before generating income. Financing may come from personal funds or investors, but limited funding and high risk exist. To attract investors and customers, create a brief sketch or prototype to showcase market potential. Validate the market early to start raising funds for the launch.

Introduction

When a product is launched, it enters the introduction stage of its life cycle. During this stage, the marketing team’s primary focus is to create product awareness and reach the target market. Content marketing and inbound marketing strategies help in promoting the product.

The time spent at this stage can vary based on product complexity, competition, innovation, and other factors. Success in this stage can lead to progression to the next stage.

Growth

Consumers are now purchasing the product in response to marketing campaigns. Demand and profits are rising, and competitors seek to challenge your success.

In this stage, marketing shifts from getting attention to establishing a brand presence. You need to demonstrate why your brand is better than the competition. Your company may add new product features, enhance support services, and expand distribution channels as it grows. These efforts should be a key focus of your marketing strategy.

Maturity

Growth slowdown marks the start of the maturity stage. At this point, the market may reach a saturation point as competition increases despite high consumer usage. Lowering your prices might be required to remain competitive. Additionally, during this stage, sales remain steady while costs decrease.

Unlike the initial stages, where your marketing efforts focus on product awareness, at this stage, your marketing should focus on highlighting your distinct product features, strengths, and customer service. Otherwise, you’ll enter the decline stage too soon.

Decline

If your brand loses popularity among consumers, it may enter the final stage. As the market expands, competition will increase, and market share will be divided among various players. And an increase in competition often leads to a decrease in sales.

Factors Affecting the Product Life Cycle

While you can manage your product’s concept, positioning, and marketing internally, external factors can also play a role in its life cycle. Some examples of external factors that can impact the PLC are listed below.

Ease of Entry

Factors like expenses, market size, and barriers to entry also play a role. With little competition and low barriers, your product’s life cycle may be shorter. On the other hand, higher levels of these factors may make entry harder but lead to a longer product lifespan.

Technological Advancements

Industries with fast tech advancement, such as cell phones, tablets, or computers, tend to have short product lifecycles. Maintaining competitiveness requires understanding the pace of tech evolution, your target market’s needs, and when to improve your product.

Market Acceptance Rate

The consumer acceptance rate is a significant factor in determining the life cycle of a product. Analyzing the life cycles of comparable products can provide insight into your acceptance rate. Conducting market research can aid in forecasting the speed of adoption and acceptance of your product.

Economic Forces

During the height of the pandemic lockdowns, people spent less or were more selective in buying habits, resulting in an extended introductory phase for new products. Strong spending can shorten the introductory phase and extend the growth phase. Economic forces are dependent on your product, target market, and industry.

Examples of PLC

Below are some examples of product life cycles for some brands.

Coca-Cola

• Development – there is little information available about the formulation and development of Coca-Cola.
• Introduction – in 1886, the year of the brand’s founding, the brand appeared to have the right idea.
• Growth – Coca-Cola surpassed consumption in all states in the US within ten years of its launch.
• Maturity – while it’s impossible to pinpoint precisely when the brand reached maturity, it’s safe to say that most of its history has been spent in this stage.
• Decline – Coca-Cola’s net operating revenue has experienced a decline since 2012, which is typical for a mature stage. However, it is essential to continue investing in marketing and new products.

Havaianas

• Development – Japanese sandals made of straw or wood are believed to be the origin of traditional flip-flops. In Brazil, however, rubber was chosen as the material due to its perceived popularity among the audience.
• Introduction – the product’s introduction to the market proved successful among the C, D, and E classes, whether intentionally or not.
• Growth – Havaianas flip-flops experienced significant growth throughout their existence and eventually achieved a dominant market share of over 90 percent for flip-flops.
• Maturity – during the 1990s, there was a shift in product design and marketing aimed at a new demographic. Well-known actors starred in TV commercials, contributing to the industry’s growth and development.
• Decline – there is no indication that Havaianas flip-flops will undergo this phase soon.

How to Use the Product Life Cycle

To use the product life cycle, here are some ideas to follow:

Establish Authority Over Competitors

During the introduction stage, the priority is to position your product in the market as the most desirable option based on the chosen benefit, whether it be affordability, luxury, or any other factor. The goal is to distinguish your product from competitors and position your brand as a credible expert in the industry.

Develop Pricing Strategies

Pricing strategies vary as products go through their life cycle. Introductory pricing is a marketing strategy that involves positioning oneself against competitors. Product pricing may vary during growth due to feature additions, availability, and other considerations. Competitive pricing can result in price reductions as a business becomes more mature. A decline typically results in a decrease in price or a return to the beginning.

Develop a Successful Marketing Strategy

Each stage of the product life cycle presents opportunities to refine your marketing strategy. During the introduction stage, you will test ads, explore channels, and connect with your target audience. In the growth stage, use great content to connect on your channels. In maturity, you may try new messaging, different media, and other ways to delay the decline.