To many devoted entrepreneurs, a product is kind of like a child. It’s your creation, a reflection on you and your hope for the future. Is it any wonder that the business world uses a biological lifecycle as a model for how a product is expected perform? It’s called a product lifecycle, and in it a product is born, it grows, it matures, and (in many cases) it declines. You can almost hear the strains of “Sunrise, Sunset.”
Stages of the Product Lifecycle
While it’s called a product lifecycle, the term can refer not only to a single product, but also to a product category or even a brand. There are generally four stages, the lengths of which depend on the specific product.
This is a stage where many startups live. It’s all about the launch and the buildup to the launch, which includes the idea, validation and development of the product, the designing and perfecting of a prototype, the manufacturing of the product, the initial marketing, and the limited distribution. This tends to be the costliest stage for the business, because a lot of money is going out before there is real demand for the product. During this stage, an initial price is determined based on the competition. Pricing strategies include penetration pricing, which is pricing an item low for wide adoption, or a so-called skimming strategy, where prices start high initially and then go down in the growth stage.
Once the product has gained acceptance, sales start to grow. The growth stage is when product costs should get lower (due to economies of scale) and profit margins grow. It’s also the point where competitors start to rear their ugly heads. The company can increase advertising during this stage to expand the market even further. That’s the good scenario. The other scenario in the growth phase is realizing that the product is too expensive, not as widely accepted as it might have been, or pushed aside by the competition. In that case, the company can decide to move quickly from the growth stage to decline.
The product is all grown up. Sales may have slowed from the growth stage, but the product could still have a long life, depending on how things go in the maturity stage. Marketing dollars can be spent on keeping the product popular and outmaneuvering competitors. Manufacturing costs can be lowered to make the produce more profitable. The product’s price or audience can change. Profit in the maturity stage will be theoretically used to fuel the introduction of new products, or used to refocus on a popular product. For some products, the maturity stage can last for years or even decades.
Sales have peaked and revenues have peaked and are starting to dwindle until, eventually, the product is no longer marketable. There is an argument that this stage is not inevitable. In fact, some products can live on forever with strong marketing and branding. Even products seemingly in decline can be repackaged or target a new market. For products that are in decline, however, a business must decide whether to stop producing the product or sell their business to another company.
The Product Lifecycle Is Not the Only Option
The product lifecycle is one model that can help businesses plan what to expect from one product, and it encourages businesses to drive research and development for new products. But it is not the only tool that marketers use, and it has its detractors. In an unpredictable and changing market, stages in the product lifecycle could change for unforeseen reasons. Critics argue that it may make sense to react and adapt to promote continued or renewed growth, rather than allow maturity or decline to take place. In other words, if you live by the product lifecycle model, you are allowing your product to die according to the product lifecycle model. Some entrepreneurs just can’t stand thinking about anything bad happening to their baby.
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