What is the Product Life Cycle?
The Product Life Cycle (PLC) is the course of a product’s sales and profits over its lifetime. There are 4 stages to this cycle: 1. Introduction 2. Growth 3. Maturity and 4. Decline. This cycle helps companies determine and foresee where their product will go, and what moment in time improvements and changes need to be made.
1. Introduction Stage
This is the point when a company introduces a new product to the public. The company determines pricing strategies, whether it wants to use price skimming, penetration pricing, bundle pricing, etc. This is the time the company determines how to advertise, and will spend more money on advertising than it makes on selling the new product. Also, it’s important in this stage to reach out to early adopters or other influencers in the market.
2. Growth Stage
In the second phase, the company is hopefully seeing an increase in sales and a decrease in manufacturing costs. But, it doesn’t want to get too comfortable. In the growth stage, the company should be looking for ways to innovate and add value to its customers. It may be looking for options to expand its target audience and break into a more massive market. Look at different options of distribution, what is working well, and what could work better.
3. Maturity Stage
Maturity is when a product has reached a peak in sales and costs of production have dropped. This stage is when the company should make changes to the product so the maturity stage lasts longer and the lifetime of the product is extended. This can be done by launching a new version of the product. Apple is a great example of this. They are always launching a new and improved product to keep their customers interested and satisfied. Evaluate where the company’s prices are sitting and whether there is a need to increase or decrease the price based on cost and current revenue.
4. Decline Stage
The fourth stage is the time to contemplate whether to let a product fade out or not. The company can choose to invest in more marketing, an added feature, or another product to add to your line. But if it does choose to let a product fade out, it is good to have an exit strategy! The way a product exits the market says a lot about the company and leaves a reputation, so it’s best to do it tastefully.
The Product Life Cycle is important in helping products take off and become successful. Always be ready to change and improve throughout the product life cycle and this will create a successful product.
Product Life Cycle Instructions/Guide
This stage is optional in many Product Life Cycle diagrams but not optional in creating a product! Only costs are incurred during this stage as the product is not yet for sale. You are likely surveying prospective customers to find out what features your product needs to include.
Finally, you release the new product to the public. You are likely only focusing on a niche group of customers to create a solid user base–most likely the innovators and early adopters of the market.
Set your prices low during this stage to penetrate the market.Your company will not see the profit that it will in later stages of the cycle.
You will know when your product is out of this stage when you start marketing to a broader audience and break even on your ROI.
You’ve made it! During the growth stage sales skyrocket as the late majority takes to your star product. It is now mainstream and you are advertising to a broader audience.
You now have flexibility on pricing because there are few, if any, competitors yet in the market. You can focus on adding features to the product and improving its quality.
You’ll know when this stage is coming to an end when the company begins to see sales plateau. This is natural and happens with every product. Competitors begin to appear in the market as well, marking the end of the Growth phase.
Your product has reached its peak. The goal during this stage is to defend market share while maximizing profit.
One strategy at this point is to differentiate your product from that of competitors to try and maintain sales. The company may also consider lowering the price to better compete.
This is the point where you need to start offering incentives to customers to purchase your product. It is no longerthe Star and more of a Cash Cow. Once your profits begin a continuous downward trend, you know know this product is leaving the Maturity stage of the Marketing Tool: The Product Life Cycle.
It is important to reduce, or at least maintain, costs during the decline phase of the life cycle. The company can possibly reduce features and offer it to a niche market. You are just trying to squeeze the last of the cash out of this Dog.
When your company feels that the product is no longer profitable, liquidate remaining inventory and collect on the remaining cash.
Product Life Cycle Template:
This blank template can be used to track the progress of a product’s life cycle.
By: Aaron Murdock