Product Life Cycle Explained: What It Is, the 5 Stages, & Examples
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The product life cycle is one of the most important concepts in marketing and business strategy. In essence, it shows the various stages your product will pass through on its way to becoming obsolete. Here’s what it is, what happens in each step, and examples of products that have gone through this process recently.
Introduction to the Product Life Cycle
There are different ways to describe a product life cycle. Some say it consists of four stages; others claim five. However you choose to describe it, and whichever number of steps you go with, understanding what goes on in each location can provide valuable insight for managers trying to make business decisions about their products or brands and how best to utilize them in today’s fast-changing marketplaces. For our purposes, we’ll use a five-stage PLC model to help us understand what happens over time to most products as they progress toward becoming obsolete.
The Product Market Fit Stage
In the early phases of a product’s life cycle, it can be challenging to understand how users will respond. Essentially in these early days, you’re trying to test whether or not there is a need for your product. So many things can go wrong (or right) during this phase that it is almost a fly-by-night type of operation – if you get it right, you might have a hit on your hands; if you don’t move quickly and change course immediately while testing what works and what doesn’t then your product will flop miserably, and you may as well throw in the towel right then and there.
The Growth Stage
To reach saturation in your product life cycle—meaning every consumer knows about your product—you’ll want to spend money on marketing and branding campaigns. Launching is not enough; you need to get consumers aware of your product and convince them that it’s valuable enough to give up a portion of their paycheck. Once you’ve gained a customer base, you can start to gain traction (and sales). As long as new customers enter your funnel at a greater rate than those who drop out (or stop buying), it’s time to scale back some of your marketing spend—but never lose sight of consumer acquisition.
Products in their mature stage have either been replaced by newer versions or were so wildly successful initially that there’s no longer a market for them. Microsoft Windows XP, for example, has long since been replaced by Windows 7 (and will soon be superseded by Windows 8). And Hasbro has brought My Little Pony back from its initial launch in 1983 to compete with other dolls and toys on today’s market. During its mature stage, your product should focus on stabilizing and maintaining quality control. Also, look at how you can add new features to make your product more valuable to customers who have already bought it.
You’ve reached a point where demand for your product isn’t high enough to support profitability. If you want to continue selling your product, you may need to introduce another product or rebrand/redesign it. The decline can be managed in two ways: You can shut down sales and try to sell what’s left of your stock at discount prices. Or, you can lower production costs to keep up with declining demand for your product. Reducing labor costs is a simple and direct way; layoffs are often necessary here.