The markets are constantly changing and in continuous evolution, this means that the products offered by companies have a limited life and experience an evolution from launch to retirement, going through different stages and suffering variations in sales.
WHAT IS THE LIFE CYCLE OF A PRODUCT?
In marketing, the life cycle of a product is understood as the set of stages a product goes through from its introduction in the market to its withdrawal.
The concept of a product’s life cycle arises from the analogy between the evolution of living beings and that of products, since both go through different stages throughout their existence. A living being traces a life curve that goes through birth, adolescence, adulthood, old age, and death. As for the products, a similar cycle occurs, which you can see below.
STAGES OF THE LIFE CYCLE OF A PRODUCT
The identification of the factors that affect the evolution and demand for products, as well as the duration of each of the phases, will determine the company’s ability to adapt its products to the new needs of consumers. The life cycle of a product consists of 4 main stages: introduction, growth, maturity and decline.
In the introduction stage, after preparing the marketing plan , the product is launched for the first time on the market, we are facing a first stage full of uncertainty and risk. It is also the stage of the life cycle of a product that entails a higher cost, since the first approach of the product to the consumer occurs, which includes both prior market studies and the development of the product itself, as well as investment in communication campaigns and promotional marketing actions.
Normally at this stage, demand is less than supply, since the highest percentage of sales comes from the most innovative consumers and early adopters, who are those who accept a higher risk when buying and are excited to experiment with new products. .
The key at this stage of the life cycle of a product is to define and work on the positioning and investigate the market response to the product, in case it is necessary to react quickly and be able to reorient the strategies.
In the growth phase, the product is positioned in the defined segment, and begins to be accepted by consumers. This causes sales and therefore profits to increase .
Typically, the increase in profits occurs because manufacturing costs are reduced either by economies of scale or by gaining manufacturing experience.
Despite this, competition in this second stage of a product life cycle is usually not very intense. It is likely that new competitors have appeared, but these new players will try to differentiate their product and begin to build their brand positioning .
The key at this stage is to reinforce the positioning and make modifications to adapt the product to the growing demand.
The maturity stage occurs when the product has reached the top in terms of market share. This stage, the third of the life cycle of a product, usually has a longer duration than the rest.
Sales continue to increase, but at a slower and decreasing rate, until the point that they stabilize and then begin to stop
At this stage the competition is already considerable, so it is not necessary to compete only on prices, but also other relevant factors for consumers must be identified and worked on, to really get a product and a differentiated value proposition.
The key at this stage is to anticipate the drop in sales by looking for proposals and innovations that will make the product attractive again in order to sustain sales.
No company wants to reach the decline phase, since it is the last stage of a product’s life cycle. Sales begin to decline gradually as the product has been replaced by other more attractive options for consumers.
Profits can become losses and, therefore, the product is no longer profitable for the company, if the necessary measures are not taken.
In this phase, I usually recommend that the product be withdrawn from the market, since there are few opportunities to revive it.
The key at this stage is to minimize investment and plan actions where different aspects are taken into account: replace the product or modify it to focus it again on the market.
LIFE CYCLE OF AN EXAMPLE PRODUCT
Apple released the iPod on October 23, 2001, beginning the introductory stage of a product life cycle. In 2002 sales had already reached 600 thousand units, the iPod was in the growth stage . Due to the popularity achieved, in 2003 Apple created the iTunes application, creating a new way to sell music legally and easily. In the following years, Apple developed different versions of the iPod with new technological advances, such as video playback on the device. As you can deduce, the iPod was in the maturity stage of the life cycle of a product.
After the launch of the iPhone in 2007, the course of the iPod changed, and sales began to stagnate, entering the decline stage . The iPhone terminal included all the functions of the iPod, plus a whole new world of possibilities. Who would buy an iPod while being able to buy an iPhone? Steve Jobs himself seeing the situation of the life cycle in which the iPod was in 2007, decided to make a statement stating that “the iPhone is the best iPod in the world.”
Finally, Apple eliminated many of its iPod models, and 17 years later it has been simplifying the line and has focused on two models, which do not even appear on the central line of the official website. In addition, the last renewal occurred in 2017, therefore, the device continues to be on sale to meet the demand of a minimum percentage of consumers who continue to buy it, but in the short term it is expected to withdraw from the market.
As we can see, the iPod is a good example of how a product can go through all stages of a product’s life cycle.
It is important to know and know how to manage the stage your product is in, since the decisions to be made in each one vary and are different. Therefore, it is vital to carry out actions appropriate to each circumstance, in order to overcome the challenges that arise at each stage of the cycle. The marketing strategies of a company must adapt to the fluctuations that the products undergo over time, in order to optimize decision-making in the best possible way. Identifying what stage your product is in, will help you define your strategy and enhance your marketing efforts. As you have seen throughout the article, it is important to study and work on the life cycle of a product, since it can directly affect the survival of a company.