Table of Contents
- Product development
- Product introduction
- Product growth
- Product maturity
- Product decline
- Using a PIM System during product life cycle
All products go through a defined life cycle. The concept of six or four stage product life cycle means that, for the majority of products, there are distinct phases each with predictable sales and profits. This means that you can follow the progression to build optimal strategies at each stage of your product’s life cycle.
Using this concept, marketers can
- anticipate changes in demand,
- forecast sales and profit,
- determine how to position the product,
- forecast other marketing measures,
- decide when and how to focus on product investment.
Whereas the initial concept developed by Raymond Vernon included four stages in the product life cycle, the model was later expanded to include six. We will consider the six stage model.
|Create a serial model
|Analyze, gather feedback
|Take over the market
|Medium with continued growth
|Successors of innovators and early majority
|Rising / medium
|Obtain the greatest benefit from the market
|Keep sales at the same rate: prolong the use or create more variants
|Start to reduce
|Leave the market in time, planning to bring a new product to the market
|Low and rapidly decreasing
|Low and rapidly decreasing
Today, you can’t escape digitalization so most people end up using a number of systems to facilitate business processes. Surely, the first piece of software that comes to mind when you think about the product life cycle concept, is PLM or Product Lifecycle Management. This essential software is used primarily in the product development process. It serves to organize engineering and manufacturing workflows. If you are more interested in organizing marketing information, a PIM system would be a better fit.
The product development stage is also called "the Valley of Death" for good reason. The development phase involves hefty costs for the company, yet there are no guarantees on the returns on the invested funds. Studies show that only one in four products achieves commercial success.
The development process usually includes MVP (Minimal Viable Product) development and its review in real-world situations, evaluation of the results and improving the MVP. The development ends when product performance testing and customer ratings show that the product is in real demand. The demand has to be created during the initial development stage.
The main features of product development are
- a high demand for labor, production capacity, and time,
- high financial liquidity required from the company,
- the product is presented on the market for the first time,
- high costs.
An example of a highly anticipated product in the development stage is LG Signature OLED TV R9. It will be the first rollable TV. The screen can be hidden when not in use. LG is expected to launch the product late in 2020.
Beginning from this stage the product can be sold to the end customer. The goal of the product introduction life cycle is to analyze first-customer feedback and to create demand for the product. If the customers give positive reviews, the company expands its distribution channels. At this stage, it’s essential to encourage people to use the product and establish practices. To generate awareness of the product and persuade consumers to try it, the company must publish plenty of relevant product information.
Products that require an explanation must be explained to potential customers in more detail. For some industries and product types it is typical, that products are advertised before they actually go on sale and some of them can even be pre-ordered.
The end of the market launch phase is marked by reaching break-even point. The point at which the product sales completely cover the costs of production (both fixed and variable costs are considered).
The main features of product introduction are
- aggressive product marketing,
- low profit and sales,
- low competition,
- high costs.
Harley-Davidson’s LiveWire electric motorcycle was introduced in September 2019. Production and delivery were temporarily suspended due to a charging issue discovered after the introduction.
The Nintendo Switch Lite device was launched worldwide on September 20, 2019. By September 30, 2019, more than 1.95 million units had been sold.
Some products, like Betamax, never progressed beyond the introduction phase.
During the product growth stage, sales are increasing. The manufacturer seeks to increase the number of distribution channels and to establish long-term relationships with new stores, dealers and e-commerce platforms. More customers buy the product. Competing products, often with better features and lower prices, appear on the market, sometimes resulting in prices wars. Advertising switches to more aggressive brand advertising, highlighting the differences between the brands. Often, the manufacturer improves the product’s features and design, and releases new variants (e.g., new flavors), etc, to extend growth as much as possible.
The main features of product growth are
- consumers know the product well,
- sales and profit grow dynamically,
- increasing competition,
- the product is significantly improved,
- the price is reduced due to increased production and increased competition.
Solowheel is at its growth stage. It was introduced in 2008. It was one of the best-selling electric unicycles in 2019. Now, it’s sold in several versions: Classic, Extreme, and Scorpion.
At the product maturity stage sales are still rising, but at a slower pace. There are price wars, improvements cost more and bring in less profit. Growth is almost only achieved by attracting customers from competing products. Customers are won not by novelty, but by price reductions, promotions, and diversification of the product. Many products achieve their most profitable position, as a result of lower marketing budgets and due to a considerable market share gained during the product growth stage.
Companies develop new strategies to extend the maturity stage. They might also try to modify the target markets. For example, they may try to reach new segments, new geographical locations, or even find new uses for the product.
The main features of product maturity are
- peak sales are achieved,
- competition reaches a peak,
- reduced product costs due to a high sales volume.
Coca-Cola is at the maturity stage of the life cycle. This stage has been prolonged through the creation new flavors and by offering customers discounts. There are many stable products that remain in the maturity stage for a long time. These include Evian mineral water and Kelloggs Corn Flakes.
By the time a product reaches maturity it has been around for a long time. Customers know the product well and may even find it boring. The volume of product on the market has maxed out, having reached its peak. If the product is durable most households may already own it and you rely now only on the replacement market.
Market competitors try to achieve cost leadership. By removing certain cost blocks, companies try to offer their products cheaper than others. Those who have successfully achieved and maintained cost leadership can maximally exploit the saturation stage.
From this point, sales usually go down. The best way to keep your product selling is through innovations and development of unique marketing strategies.
The main features of product saturation are
- sales drop,
- profits drop,
- maximum competition,
- loyal customers drive main revenues,
- strong reduction in product costs.
Tablets have reached market saturation. Competition, primarily from China, has peaked. There is no more growth, and smartphones are driving tablets out of the market.
DVDs have also reached the level of saturation. The market is saturated, and the Internet and Blu-ray have started replacing them.
During the product decline, there's a drop in demand and profits, companies are losing their market share, which cannot be recovered even with the help of marketing. Technically better innovations and replacement products preferred by customers are present in the market. Most market players start to go bankrupt or leave the market. Product demand drops off completely or falls to a very low level. In some cases, the product becomes a craze for a small group of followers, e.g. the sale and repair of gramophones and gramophone records.
The best strategy during product decline stage is to concentrate on further development of the product, its variants and successor models.
The main features of product decline are
iPod is at the decline stage. It reached its peak global sales in 2008, and since then sales have steadily decreased. Production has continued at low volumes to clear out and monetize inventory of unused parts.
Some companies manage to relaunch products which appear to be in decline. In the mid-1990s, Apple computers were considered close to decline but in the early 2000s, they were successfully relaunched.
A PIM system can offer the marketing and product manager helpful support during the product development, introduction and other stages of the product life cycle. A PIM system helps to to disseminate the standardized information to the necessary channels. It also makes it possible to increase the number of channels without increasing their maintenance costs. If the sales channels are connected to a PIM system, the synchronization and updating of the product data will take place in a very short time. This also means that error correction will take less time than it would without a PIM solution.
Practice shows that large companies that have introduced a PIM system have increased their turnover by 25 percent annually. The reason for this is that new sales channels are easily connected and maintained on the PIM system. With a PIM, manufacturers can create more complete and precise product information, because central information can be updated and supplemented more than once. And it is known that the customer is more likely to buy the product with a detailed and qualitative description.
Completeness, usability, accuracy and timeliness of the provision of information about products, special offers, discounts and bonus programs increase consumer confidence, which also increases their loyalty. In this phase in particular, the quality of the product descriptions is the decision criterion for the purchase. This criterion becomes particularly important in a highly competitive environment.
As an example, consider the Procter & Gamble and Walmart case. Because after the PIM software was introduced in this company, it showed that there were 3,7 percent and 2,5 percent of products in the catalogs of these companies were obsolete (they appeared in the catalogs but were not purchased). With a PIM system, the company can keep its range up-to-date and maintain product catalogs; in addition, a large amount of the collected product information can be used.
The concept of the product life cycle allows companies to plan marketing activities better according to the strategy selected. The 6 stages include Development, Introduction, Growth, Maturity, Saturation, and Decline. This is the usual pattern, though there are exceptions. Many products fail even before the growth stage, the others manage to prolong their maturity for decades, escaping decline.
The product lifecycle concept is a forecasting model that helps marketers to work out the optimal strategy of market behavior for each product life cycle stages to earn maximum profits and understand when to take the old product out of the sale catalogs and introduce the new one, in some cases as its successor.
PIM systems are designed to automate the work involved in product information, which relieves your employees of routine work, reduces the number of errors and enhances the quality of product information.
- product costs fall below the break-even point,
- large scale production stops,
- most competitors are leaving the market.