Unless you happen to come up with a product like Coca-Cola that remains eternally in demand, the products your small business markets will typically follow a life cycle that arcs from initially increasing to ultimately waning sales. Virtually all products tend to experience the same four identifiable stages of introduction, growth, maturity, and decline. Understanding these stages and how each of them affects your product’s position in the marketplace can help you optimize your marketing and maximize profitability.
When a product is in the introduction stage, it has distinctive pluses and minuses. Bringing a new product to market is the most costly stage, requiring market research and a major marketing campaign. Sales may be slow as the product finds its audience among potential consumers, but smart marketing should steadily increase as buyers discover the product. Introductory marketing efforts should focus on raising awareness of the product’s particular benefits. Introducing a new product gives you the chance to craft the public’s perception of it just the way you want, as well as the opportunity to use it to enhance your overall brand image. Negotiating your way through the introduction stage with maximum success depends on solid market research done in advance, so that you know your target buyers and the best sales approach.
The growth stage is the period of sustained, strong growth in sales revenue as more consumers buy the product and it becomes established in the marketplace. The growth stage affords the opportunity to increase sales and improve your profit margin. Initial development costs are behind, and you can benefit from economies of scale in production, effectively lowering your production costs and boosting your bottom line. Increasing the numbers of buyers may enable you to raise prices. You can leverage increased profits to fund advertising. Consider increasing the product’s perceived value by introducing extra features or accessories to go with the product.
The maturity stage shifts the focus of marketing efforts to defending the product’s established market share. The strong sales growth of the previous phase begins to taper off as the product reaches market saturation. You may tailor advertising specifically to counter directly competing products that have been introduced by competitors. Accentuate your product’s unique features to differentiate it. Since marketplace awareness has likely peaked, you can improve net profits by cutting back on advertising or on prices to stay competitive. Alternatively, you can seek out new distribution channels or new markets to tap into customers undiscovered by your competition.
Products eventually enter a decline stage and are gradually removed from the market. This is often spurred by technology advances, such the replacement of vinyl records by CDs. Increased competition and necessary price reductions may have made continuing production unwise. However, if your product still has loyal, repeat buyers, you may opt to continue producing it in limited quantities, while discontinuing marketing expenditures. You may attempt an extension strategies to revitalize sales of the product, perhaps with significant feature upgrades. Another strategy is finding a new group of consumers by introducing your product in a new geographical area. Cutting price and profit margin is another extension strategy.