Every product that you sell has a life cycle that starts with the initial concept and ends as the product leaves the market. These stages play an important role in your business, affecting everything from customer demand to sales and marketing. When you understand where each product is in its cycle, it’s easier to manage inventory and maximize revenue. Hence, following are the different product life cycle stages:
1) Product Development
During this stage, you’re developing a product and introducing it to the market. The beginning of the product life cycle is the busiest and most exciting time. You can expect to undertake a variety of tasks, including:
- Market research
- Developing your idea
- Making a prototype
- Market testing the prototype
- Launching the product
- Marketing the product
When your products are in this stage, it’s safe to expect high costs and low profits. Sales are often low, and you may need to invest heavily in marketing to bring in new customers. Depending on your market, you may have few competitors at this point. As this stage comes to a close, your sales start to break even with your costs.
2) Product Growth
Once the product has been on the market for a while, it enters the growth phase. Now the customers are aware that the product exists. More importantly, you know how customers react to your product. That means you can make adjustments to the product design as needed and shift your sales and marketing strategies to meet your customers’ needs. Depending on the number of sales, you might also start reaching out to new audiences.
During the growth stage, your costs shift from development and testing to marketing and advertising. Here, your goal is to build awareness and interest. Eventually, sales volume increases, and your profits rise. You may also see more competition, which might require changes to your pricing structure.
3) Product Maturity
Product maturity is a comfortable time for your company. Your product is well-known, and sales are strong. Your manufacturing systems are efficient and your costs are low, so your profits are at their highest. Chances are, there are plenty of competitors in the market, which means that your primary marketing and sales goal is to distinguish your product and brand from the other available options. This low-cost, high-revenue period is a great time to start the process of building a new product.
At the end of the product maturity stage, steep competition starts to force your prices down. Your costs stay the same, though, which means that your profits start to drop.
At some point, every product reaches the end of its life. There are many reasons why, increasing costs and more competition might reduce profits dramatically. Or another product might enter the market and make your item obsolete. Think of the pager, which quickly became unnecessary when cellphones were mass-produced. As a business, you can cut your losses by recognizing when a product isn’t viable. Look out for signs like:
- Forced price reductions
- Dropping sales volume
- Low profitability
- Shrinking market
The product life cycle varies for every item. New technology can knock a product like phones or tablets out of the market in a matter of months. Using this system to gauge the market status of your products can help you determine when to start innovating. Keeping each cycle in mind when creating profit reports can give you an idea of where a product it headed. Knowing your company’s product cycles can help you plan for the future and use your resources efficiently in the short term.