What is the Product life cycle?
The Product Life Cycle (PLC) is the roadmap of a product's journey from its introduction to the market to its eventual retirement. It's a comprehensive evaluation of a product's entire lifespan and provides valuable insight into its performance. By tracking the PLC, companies can make informed strategic decisions on pricing, promotion, growth, and cost reduction. Each stage of the PLC requires unique skills from product managers to ensure its success.
Watch the product life cycle, but more important, watch the market life cycle.– Author: Philip Kotler
What are the different stages in the Product life cycle?
Let us understand the different stages of the product life cycle. We'll take a closer look at a real-life product in the market to grasp the concept and make it more relatable. Using various examples, we'll delve into each stage of the PLC and explain their significance. To wrap it up, we'll delve into the exciting world of Facebook's product lifecycle and see how the world's largest social network navigates the PLC.
1. DEVELOPMENT
Product development is the crucial first step in the Product Life Cycle (PLC). It's the Research and Development phase where companies bring their ideas to life before introducing the product to the market. This stage involves comprehensive market research, competitive analysis, prototyping, testing, and crafting a solid product strategy. Developing a product can be costly and time-consuming, often requiring significant funding and resources. Despite the challenges, it's a vital stage in the PLC and sets the foundation for the product's future success. Be prepared to overcome the "Valley of Death," a widely recognized obstacle in product development where resources and funding may be lacking.
As a product manager, you play a critical role in shaping the success of a product during the development stage of the product life cycle. From creating a product strategy and roadmap to defining the product's functional requirements, prototyping, validation, and launch preparation, you work closely with stakeholders and teams to ensure a smooth and successful product development journey.
Highlights of the Development Stage
Increase in investment and no sales as the Product is not in the marketplace
Market research and Competitor analysis
Development and test product effectiveness
Strategy for Product launch and commercialization
Example: Apple Next-Gen Phone
Next-Gen iPhone is currently in the development stage. The much-anticipated device has been the topic of discussion, with rumors and speculations around its new periscope telephoto lens and advanced camera capabilities. The tech giant is expected to showcase this cutting-edge technology during its annual event in September 2023.
2. INTRODUCTION
The Introduction stage marks a major milestone for any product as it officially launches into the market. This stage is about creating buzz and building a strong consumer base through advertising and promotion efforts. Product managers must carefully consider their pricing strategy to maximize success, which is vital in gaining market confidence. Two popular pricing approaches include Market-Skimming and Market-Penetration pricing strategies.
The Market-Skimming Pricing approach involves setting a high initial price for a product to target early adopters who are willing to pay more for the latest technology. Over time, the price is gradually reduced as the product becomes more widely adopted.
One of the familiar players to use this strategy is Apple. Before the new iPhone release, a buzz is created around the new features to skim the cream customers willing to pay a higher price to get their hands on the product. In the later phase, they launch a SE version, which is a much cheaper version targeting a specific customer segment.
On the other hand, Market-Penetration Pricing aims to quickly reach a large customer base by offering a lower price point. This approach, also known as Predatory Pricing, is used to attract customers from the competition. Companies like Amazon and Uber have utilized this strategy to gain a loyal customer following by offering competitive prices.
Highlights of the Introduction Stage
Increase in the marketing and advertising cost to improve product awareness.
Low Sales volume as the product is new to the market, and the consumer base has just started to grow.
Limited profits due to low sales volume and awareness of the product
Limited competition if the product is a niche giving the first-mover advantage.
Example – Tesla Cyber Truck Launch
In November ’19, Tesla finally unveiled its Cybertruck, targeting a new market segment using a skimming Pricing strategy. The electric-car maker followed a similar approach with its Model 3 sedan, releasing more expensive and profitable versions before the least expensive trim.
3. GROWTH
The growth stage of the product life cycle, also known as the "Take-off" stage, marks a turning point for the product. This is when market reactions are positive, and the market value of the product is on the rise. The product's increasing popularity and consumer demand lead to a rise in the sales curve, making it an attractive investment opportunity for investors. (refer to the chart at the top)
In this stage, expanding product distribution and reaching even further is essential. This can be achieved through targeted advertising campaigns and promotions, leveraging digital and traditional marketing channels like social media, TV commercials, radio, and newspapers.
As the market develops, competition also increases as new players looking to enter the market. For example, the telemedicine industry saw a surge in growth due to the COVID-19 pandemic, attracting new players to the space.
Product managers in the growth stage focus on enhancing the product to sustain growth and drive business success. Utilizing a data-driven approach, they analyze customer feedback and market response to identify new features and make improvements. By staying ahead of the competition and constantly evolving the product, they aim to drive the business forward and capitalize on the growth opportunities available.
Highlights of the Growth Stage
Increase in the awareness of the product due to advertisement campaigns and promotions.
An increase in sales and a reduction in production costs lead to more profitability.
Increase in competition as new players want to set foot on the developing market
Increase in reach of the product by Introducing additional features to tap the untapped customer segment.
Example – Chatgpt
ChatGPT has been gaining popularity as a language model app, and it has now entered the growth stage of its product life cycle. It is being used by a rapidly increasing number of users, with over 10 million downloads to date. The app's user-friendly interface and advanced language processing capabilities have made it an essential tool for businesses and individuals.
4. MATURITY
he Maturity Stage of the Product Life Cycle is a crucial phase for businesses as it marks the point at which the product has reached its peak in sales but is facing increased competition. This stage is characterized by profitability and a need for consistent innovation to remain competitive.
In order to thrive in the maturity stage, companies must focus on product extension strategies such as improving features and services, launching new advertising campaigns, revamping brand packaging, targeting new customer segments, and finding ways to stay profitable. For example, Instagram, a leading social media platform, has added features such as Stories and Reels to maintain its dominance in the market.
It's essential for product managers to play a key role in driving product innovation and differentiation in order to stay ahead of the competition and maintain profitability in the maturity stage of the Product Life Cycle.
Highlights of the Maturity Stage
A Peak in the sales volume as the market starts showing signs of saturation
Increase in competition leading to new features and reduced cost of the product
Increase in market share by differentiation (i.e., adding features, targeted marketing)
A Decrease in profits towards the end of the maturity cycle.
Example: Netflix
Netflix, the global leader in online streaming, has reached the maturity stage of its product lifecycle. Founded in 1997 as a DVD rental service, Netflix has continuously adapted to meet the changing demands of its customers. In 2007, the company made a strategic shift towards streaming, which has proven to be a successful move. Today, with 182 million paid subscribers and low fixed costs, Netflix dominates the market but faces tough competition from major players such as Amazon Prime and Disney
5. DECLINE
As the Product reaches the Maturity phase of its life cycle, the company may experience a slowdown in revenue and a decline in its user base. This may be due to increased competition in the market or a loss of consumer interest. The chart shows that this stage is marked by decreased sales and profits.
At this point, the company must carefully assess the situation and determine whether the product is entering a Decline phase or if the sales dip is only temporary. The product managers can use Product Extension Strategies, such as adding new features or exploring new market segments, to reinvigorate the product.
For example, a leading tech company, Microsoft, shifted its focus from smartphone production to the cloud and subscription model, which resulted in significant growth. In the Maturity phase, the focus for product leaders is on diversifying the company's portfolio and capitalizing on the existing customer base or exploring new markets.
Highlights of the Decline Stage
Decreasing sales and profits due to the decline in the market of the product
Reducing the production and maintenance cost to make a profit even when the sales decline
The Decision to Discontinue the product and to get the most out of it by mergers and acquisitions.
The Product life cycle model provides valuable insights into a product's performance in the market, but it is not a foolproof framework. Some products may skip the growth phase and go straight into decline, which can be misleading if the sales data needs to be carefully analyzed. Other Factors, such as market and product type, can greatly impact the model's accuracy. As a product manager, it is important to be flexible and adjust strategies based on the market response and adaptability of the product.
What is the difference between the product life cycle and the product development life cycle?
The journey of a Product from inception to retirement can be charted using the Product Life Cycle (PLC) framework. This model outlines the different stages a product goes through, including its introduction, positioning, performance, and growth. However, another important aspect of a Product's journey is the Product Development Life Cycle (PDLC). This model focuses on the various phases a Product undergoes, from idea generation to commercialization, with a specific emphasis on developing the right product for the right market.
In my next blog, I'll delve deeper into the intricacies of the Product Development Life Cycle. I always appreciate the opportunity to engage in meaningful discussions and exchange ideas. If you'd like to connect and further explore this topic, I would be more than happy to connect with you on this topic.
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