The Product Life Cycle: What You Always Wanted To Know, But Were Afraid To Ask
Just like many things in life, products actually follow their own life cycle. The life cycle involves multiple stages, the involvement of numerous professionals, and utilizes a variety of skills, tools, and procedures throughout its life.
The purported life cycle defines itself as four things: a limited life, sales that transcend different phases, the ascending and descending of profitable income, and the necessity of marketing and production.
Whether you are just a small-time eBay seller looking for products to auction or an experience entrepreneur looking for a lineup to stock the virtual shelves of your new online retail store, understanding the product life cycle is vital to your success.
There are six stages in the life cycle of a product. The market introduction stage begins during the onset of production and the product is new to the market. In this first stage, the costs are typically high, there are very few competitors, customer demand is still forming, and there is virtually no profit as all the money is sent to production and marketing.
The growth stage, however, takes the product out of infancy and into a more active phase. It is at this point that the product increases in sales and production, and as prices drop more people become aware of it and sales continue to increase.
The product, upon reaching the mature stage, will have peaked in its success and its sales. The costs are lower due to the high volume of production that saturates the market. Continual increases in competition have caused prices to drop significantly over time, making brand distinction extremely important to sustain the product through this stage. In the end, however, profits decrease.
During the fourth stage of saturation and decline, costs become greater than the price while sales begin to dwindle. Profiting at this stage is challenging and requires a professional marketing strategy that can increase sales by either changing distribution or refreshing the product.
When the life cycle of a product reaches the fifth and sixth stage, it will typically appear as a variation of the original in an attempt to differentiate itself from stiff competition. An entirely new marketing campaign, or even overhauling the product a bit (think a change in ingredients for food products, new designs, updated technology, etc.) may help boost sales at this phase.
When the final stage is reached it comes down to either evolution or extinction. How the product is identified in the market place will either make or break its success. If demand for the product evaporates, then it may evolve into a variation of the original, thus minimizing research and development costs on a brand new and completely unique product.
You may be a buyer for the largest retail chain in the world or an individual researching products and suppliers for your basement-run home business. Either way, product life cycle is an important concept to consider when choosing product lineups and profit projections.
By understanding a product's relevance to the marketplace you are able to circumvent termination and reinvent remaining products for a changing world.