Lifecycle of Goods or Services
A product's life cycle is a series of distinct stages it goes through during its commercial life, each requiring a unique approach to maximise profits. The product life cycle consists of five phases: Development, Introduction, Growth, Mature, and Decline.
In the Development stage, thorough market research is conducted to identify customer needs and market opportunities. The product is customised to address key pain points, and investments are made in product design, testing, and refinement to ensure a strong market fit. Future marketing and pricing strategies are planned based on research insights.
The Introduction stage focuses on building awareness with heavy promotional activities. Strategic pricing, such as skimming (high initial price) or penetration pricing (low to gain market share), is employed. The brand is positioned through storytelling to create interest and trust. Initial losses are accepted while building distribution channels.
During the Growth stage, leveraging rising sales allows for scaling up production to reduce unit costs through economies of scale. Market penetration or product differentiation strategies are used to expand market share. Marketing is optimised to emphasise competitive advantages and brand loyalty. Close monitoring of market share metrics is crucial to maintain a competitive edge.
In the Mature stage, the focus shifts to cost control and improving operational efficiency to maintain profitability as sales plateau. Product extension strategies, such as feature enhancements, packaging changes, or new distribution channels, are employed to reinvigorate demand. Customer retention is emphasised with loyalty programs and personalised marketing. Competitive pricing strategies and promotional offers help defend market share without damaging brand value.
The Decline stage presents a challenge, as the product's success is no longer guaranteed, and it may be eliminated from sales. The decision is made between harvesting (reducing costs and maximising remaining profits) or divesting (phasing out the product). Strategies to extend the life of the product in the decline phase include reducing prices, adding new features, or new packaging.
Throughout all stages, close monitoring of sales trends, customer feedback, and competitor activity enables timely adjustments to strategies, ensuring maximised profit across the lifecycle. Understanding which stage the product currently resides is essential for adjusting marketing strategies. The length and number of sales may vary for each product, but the pattern is quite similar.
Successful advertising and promotion mark the Growth phase, where high advertising costs are maintained to strengthen sales. The characteristics of the Mature stage include a product's sales being at their peak but with slower percentage growth, and a reduction in advertising. In the Decline phase, sales start to fall, and the decision is made to either extend the life of the product or eliminate it from sales.
Many businesses record and track their sales information to describe the product life cycle pattern. The break-even point is reached in the Growth phase, covering development and advertising costs. The product launch initiates the Introduction phase, requiring extensive advertising and promotional costs.
In the Development phase, a product is in the form of a prototype and incurs losses due to high costs without generating sales. The product life cycle is a valuable tool for businesses to understand the stages their products go through and to tailor their strategies accordingly to maximise profits.
- In the Development phase, businesses invest in product design, testing, and refinement, making significant investments without generating sales due to the product existing as a prototype.
- During the Growth phase, businesses successfully advertise and promote their products, maintaining high advertising costs to strengthen sales and cover development and advertising costs, reaching the break-even point.
