The Product life cycle explains the product evolution stages during the entire product life cycle. There are generally four product life cycle stages:
- market introduction
- market growth
- market maturity
- market decline
During this stage the product is has been introduced for a first time by using above average advertising and promotional investments by the company to introduce the new product to the target market. The demand for the new product has to be created and target customers are attracted to try the new product.
Generally during the market introduction stage the revenues are very low and the investments are very high. Most business do not generate any profits during this stage but use marketing and sales strategies and tactics to successfully position the new product / service in the marketplace and hopefully generate profits in the next product life cycle stages.
During this stage revenues and profit increase. The target market is already familiar with the product and customers already purchase the product. More competitors try to enter this business as they see the positive market trend development and increased profits generated by the companies. Due to economies of scale the overall cost of doing business is decreasing and the product profitability increases.
During this stage market is already saturated with the product and competition is very strong. The growth in revenues starts to decline and profitability decreases as competitors start to compete more on price and less through product differentiation since most of the competitors can offer the same product. At the same time strong competition requires more marketing and sales investments to keep the market share which increases the overall cost of doing business. ;
The set of business metrics should be simplified as much as possible. The bottomline is to improve visibility and save time for decision makers who will use the report continuously.
During this stage both revenues and profits decline. New products are introduced in the marketplace and replace the old products. Many competitors will not be profitable and they will withdraw from the market.
The product life cycle stages explain the growth and decline of revenues and profits associated with a product or service. Many companies in addition to marketing and sales managers have product managers who are responsible for specific products or services. The company has to develop appropriate strategies and tactics in each of these product life cycle stages in order to improve its market position and profitability which is called product life cycle management.
Product life cycle management deals with different challenges at each stage and approaches the market with different strategies and tactics in each of these stages.
Products sold, new customers, new products, new revenue, ontime delivery, etc.
The main objectives of managing your Product life cycle are to reduce the time required from development to market, to improve product quality, to reduce the costs of product development, to identify potential sales, marketing, revenue, profit and growth opportunities… To create successful new products the company must really well understand its customers, markets and competitors.
It is also very important for decision makers to understand the limitations as well. It is difficult for management to assess accurately where a certain product or service is on its life-cycle. For example a sudden revenue growth is not necessarily evidence of successful and sustainable growth.
Differing products possess different life-cycle behaviors and the shape of the product curve varies from one product to another.
For most products, the time in each product stage is mainly unpredictable and it’s difficult to kn9w the time when each stage begins and/or ends.
Because of these limitations, strictly following this product marketing model can lead to many misleading conclusions and decisions by marketing and product managers.