Product life cycles are always associated with management and marketing decisions which are taken within a business. This will not come as a surprise to you as you probably already got that figured out by now. However, if you didn’t know, there are 5 main stages through which every product goes during its “life”. These are: development, introduction, growth, maturity and decline. This is where the fun part comes because each stage has its particular costs, risks or opportunities. Moreover, if that weren’t enough, the stages for each individual product will differ. For example, the development stage for a mobile app will differ from the development stage of a fast food product and the time will most likely not coincide.
1. The Development Stage
Many entrepreneurs and business owners refer to this stage as “the valley of death”. In this stage costs will pile up and no revenue will come your way. It is a well-known fact that some products may require years and a huge capital investment in order to develop and test the effectiveness of a product. Given the fact that in this instance the risk is high, the outside funding resources will be limited. Most already established companies will fund the development and research for a particular product from revenue that is obtained by means of their current products. However, the main problem arises in a startup business, when entrepreneurs will build their company from personal resources. So make sure you have enough many to stay afloat during the development stage.
2. The Introduction Stage
This stage consists mainly in developing a market for your product and building product awareness. While marketing costs will prove to be extremely high at this stage, it is essential that you reach out and create awareness among potential customers. Moreover, in this stage you will obtain the intellectual property rights protection. You should be aware that the pricing of the product is usually high and to recover the costs from the development stage will prove difficult. Most startup business owners will obtained funding in this stage by means of investors, banks or loans.
3. The Growth Stage
Finally, you’ve made it to the adult table. In this stage the product is accepted by customers. However, the competition is fierce as many companies are fighting to increase their market share. Developing innovative products proves to be an interesting market as there is limited competition and the product prices are pretty high. In this stage the product demand and the profits will significantly increase and the marketing will be aimed at a broader target audience. In the growth stage, funding can come from two sources: banks, loans or investors or by increasing your sales revenue.
4. The Maturity Stage
In this stage you will notice that sales will start to level off while the competition increases. To ensure you can avoid from moving to the next stage too quickly, you should enhance some product features. This will translate into maintaining market share. Moreover, unit sales will reach its highest peak in this stage while prices will slowly decline to stay one step ahead of the competition. Another important aspect you should know about this stage is that the production costs will decline given the efficiency in the manufacturing process. Also, in this stage your company shouldn’t need additional funding.
5. The Decline Stage
Let’s face facts. There are only three things certain in life: death, taxes and banks. Whether you want to or not, your product will reach this stage eventually so make sure you are ready at any point for things to turn 180. Given the market saturation sales revenue will be decreasing. Moreover, other aspects which could lead to low revenue has to do with fierce competition and the shift in the needs of customers. So if you find yourself backed up against the wall, what do you do? Do you discontinue the product, sell the manufacturing rights, find new uses for your product or do you tap into new markets by means of exporting? The answer will always be different given the profile of your product and that of your customers. To avoid discontinuing the product you could resort to rebranding and repackaging using taglines such as “the improved version”.
One awesome tip I got from one of the biggest entrepreneurs alive was to develop multiple products at different points. In this way, you will manage to bring in revenue regardless of the life cycle one of your products will be in. Moreover, you will be covered if one of your products will decline overnight.