What Is the Product Lifecycle?
Product lifecycle is a term in business and marketing that describes the stages a product goes through from the moment it was introduced to the market to its eventual exit. By understanding this concept, a business can understand how the project’s sales, popularity, and profitability change over time.
The model is essential for any business that wishes to plan and execute effective strategies at every stage and maximize the product’s potential. Doing so may ensure the long-term success of the product, and even though every product exits the market at some point, this would allow you to get the most out of it before its eventual departure.
Four Stages of the Product Lifecycle
The way it was defined in the business world, the product lifecycle consists of four different stages, each of which is marked by its characteristics and opportunities for businesses. The steps are all relatively easy to understand, even for those brand new to the business world, and they include the following:
Stage 1: Introduction
In the introduction stage, the product is presented to the market for the first time. At this stage, sales are usually relatively slow, as the market only discovers the outcome. Businesses typically invest heavily in marketing during this stage to promote the development and spread awareness. Meanwhile, customers are slowly becoming familiar with it, which makes this a crucial phase to establish a strong brand presence and ensure that the product becomes reputable.
This stage is characterized by high marketing and development costs, while profitability usually comes during later stages.
Stage 2: Growth
The second stage is known as the growth stage, where the sales start to pick up as the market starts accepting the product. Consumers begin to understand its value, and this is where the word-of-mouth promotions also pick up. Customers who purchase the product start recommending it to their friends and family and on social media, which increases awareness even further and brings more people to the product.
Competition will likely also start to increase around this time. This stage is critical for businesses, and it often brings the most significant profit potential.
Stage 3: Maturity
The third stage is called the maturity stage where the product reaches stability. Sales continue though generally at a slower pace than the previous phase. Customers are well aware of the product now, and they are buying it due to positive past experiences, recommendations from trusted sources, and the like. Market saturation is possible, and competition starts to intensify.
Stage 4: Decline
The final stage of the product lifecycle is known as the decline stage, which is where sales start to drop quite noticeably. Consumers begin losing interest in the product, typically because of evolving technologies or a superior competing product, which have changed consumer preferences. Sometimes, this may also happen due to market saturation. This is the stage where businesses start facing challenges in maintaining profitability.
As a result, they must decide whether they should continue supporting the product, try to reinvigorate it, or allow it to exit the market. The choice they will make largely depends on the nature of the product. Technology, for example, usually becomes obsolete at this stage, and there is no natural way of reinvigorating it — the market wants something new and better.
For other products, businesses may try to bring them back, but this stage typically involves significant cost-cutting, streamlining, and seeking alternative revenue sources.
Examples of the Product Lifecycle
With the understanding of what product lifecycle is and how it works, we can now see this in several examples of products that find themselves in different stages at this time, such as:
In the late 19th century, the market saw the introduction of a typewriter. While it was trendy for over a century, the machine started going into decline as electronic word processors were invented. When computers, laptops, and smartphones emerged, they became almost obsolete. Today, you can still find them, but they are pretty rare and are now at the end of their decline phase. There is barely any demand, and they only see a few sales, as modern alternatives now dominate the market.
VCRs, or Video Cassette Recorders, are another example of a product in its decline phase. They blew up when they emerged despite being relatively expensive at the time. But, once a groundbreaking development, a VCR was quickly replaced by DVDs. These days, even DVDs find themselves in the decline stage, while VCRs are almost ready to exit the market, being highly unlikely ever to see a recovery.
Electric Vehicles (EVs) entered the market a while ago, and right now, they are in a growth stage of the product lifecycle. Carmakers worldwide are working to push them into the marketplace as the demand constantly grows. Even though they are not new, they have seen constant improvement and innovation over the years, driving sales and interest.
4. AI technology
Similar to EVs, AI tech is not new to the market. It has been around for years in one shape or another. However, recent breakthroughs in this technology have allowed them to enter a growth stage, and increased interest due to all the new use cases that are being uncovered all but guarantees that this stage will last for a good while longer. Someday, it is likely that even AI will experience the maturity and decline stages, although, at this point, that will likely be in the distant future.
Understanding and effectively managing the product lifecycle throughout each stage can have a highly positive impact on the business, from improving the reputation of its brand and the product itself to preventing pollution of the environment. However, the product lifecycle is a fact, meaning that all products will eventually go through all four stages, no matter how innovative they might be.
Even so, understanding each of the phases, coupled with the understanding of the market conditions, consumers, and other aspects discussed previously, can significantly prolong the product lifecycle, which allows the company to profit more from the product before it eventually exits the market.