For any business selling a product, the key to success is understanding what it is your customers want, and the right time to sell it to them. But the right product won’t be right forever – most products have a life cycle, which evolves as they move from market introduction to growth, maturity, and eventually decline.
Understanding how a product life cycle works can help your business efficiently allocate time, resources, and budget to ensure that you continue to offer products that your customers want.
What is a product life cycle?
The concept of the product life cycle was first shared in the Harvard Business Review in 1965 [1] and identifies four key stages that most products move through:
- Introduction (or market development)
- Growth
- Maturity
- Decline
The stages of the product life cycle
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Introduction
The product life cycle starts with the launch of a new product or service, says Elina Scorey, Business Development Director at Distil.ai. This phase can be costly, so entrepreneurs should decide carefully about when to launch new offerings.
“As a business, sustainable growth comes from understanding what customer need isn’t being met, and introducing new products that meet that need, while maintaining a balance between innovation and existing, successful products that form the bulk of your current sales,” says Scorey.
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Growth
If a new product is introduced successfully, then the second stage of the product life cycle is growth. The rate of growth will depend on things like the size of the potential market opportunity, the frequency with which the product is purchased, and the number of competing products in the marketplace, says Scorey.
Maturity
Eventually, some products are able to reach a steady state of predictable sales. While there might not be significant market growth, this stage of product maturity can be extremely profitable. Your company has learned over time how to create the product efficiently, and high rates of brand and product recognition, combined with return business, can mean higher profits and lower marketing costs.
This stage in the life cycle of a product also brings risks: new market entrants can disrupt an industry with cheaper materials, technical innovation or a more fashionable product.
Decline
For most products, the product life cycle eventually reaches a point of decline, when demand and sales fall, and the product becomes less popular. This might be because new materials are available to make cheaper products, new technology might render a product obsolete, or consumer tastes change, and the product is no longer in demand.
Why is the product life cycle important?
Very few companies survive by making the same product indefinitely, and even giant brands have to continually innovate and redevelop their products to stay relevant and modern.
Customers’ needs change and it’s essential that businesses evolve their product range to meet those needs.
“If your business is using data and carrying out regular sales forecasts based on good customer data, you can see where each product sits in the life cycle, and react before sales start to drop,” says Scorey. “By the time you notice a product has stopped selling, it could be too late for the business to recover.”
Companies that track product life cycles are in a better position to make strategic decisions, Scorey adds. “Revenue from a product might be increasing, but the underlying data shows you that the product is actually starting to decline because you’re seeing lower or slower conversions,” she says. “Conversely, your data might show that more people are buying your product and it’s still growing, so there’s potential to create a bundle of items, or turn a product into a subscription to maximise revenues.”
Product life cycle example
Tog-24, an outdoor clothing brand known for its high-quality durable products, has been operating for over 65 years. According to Managing Director Mark Ward, the company revises a limited number of items, potentially introducing new patterns or prints annually.
The company introduces new products only when there is a clear need for them.
“We might see that a particular product is starting to falter, and we want to replace it with something more relevant, or it might be that there is a new fabric that is better performing than what we already use,” says Ward.
Over a period of 12 months, the new product will be designed and tested for both fit and performance. At that stage, it will be launched to customers, with the results carefully monitored. “We have a Head of Merchandising who is constantly looking at figures and identifying patterns to see what is emerging, and what might be on the decline,” says Ward.
“Because our development process is long, we need to understand when something has peaked, so we can start to find something better that we’ll be 100% happy with," he says.
"We don’t ever want to rush that.”
Pros and cons of using product life cycle
The big advantage of using a product life cycle model for your business is that it can provide early signals to make better strategic decisions around things like product development, marketing and inventory. Product life cycles are also critical to successful business forecasting, says Scorey.
“The product life cycle is a forecast of how products will grow over time, and combined with things like profit margin and sales data, can help you with the long-term planning of your cash flow,” she says.
The drawback of being too focused on the product life cycle model is that it could lead to short-term mistakes and strategic errors. For example, dipping sales might relate to seasonal fluctuation more than genuine product decline.
Ultimately, it comes down to understanding your products and your customers to know just how long a product life cycle can run.
Tog-24 takes pride in selling the same microfleece products for over ten years, and some outdoor coats for forty years, according to Ward. “Getting the product range right is a massive thing for us, and we’re reviewing product data weekly,” he says. “Ultimately, we’re not interested in selling things because they’re new; we want to sell things that customers are still bringing back to our in-house repair service in 20 years’ time because they love it so much."
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Sources
[1] Harvard Business Review, Exploit the Product Life Cycle
