Product life cycles

The product life cycle is something that seeks to show the popularity of a product over time. This popularity will usually be reflected in sales that are made, so a business will need to understand the product life cycle to make the most money. Through each stage of the life cycle, the desirability of a product will change.

The development stage

Any new product starts in the development stage. At this initial stage of the life cycle, research and development is undertaken and the product is not yet on the market. Because of this, sales of the product will be zero as the business is yet to launch the product for people to buy. The development stage can last a varying length of time depending on the individual company or product that is being created. Some products will not require intense development as they may be an extension of an existing one, whereas others will be completely new and innovative, so a very long development period will be needed to refine what the product is and what it will do.

Launching the product (introduction phase)

When a product is launched into a market the interest of potential buyers will start to increase. Sales will begin to be made and this part of the life cycle is all about one thing – getting word out to the public about the new product. Since the product is brand new to the market, sales will begin slowly and marketing is required to get the biggest exposure for the new product that is being offered.

The growth phase

The company will look to grow the interest of people in the product and increase sales as quickly as possible. When the product life cycle is shown on a graph, this part will show an increase in sales as word spreads about the new product and sales increase dramatically. As products are sold to customers, word will spread naturally and new customers will make purchases after seeing other people with the particular product or service. This growth relies heavily on marketing and recommendations of existing customers, so brand loyalty is key.

Product maturity

As sales and growth reach the maximum for the product in question, the life cycle is said to reach maturity. Here the sales will peak and revenue will be very high as the company starts to make a profit on the money spent during the development stage and marketing. Once the sales made start to even out they will slowly begin to decline due to the fact that many potential customers have now bought the product. Once a product starts to reach the end of the maturity period, the company may try to extend the life cycle. We will look at this a little later in this section.

Product decline

Following the boom of the product launch, sales will start to reduce. This is inevitable as the market becomes saturated. This means that other competitors have brought out similar products that have taken away sales and other customers have already purchased the product.

From the graph shown on the next page you will see the change in sales during each of the phases of the product life cycle. From a business perspective, it makes sense to attempt to increase sales in each stage of the life cycle so that products can make the most money after being launched.

Product extensions

Once a product reaches maturity and sales begin to dwindle, a business may try to extend the life cycle. Doing this will help the company to make further sales and increase the declining numbers of new customers. Extensions will usually require the company to strategise on the best possible way to increase sales and re-energise its goods in order to boost sales. This may involve bringing out ‘limited edition’ products or ones that have bonus features which the original did not have. A good example of product extensions can be seen in the car industry. As a car’s sales begin to decline, the manufacturers may bring out a new ‘sport’ version with more power or a new version that has different stylings to the previous version.

Each product that is brought to market will have a slightly different life cycle. Due to the number of potential avenues a business can pursue, no two products will be exactly the same so each stage of the life cycle will be a different length and reach different peaks in numbers of sales.