What is a Product Life Cycle?
- Products have a limited life and, thus, every product has a life cycle.
- Product sales pass through distinct stages, each of which poses different challenges, problems and opportunities to its company.
- Products will have different marketing, financing, manufacturing, purchasing and human resource requirements at the various stages of its life cycle.
- A product life cycle can be understood through a 4-stage model.
- The model describes four stages throughout a product's life: launch, growth, maturity and decline.
Launch
- There are slow sales and little profit as the product is launched on the market.
Characteristics
- High costs due to initial marketing, advertising and distribution.
- Little or no profit is made due to high costs and low sales volumes.
- There may be little to no competition.
- Demand must be created through promotion and awareness campaigns.
- Customers must be prompted to try the product.
- Sales volumes are low, but slowly increasing.
Growth
- The market gradually accepts the product, so diffusion starts and sales expand.
Characteristics
- Costs reduced due to economies of scale: as production and distribution are ramped up, economies of scale kick in and reduce the per unit costs.
- Sales volume increases significantly: as the product increases in popularity, sales volumes increase.
- Profitability begins to rise: revenues begin to exceed costs, creating profit for the company.
- Public awareness increases: through increased promotion, visibility and word of mouth, public awareness grows.
- Competition begins to increase with a few new players in an establishing market.
- Increased competition leads to price decreases: price wars may erupt, technology may get cheaper, or other factors can ultimately lead to falling prices.
Maturity
- Sales peak but remain steady, so maximum profit is achieved.
Characteristics
- Costs are lowered as a result of production volumes increasing and experience curve effects.
- Sales volume peaks and market saturation is reached.
- Increase in numbers of competitors entering the market.
- Prices tend to drop due to the proliferation of competing products.
Decline
- Market saturation is reached and sales start to reduce as well as profit.
Characteristics
- A decline in sales volume as competition becomes severe, and popularity of the product falls.
- A fall in prices and profitability (the latter ultimately moving in the negative zone).
- Profit increasingly becomes a challenge of production/distribution efficiency rather than increased sales.
Variations in Product Life Cycle
- Certain measures can be undertaken by designers to alter the life cycle of a product generally extending the life cycle of the design.
Product Generations
- A business practice in which a company releases a new group of products that have advanced features compared to an earlier group.
- For example different iPhone models.
Product Versioning
- A business practice in which a company produces different models of the same product, and then charges different prices for each model.
- For example a sports, economy and deluxe version of the same model of car.
Obsolescence
- Obsolescence is the the process of becoming obsolete or outdated and no longer used. It can be considered in four ways.
Planned Obsolescence
- A product becomes outdated as a conscious act either to ensure a continuing market or to ensure that safety factors and new technologies can be incorporated into later versions of the product.
Style (Fashion)
- Fashions and trends change over time, which can result in a product no longer being desirable.
- However, as evidenced by the concept of retro styling and the cyclic nature of fashion, products can become desirable again.
Functional Obsolescence
- Over time, products wear out and break down.
- If parts are no longer available, the product can no longer work in the way it originally did.
- Also, if a service vital to its functioning is no longer available, it can become obsolete.
Technological Obsolescence
- When a new technology supersedes an existing technology, the existing technology quickly falls out of use and is no longer incorporated into new products.
- Consumers instead opt for the newer, more efficient technology in their products.