Product Lifecycle

Is it possible to predict the lifecycle of a product? The product lifecycle theoretical model is based on two metrics: time and rate of sales. If you look at the model as a graph you’ll notice that the number of sales creates a curve upward as time passes. It starts low, increases, plateaus and finally declines. This is considered the classic product lifecycle trajectory.

All of this happens across a number of product lifecycle stages. 

There are five core stages a product will go through in its lifecycle:

The concept and product lifecycle stages can also be applied to an entire category of products or a brand. The better a company understands the stages the better prepared it will be to navigate each one as it arises. 

This is the period before the product is brought to market, and therefore there will be no expected sales. The company is expending a fair amount of resources to research, develop and test a new product before making it available for sale. This stage can be quite long depending on the product being developed and the market. During this phase marketing research is also done to gauge demand, help develop the product and optimize ad campaigns.

The introduction phase marks the time when the product is launched. Because the product is new and relatively unknown, sales growth is typically slow during the introductory stage while promotion is high. A company should pay very close attention to the: 

Two metrics that will likely be far from your goals are cash flow and cost per acquisition. Often in the introduction stage cash flow is negative. You’re spending a lot on marketing without the number of sales needed to offset the cost. Because of how much is spent to attract customers and build awareness, the cost per acquisition tends to be high. Ideally, these two metrics will move in the opposite direction during the growth stage.

After the product has had time on the market to gain a following it enters the growth stage. This is when sales should hopefully increase rapidly. The rate of sales growth indicates how successful the product is in the market and whether adjustments need to be made to increase awareness, boost conversion rate or redesign the product to better meet the needs of the target market.

Ideally, production cost will decline, sales will increase, revenue will grow and cash flow will become positive. 

You’ll need to continue to heavily promote the product during the growth stage. This is the time to expand your market reach and gain as many new customers as possible for maximum market penetration. Doing so may require improving the product, adding new features, providing more options, etc.

During this stage, you may find new competitors entering the market trying to replicate your success if your product is attracting customers. You’ll enjoy already having part of the market share, but you have to work to keep it. Customer service needs to be exceptional, and you may need to alter your pricing strategy if a competitor offers the same quality at a lower price.

Gatorade is a great example of this. When Gatorade was developed there was nothing else like it on the market. Researchers at the University of Florida developed it to give student athletes an edge. But shortly after the product was made available to the public and attracted customers many other companies began making their own sports drinks. The same is true for Red Bull energy drinks. 

After the growth phase comes the maturity stage. The rate of sales tends to level out and slow at this point, even for a successful product. If you aren’t the market leader things can get tough because competition with other top competitors will be at an all-time high. 

However, if you were able to lock down a good portion of the market share during the earlier stages you should still have good profitability during this stage. The cost to produce your product should be low and operations should be running very efficiently. 

One thing working against you is pricing. With more options on the market, prices will likely start to decrease. The tradeoff is you won’t have to invest as much in marketing and product development, which helps maintain positive cash flow. 

The goal in the maturity stage is to maximize the return. Below are a few ways to do that:

The final stage marks the beginning of the end for a product. The sales start to decline either slowly or sharply. It happens to almost every product, even those that were successful. It could be a change in technology, cultural shift, change in consumer taste or another product that makes yours obsolete.

A decline may not be all bad news for a business. If a new product developed by the business essentially replaces an existing product that could be the cause of the decline. This is the case with Apple’s iPod after the iPhone was released. 

With the decline in sales comes a decline in revenue and profitability. Though demand for the product is falling, you may actually see intense competition in the decline stage as everyone tries to squeeze as much revenue out of their products as possible while they can. 

The best thing a company can do during the decline phase is cut back on spending and marketing and focus efforts on maintaining market share. Cater to the loyal customers that love your product if possible. 

Once the product is no longer profitable it’s time to discontinue production. Doing so will help you preserve resources for the development of a new product or marketing a product that is in the introduction or growth stage. 

The product lifecycle model isn’t an exact science. It will vary from product to product and is meant to help a company be more agile. It’s also worth noting that the stages can last for different durations from one product to the next. Some highly successful products stay in the maturity phase for years or decades.