The Product Life Cycle is a management tool that tracks a product’s journey from introduction to decline, helping businesses make informed decisions about marketing, production, and sales at each stage to maximize profitability.
Primary Implication
Failing to know whether the products you offer are in the growth, mature, or decline product life cycle phase is a leading cause for cash being wasted.
Most businesses are in the mature phase of the product life cycle. Few are innovators of a new product they own a patent on or early adopters that moved quickly to sell a product not available before. This is why the application of the Business CPR™ Management System is critical to your sales, cash, and profit management practices.
Overview
The Product Life Cycle is a management tool that uses a product’s journey from development to withdrawal to help management determine how best to market, produce, and sell each product. It reflects four stages of a product’s evolution from introduction to growth, maturity, and decline.
The Product Life Cycle begins with an idea, which then undergoes development so that it can be produced, marketed, and sold. For 98% of small businesses, it is about offering a product already available in the marketplace. It is not about developing a new product that has never existed.
What’s new is the business entering the market with their version of existing products or introducing a new product for that business, not the market. What’s important about knowing that each product you sell has its own product life cycle is how it shapes the decisions you make and actions you take to maximize sales and profits.
For example, a product in the introduction phase requires different influencing than a product in the growth and maturity phases. A product in the market decline phase is about accelerating cost reduction, not creating marketing. Each phase impacts resource allocation across a business. Management teams who know where their products are in their life cycle help them proactively make decisions and actions.
Below are the four core product life cycle phases once a product is developed and ready to sell:
Introduction: is the first phase of the product life cycle when a business introduces a new product to the market. For most businesses, this involves introducing the product to their existing customers. The goal in the introduction phase is to create awareness and generate interest with their target customer to enter their sales process.
Growth: is the phase when prospects start buying the product, resulting in month-to-month and year-over-year sales growth. Three patterns of growth exist in this phase—incremental, episodic, and rapid growth. The type of product sales growth a business experiences is shaped by the supply, demand, and frequency of use for a given product.
For example, a business selling to snowboarders will have episodic sales based on the seasonal nature of product demand and incremental growth shaped by how well the business does in creating demand for its products. A business that serves a daily need and does it better than its competitors can experience rapid growth until the market becomes saturated.
Those who approach marketing and sales as if their product is in the growth phase burn through cash, trying to generate sales in a competitive marketplace. This is aggravated when operations have been allowed to scale up to meet anticipated demand when they need to be focused on reducing costs to maximize profits.
Maturity: is the product phase when sales slow down because supply exceeds demand. The stiffer your competition and the harder it is to grow sales at a profit the more likely you are in a mature market with “me too” products. Your opportunity is to either reduce costs or live with declining profits that can be corrected by raising prices because supply exceeds demand.
Decline: is the beginning of the end for a product. In this product life cycle phase, sales are hard to come by as demand for the product evaporates due to product obsolescence. The management decisions associated with this phase are about recognizing when it’s time to withdraw the product before losses become difficult to overcome.
Each product has a life cycle that differs from one another. Knowing which life cycle phase a product is in is one of the most effective ways to prioritize and allocate resources. Those who do this well enjoy higher sales, profits, and cash inflows relative to outflows than those who don’t.