Product Life Cycles - Developing Your Product Strategy
By: Ian Traynor
Understanding how markets change, and how they react to your own products and services is a vital part of management and marketing strategy. If you understand the Product Life Cycle, you will be ahead of many of your competitors!
If there is one thing that is certain in this life, that is 'Change'. Wherever we look, we see aspects of our life changing. This is clearly seen on the Internet. We see design, technologies, markets - and web sites - evolve, become the current fashion and then fade away.
This is a very general concept that applies to all products and services. The 'Product Life Cycle' is a description of what happens to anything that we produce and sell. It applies to all businesses, large and small. Understanding it and taking appropriate action is essential if you are to maximize the sales and profits of your business.
Products (and by this word, we also mean 'services') go through a cycle which can be described in 4 stages:
* Introduction: Characterized by a low level of sales and losses, as development costs build up. Sales are generally made to 'early adopters' in the market place.
* Growth: The product gets known more widely. There are few competitors, and profit margins tend to be good.
* Maturity: Here, sales are maximized. If the product has mass market appeal, this is when the bulk of potential customers will buy. Competition increases, and profit margins tend to fall.
* Decline: Shown by the dotted line on the chart. The product starts to 'show its age'. New and better competitive products emerge in the market. Sales fall and profits dip sharply.
Arresting the decline
It is possible to defer the decline of a product by a number of strategies:
* Increased promotion - to mop up any laggard potential buyers
* Enhancing the product - adding new features and benefits, which make it appear to be different from the 'old' product.
* Introducing add-ons and variations - giving a wider choice of buying options
* Finding new markets - in effect, broadening the market place.
Inevitably, however, the life of the product is at an end. And unless new products are introduced by a business, the life of the business is also at an end.
Introducing new products
If your business has a number of products, it is likely that they will each be at different stages of the product life cycle. If you are to avoid a decline in overall sales and profits, the timing of introduction of new products is crucial. If you are simply to maintain a plateau in sales, you need to carefully plan the timing of introducing new products.
OK, so this looks fine in theory, but what about the practical implications? First, never expect everything to work out as smoothly as in the text books. But don't reject the theories because of this. Understanding the theories will help you to develop your business more effectively - and you can look around at examples in the wider world to see how these theories have been put into practice.
Take the auto industry, for example. Existing models frequently have their life extended by some subtle reshaping of their body work. Some models which were around for a long time, such as the Ford Escort, ended their life looking nothing like the model when it was first introduced. Manufacturers add all sorts of enhancements during the life of a model, to give wider choice, and sometimes, the appearance of the introduction of a new model. 'Special Edition' models can appeal to new, sometimes niche markets. But auto manufacturers also plan well into the future so that they can introduce new models to take over as the older models start to mature and go into decline.
Take action in your own business
So, look very carefully at what you are selling now. It is almost certain that you will not be selling the same things five years from now. Not that the product life cycle is fixed for all products - it can vary considerably. Computer items, for example tend to have relatively short life cycles, whilst some services, such as the sale of property and real estate, can remain relatively unchanged for many years. But they will change!
Look at what your competitors are doing. Look at what your customers are doing - and talk to them about their future needs.
The keys to effective product development are information and planning ahead. Neglect them at your peril!
© 2007, Ian Traynor.
Ian Traynor has been building and running websites since 1996. His "Marketing Magic" website provides tons of free advice and help on all aspects of online and offline selling and marketing. Sign Up on "Marketing Update" newsletter - and get access to his subscribers' free Download Library. Ian is also the Principal of the Newbies School of Internet Marketing.