The product life cycle concept outlines a product’s stages, from creation to market decline.
Much discussed in marketing and sales circles, the product life cycle is a concept that considers the time from the moment an item is created until its period of market decline. Therefore, knowing what happens in the interim is essential for the company to know the right time to apply its marketing and sales actions, and which ones to use.
The core idea is to prevent the product from becoming extinct, that is, from going out of circulation. However, if this exit is inevitable, it must be done in a way that does not harm the company’s image or the acceptance and sale of other brand items to the public.
Understanding the meaning of the product life cycle is also essential for the company to align its strategies with the item’s phase. This makes it possible to identify, for example, when to intensify advertising campaigns or when to launch an updated version of the same solution.
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What is a product life cycle?
The product life cycle is a framework for predicting a product’s journey from creation through launch and market reception. It divides a product’s useful life into distinct stages from beginning to end.
The natural path of the life cycle begins when the item is introduced to the public and sold. The end of the cycle occurs when new (and better) options are launched—either by the brand itself or by competitors.
Understanding the stages of the product life cycle helps marketing and sales professionals determine the best advertising, promotion, pricing, and expansion strategies for new markets. These strategies are called product life cycle management.
One thing the market is certain of is that no matter how good your product is, it will eventually be discontinued. And that doesn’t necessarily mean it’s a failure. It’s just the evolution of free competition: the market will become saturated, and new purchasing options will emerge.
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What are the phases of the life cycle?
Theodore Levitt, a German economist based in the United States who became a master at Harvard Business School, created the concept of the product life cycle. According to him, there are five phases of the product life cycle: development, introduction, growth, maturity, and decline.
Levitt defined this composition after he identified and concluded that the characteristics and applications of a product tend to change during its existence. For this reason, all strategies involving this item need to be aligned with the moment it is going through.
Next, we will explain in detail each of the phases identified by the economist.
Phase 1: Development
The product development phase is the brainstorming phase, in which ideas leave the creator’s mind and are put on paper, only to become reality after analysis and testing. It is during this period that the characteristics, functionalities and purposes of a solution are identified, considered and analysed.
In this regard, the company must test its prototypes to find flaws and points for improvement before actually making the finished article available to the public.
Generally speaking, sales actions are not necessary during the development phase of the product life cycle. However, the company can anticipate marketing and create campaigns that attract attention and arouse potential customers’ curiosity about a new product about to be launched.
Phase 2: Introduction
Once the product has been created and properly adjusted to meet the needs of the target audience, it is time to launch it on the market. This phase is called the introduction in the product life cycle.
This is when the brand distributes and/or releases its solution for sale. Since it is a very early stage, it is common for the sales volume and revenue to be low. This happens because potential consumers are still getting to know the product and analysing whether it really solves their problem.
To increase this acceptance and make the product better known, the company must invest in marketing, with actions that highlight the functionalities, benefits, and return that the acquisition of this item can bring to the customer.
Phase 3: Growth
If the previous stage was well planned and executed, the product naturally enters the growth phase. At this point, the public knows the company’s new offering and its advantages. As a result, sales volume increases, boosting the brand’s revenue.
However, many companies need to improve at this stage. They believe that their solution is already well-received, so they focus on advertising campaigns and sales strategies. It’s important to remember that this growth is essential for the product to enter the next phase of the cycle, which is maturity.
If this does not happen, growth risks going straight to decline, wasting all the effort and investment made up until then, and negatively compromising the brand’s image.
Phase 4: Maturity
Products that are at maturity in the market are those that have reached the peak of their potential. At this stage, sales tend to stabilise, and the item in question gains a loyal audience that, in addition to buying it, promotes it positively.
The longer the maturity period, the more profits the company will generate. In addition, this interval contributes to the company’s consolidation and boosts the acceptance of products yet to be launched.
In this regard, we assume that positively known brands are those that have won the “hearts” of consumers. Therefore, the more credibility and time they have on the market, the greater the chances that customers will be interested in and purchase new solutions created and made available by the brand.
Phase 5: Decline
The fact is that no matter how consolidated and established the brand is, and no matter how mature the product is, it is almost inevitable that, at some point, the moment of decline will arrive.
When this happens, the company has the option of improving its solutions and, therefore, making them attractive again or discontinuing the offer and focusing on other items that are more current and sought after by customers.
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How does the product life cycle impact your strategy?
Monitoring the product life cycle is essential for good financial and commercial management of your company. The main reason is that this monitoring allows the application of sales and marketing strategies and approaches compatible with the evolution stage of the item being sold.
For example, a solution in the introduction phase requires actions that help in its dissemination so that the public becomes aware of it and is interested in purchasing it.
If it is in the decline phase, the company needs to consider and apply tactics that prevent a drop in sales volume and reverse low customer acceptance, among other things, all with the purpose of preventing the product from going out of circulation.
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What are the benefits of monitoring the product life cycle?
Among the main advantages of monitoring the product life cycle, we highlight the following:
- Improved lead generation and management, with clearer and more accurate identification of new business opportunities.
- Optimisation of marketing investments.
- Directing and better use of sales efforts.
- More support for strategic decision-making.
- More conclusive long-term financial planning.
- Increased product longevity.
- More effective organisation and management of processes.
- Possibility to adjust more appropriately to deal with competitors.
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Product Life Cycle and BCG Matrix: Are They All the Same Thing?
Yes, the product life cycle concept is similar to the BCG Matrix in some ways. However, they are not the same thing, and neither can replace the other in terms of analysis and outcome.
While the first refers to a product’s phases, from its development to its decline, the second is a visual representation of the positioning of each of a brand’s solutions.
The BCG Matrix, developed in the late 1960s by Bruce Henderson for the Boston Consulting Group, assigns roles to each of a company’s products or services. Its main objective is to guide resource investment and tactical decisions. This focus on product strategy often leads to confusion with the product life cycle concept.
How the BCG Matrix Works
As mentioned, a product’s life cycle is divided into development, introduction, growth, maturity, and decline. The BCG Matrix is divided into four categories: star products, cash cows, question marks, and pineapples.
🌟 Star product: This classification is given to items that are in the growth stage and that have considerable potential for future profitability. However, they are still stable and, therefore, require more investment and advertising and sales strategies.
🐄 Cash cows: These are products with market maturity and are generally the ones that generate the most revenue for the business.
❓ Questions: this category includes services and products that do not show clear signs of whether they will actually result in a good financial return. The reason is that they are often innovative solutions from specific niches or recently launched.
🍍 Pineapples: attributed to items that generate major problems for the company, such as the need for high investments.
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