The product life cycle depicts the journey of a product from conception to market withdrawal. In this cycle, a product goes through stages including introduction, growth, maturity, and decline.
Each stage has factors influencing performance and strategies needed to maximize the product’s potential. Explore a detailed explanation of the stages and factors in this article!
What is Product Life Cycle?
Before delving further, let’s first discuss the concept of the product life cycle. According to Investopedia, the product life cycle is the process involving a product from its launch to its withdrawal from the market.
Generally, companies use this concept to determine the right timing for enhancing promotion, adjusting prices, expanding markets, and making design changes to the product’s packaging. Product managers typically incorporate the product life cycle into their daily activities.
Additionally, the product life cycle helps identify when a new product can replace an old one in the market. This is because all products will eventually be withdrawn from the market due to various factors, ranging from intense competition to declining demand and sales.
In daily life, we often witness old products being phased out by companies and replaced with more successful new products. This phenomenon underscores the importance of the product life cycle for companies in conducting long-term business.
Stages of Product Life Cycle
After understanding the concept of the product life cycle, let’s move on to the next discussion. Basically, the product life cycle consists of four stages: introduction, growth, maturity, and decline.
These four stages provide guidance for companies in determining future business objectives.
Let’s explain these four stages together:
- Introduction Stage: The introduction stage, as per Product Life Cycle Stages, is a challenging phase for companies. They must actively build consumer awareness of the product, including allocating a significant budget for advertising.
This stage is also a critical moment for companies as they gauge consumer responses to the product. Whether the product is well-received by the public or faces negative feedback, it poses a significant challenge.
The primary goal of this stage is to increase consumer demand and profit from the growing popularity of the product.
- Growth Stage: In this stage, consumers have gained trust in the product and tend to make repeated purchases. In other words, the product concept developed by the company proves effective, leading to increased sales.
Companies can achieve significant profits as the product becomes popular in the market. This stage is often accompanied by promotional efforts to boost the product’s popularity.
However, competition also intensifies, and companies may need to consider competitive pricing adjustments. Nevertheless, sales volume continues to increase, generating substantial revenue.
- Maturity Stage: In this stage, sales reach higher levels, and the company gains significant revenue. During the maturity stage, companies need to be smart in maintaining the market share they have acquired.
Many argue that maintaining market share is more challenging than acquiring it. Therefore, this maturity stage requires significant innovation in product development to stay ahead amid increasingly fierce competition.
Companies must be wise in spending on product development. According to The Streets, the maturity stage can last long or be short, depending on the product type.
- Decline Stage: The decline stage in the product life cycle is a phase where the product experiences a decline. Despite efforts to maintain market share in the maturity stage, a decline in sales is inevitable.
In this stage, sales decrease significantly, and consumer behavior changes as product demand declines. This decline can be caused by various factors, such as market saturation or consumer shift to other products.
Ultimately, the product will be withdrawn from the market unless it can be redesigned and remains relevant to the market. However, there are still opportunities for companies to profit when entering this stage by switching to more efficient production and markets.
Factors Influencing Product Life Cycle
Certainly, there are many factors influencing the cycle of a product. Without these factors, the stages of the product life cycle, from growth to decline, would not be possible.
The duration of the product life cycle is influenced, at least, by the level of technological change, market acceptance, and competitor presence. Referring to Economics Discussion, here is an explanation of some factors influencing the product life cycle:
- Technological Change: The product life cycle depends on the level of technological change occurring in a country. If a country experiences a high level of technological change, the product life cycle will be shorter because new and better products replace old ones.
Conversely, if the level of technological change in that country is low, the product life cycle tends to be longer. For example, the transition to full digital television broadcasting has not yet occurred in Indonesia. This makes the product life cycle of analog televisions longer compared to developed countries.
- Market Acceptance: The duration of a product life cycle in a country depends on the level of market acceptance. If consumers in that country quickly accept new products, the product life cycle will be shorter.
However, if consumers gradually accept the product, the product life cycle is also likely to be longer. Other factors such as consumer purchasing power can also influence market acceptance.
- Competitor Accessibility: Market competition also affects the success or failure of a product. Government policies in the economic sector can also play a significant role.
If competitors can easily enter the market, the product life cycle will be short. Conversely, if competitors face barriers to entering the market, the product life cycle in that market could be longer.
- Risk Management Capacity: Companies with a strong risk management capacity can maintain their products in the market for a longer period. This is because they can effectively overcome market challenges.
However, companies with limited risk management capacity cannot face significant challenges. As a result, their product life cycle becomes shorter.
- Economic and Managerial Strength: These two factors also play a significant role in a company’s success in the market. If a company has solid economic and managerial strength, its product life cycle is likely to be longer compared to a company without such strength.
- Patents: Patent registration for products can extend the product life cycle. This is because the country protects the “recipe” or product composition from being easily imitated by other companies.
If infringement occurs, the patent owner can fight it through legal mechanisms.
Challenges in Using Product Life Cycle
The concept of the product life cycle is complex and requires primary attention for companies wanting to run their business smoothly.
According to the Interaction Design Foundation, some products have a lifespan of a few months or years, while others can last for decades or even centuries. This phenomenon poses significant challenges for most companies.
Increased sales do not always indicate growth, and a decrease in sales does not necessarily mean an overall decline. Everything appears complex, and this is where the challenges of the product life cycle lie.
Recognizing the maturity and decline stages can be difficult; therefore, it is crucial to be cautious in decision-making at each stage of the product life cycle.
Overall, the product life cycle refers to the journey of a product from conception to market withdrawal. Through the stages explained earlier, the product undergoes significant changes in demand, market share, and marketing strategies needed to sustain its success.
Factors such as technological innovation, industry competition, consumer trends, and market regulations also play a crucial role in influencing the product life cycle. By understanding this concept, companies can develop the right strategies to effectively manage their products and maximize long-term success.
