Pet Rocks. Tamagotchis. Fidget spinners. Some products become very successful very quickly, only to fade in prominence after a short period of time. Fads are remarkable because of how quickly this happens, but the simple fact is that all products have a product lifecycle. Understanding this simple truth and all the complicated things it implies is vital for small businesses.
What is a Product Lifecycle Anyway?
Last week, we talked about how to launch your product. This week, we’re going to follow that up by talking about what happens after your product is launched.
Every product has a lifecycle, just like people do. There’s a whole discipline in business dedicated to this called product lifecycle management. Understanding this is critical to your business’s long term success.
First, let’s go over the stages in a product’s typical life cycle:
- Development and introduction
Each of these stages must be handled in a different way in order to succeed in business. We are going to cover each one in-depth in the sections that follow.
Stage 1: Product Development & Introduction
If there is any stage of the product lifecycle that gets too much attention, it’s this one. Just like what it sounds like, product development and introduction covers the creation of a product and the period of time after its launch.
During this stage, products are first introduced to the market and attention has to be earned. This can be done through advertising and promotion. Businesses must focus on drawing attention and interest in the hopes of getting the first few sales.
During this stage, a few basic principles will apply:
- Marketing costs tend to be high because you have not yet built a loyal audience.
- It takes time to build sales, so early revenues will probably be low.
- Depending on the market, there may or may not be a lot of competition.
- You have to create demand or actively seek to fill existing demand.
- Finding customers and generating leads is critical.
- You have to be very selective about distribution.
If you want to take advantage of the product development and introduction stage, bear in mind two basic principles. First, create a product that is tailor-made for a specific audience’s needs. That is, you want a good product-market fit. Second, promote the product as much as humanly possible. Once you have loyal customers, it’s a lot easier to stay in business, so finding that first handful of customers is mission-critical.
Stage 2: Product Growth
Once you scrap and fight for long enough in the product development and introduction stage, then comes the fun part: product growth. During this stage, people know you exist. You may see an influx of customers who are newly aware of your product and ready to give it a try.
This stage is marked by the following characteristics:
- The product is established and perhaps being gradually improved.
- Sales revenue increases, as does profitability.
- Customers are aware you exist.
- You may start seeing more competition.
Once you reach this stage, your goal is to gain customers and increase revenue. Instead of focusing on drawing attention and stoking interest, you want to focus on getting leads to convert. That is, you want people who know you exist to start taking action and buy your stuff!
Stage 3: Product Maturity
Once your product matures, you won’t see the aggressive sales growth that you used to. After all, even the most well-crafted product cannot grow forever. This is a simple fact of life. Characteristics of this stage include:
- Competitors start dropping out of the market.
- Prices might start dropping.
- Marketing costs less.
- Branding becomes much more important as a differentiator.
The goal once your product reaches the maturity stage is to defend your revenue. You want to keep customers coming back for more. You have to make sure that your brand provides a good experience. Maintaining customers becomes more important than generating new leads. At this point, you may also want to look into launching other products or services to shore up your business’s weakness before your product goes into decline.
Stage 4: Product Decline
It’s sad, but every product will get old after a while. It might take a month or it might take 200 years. The point is, once you reach this stage, you will need to find a decent way to phase out your product and move on.
How do you know your product is in decline? Here are a few signs:
- The profit margins are becoming very narrow.
- Sales figures are dropping.
- Prices keep dropping.
- People at large are generally losing interest.
At this point, you have three broad options for moving on:
- Rejuvenate the product to try to extend its lifespan.
- Narrow down your market and sell to a smaller niche.
- Drop the product entirely and liquidate your inventory.
How to Extend the Product Lifecycle
As you might imagine, a business wants to keep its products in the growth and maturity stages for as long as possible. Both the introductory and decline stages are perilous, although for different reasons.
Fortunately, there are loads of different ways that you can extend the product lifecycle.
One of the easiest ways to extend a product’s natural lifecycle is to advertise. This can increase audience size and gain potential customers, keeping a product in either the growth or the maturity stage for longer than would otherwise be possible.
However, advertising will receive diminishing returns as a campaign drags on. Even the best advertising campaigns will reach a point of saturation. In our experience, this happens faster than you would expect, too. So you can’t rely solely on advertising to keep a product alive.
Diversify your business
Launching new products is important for businesses in order to succeed in the long run. The greatest insurance your company can have against become a one-hit wonder is to make multiple hits!
That is to say, you may want to expand into new markets. With a little marketing research, you can identify latent customer needs and meet them.
If you want to get attention quickly, cutting the price of your goods is one very aggressive way to do so. It’s quick and dirty and sometimes it works. However, the problems with this method are clear: you cut into your profit margins.
Improve the product
There’s a reason Apple comes out with new iPhones every year. They are always making incremental changes so that they do not fall behind the competition. As such, they are perpetually adding value to the product in order to manage the lifecycle.
Give the product a facelift
Sometimes you don’t need a fancy technological change, though. Deodorant, for example, hasn’t changed for a long time. However, Old Spice knew that their aging audience wouldn’t be buying deodorant forever, so they created a bizarre, surreal series of commercials that were famously targeted at millenials in the early 2010s. Their sales figures skyrocketed.
You don’t even have to go to this extreme either. Even simple changes to packaging can go a long way.
Run a special promotion
Sometimes all you need to make a product feel fresh is run a simple promotion. It could be “refer a friend” or “buy one, get one free.” For example, Subway didn’t even the sandwich, but they did invent the five dollar footlong.
Understanding that products have a natural lifecycle allows you to make important strategic decisions for your business. It helps you know what kind of products to pursue and how long you can reasonably expect to profit from them.
There are a few simple ways you can extend a product’s lifecycle, and you shouldn’t be shy about using them. But our advice to you is simple. Remember: all things pass, including products. Be prepared for that!