A product life cycle is a series of distinct stages that each product goes through during its commercial life. Each phase requires a different marketing strategy and mix. And so too, each stage has different implications for your profits.
Knowing which stage the product currently located is essential. It helps you to know when to adjust marketing strategies. You will also know how to change costs and prices for maximum profit.
And, many businesses record and track their sales information. The aim is to describe the cycle pattern.
Product life cycle stages
For each product, the cycle length and number of sales may be different. But, the pattern is quite similar.
Cycle through five different phases. Here are the details:
In the development phase, the product is still in the form of a prototype. At this stage, you need to test the product before you launch it to the market. You also have to incur losses due to high costs and have not yet generated sales.
The product launch starts the introduction phase. To support sales, you need to incur extensive advertising and promotional costs to promote the product. In this phase, you may not have reached the break-even point to return the money you have spent.
When advertising and promotion are successful, sales start to increase. That marked the growth phase. And, to strengthen sales, you still spend high advertising costs.
At this stage, you also have reached a break-even point to cover development and advertising costs. Your job is to achieve a strong position and become a market leader before entering the mature stage.
In the mature phase, your sales are at its peak, but at the slower percentage growth. You start reducing the ads because it doesn’t have a significant impact on sales. At this stage, you will know whether products are successful or not. If successful, the product has the largest market share and is the market leader.
During the decline phase, sales will start to fall. You need to decide whether to invest money to extend its life (extension strategy) or to eliminate products from sales. Among the options for extending the life of the cycle are to reduce prices, add new features or new packaging.