Product Life Cycle

The Product Life Cycle business framework can help to analyze maturity stages of products and industries.  For any marketer, understanding your product life cycle offers invaluable strategic insight, from pricing to positioning.

The term was used for the first time by Theodore Levitt in 1965 in an Harvard Business Review article: “Exploit the Product Life Cycle.” Any company is constantly seeking ways to grow future cash flows by maximizing revenue from the sale of products and services. Cash Flow allows a company to maintain its viability, invest in new product development and improve its workforce. All this in an effort to acquire additional market share and become a leader in its respective industry. A constant and sustainable cash flow (revenue) stream from product sales is key to any long-term investment, and the best way to attain a stable revenue stream is to have one or more Cash Cows. Cash Cows are strong products that have achieved a large market share in mature markets.

Also, the modern Product Life Cycle is becoming shorter and shorter. Many products in mature industries are revitalized by product differentiation and market segmentation. Organizations increasingly reassess product life cycle costs and revenues, because the time available to sell a product and recover the investment shrinks. Although the product life cycle shrinks, the operating life of many products is lengthening. For example, the operating life of some durable goods, such as automobiles and appliances, has increased substantially. As a result, the companies that produce these products must take their market life and service life into account when they are planning. Increasingly, companies are attempting to optimize revenue and profits over the entire life cycle. They do this through the consideration of product warranties, spare parts, and the ability to upgrade existing products. It is clear that the Product Life Cycle concept has significant impact upon business strategy and corporate performance. The Product Life Cycle method identifies the distinct stages affecting sales of a product. From the product’s inception until its retirement.

The stages in the Product Life Cycle

  • Introduction stage. The product is introduced in the market through a focused and intense marketing effort designed to establish a clear identity and promote maximum awareness. Many trial or impulse purchases will occur at this stage.
  • Growth stage. Can be recognized by increasing sales and the emergence of competitors. At the vendor’s side, the Growth stage is also characterized by sustained marketing activities. Some customers make repeat purchases.
  • Maturity stage. This phase can be recognized when competitors beginning to leave the market. Also, sales velocity is dramatically reduced, and sales volume reaches a steady level. At this point in time, typically loyal customers purchase the product.
  • Decline stage. The lingering effects of competition, unfavorable economic conditions, new trends, etc, often explain the decline in sales.

You can learn more about Product Life Cycle analysis here.

Product_Life_Cycle

Several variations of the Product Life Cycle business framework have been developed to handle the development of the product, market, and/ or industry. Although the models are similar, they differ as to the number and names of the stages. Here is a list of some major models:

Variations of the life cycle model

1973 (Fox) precommercialization – introduction – growth – maturity – decline

1974 (Wasson): market development – rapid growth – competitive turbulence – saturation/maturity – decline

1984 (Anderson & Zeithaml): introduction – growth – maturity – decline

1998 (Hill and Jones): embryonic – growth – shakeout – maturity – decline

Product Life Cycle can also be extended and applied to the BCG Growth-Share Matrix, yielding an analysis tool called the Strategic Positioning Matrix.

Product Lifecycle Management

Product Lifecycle Management (PLM) is the process of managing the entire lifecycle of a product from its conception, through design and manufacture, to service and disposal. PLM integrates people, data, processes and business systems and provides a product information backbone for companies and their extended enterprise.  PLM systems help organizations in coping with the increasing complexity and engineering challenges of developing new products for the global competitive markets.

Product Lifecycle Management (PLM) should be distinguished from Product Life Cycle Management (Marketing) (PLCM). PLM describes the engineering aspect of a product, from managing descriptions and properties of a product through its development and useful life; whereas, PLCM refers to the commercial management of life of a product in the business market with respect to costs and sales measures.

Product Lifecycle Management can be considered one of the four cornerstones of a manufacturing corporation’s information technology structure. All companies need to manage communications and information with their customers (CRM-customer relationship management), their suppliers and fulfillment (SCM-supply chain management), their resources within the enterprise (ERP-enterprise resource planning) and their product planning and development (PLM).  One form of PLM is called people-centric PLM. While traditional PLM tools have been deployed only on release or during the release phase, people-centric PLM targets the design phase.

Source: Exploit the Product Life Cycle, Levitt (1965)

Product Strategy Reference Documents

Product Lifecycle
https://flevy.com/browse/business-document/Product-Lifecycle-227

Rogers’ Five Factors
https://flevy.com/browse/business-document/Rogers-Five-Factors-169

Pricing Strategy
https://flevy.com/browse/business-document/pricing-strategy-226

Pricing Strategy Implementation Toolkit
https://flevy.com/browse/business-document/pricing-strategy-implementation-toolkit-726

Psychology of Product Adoption
https://flevy.com/browse/business-document/Psychology-of-Product-Adoption-203

Business frameworks like Product Life Cycle are invaluable to evaluating and analyzing various business problems. You can download business frameworks developed by management consultants and other business professionals at Flevy here.

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This is a discussion deck template for a corporate strategy development session. In this discussion, we go through a 2-prong approach to growth and evaluate the merits of various growth drivers. This same document is available for purchase on Flevy here.
 
Have you used Product Life Cycle in your work? Please share your experiences and insights in the comments section below.

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