Understanding the Product Life Cycle

Creating a new product or service is (unfortunately) so much more than bringing a great idea to life and bringing it to the market for consumers to buy. Like everything in business, there are several steps that are meant to help guide your understanding of profits, sales, and revenue. For new products or services, this process is known as the product life cycle, which is broken down into five stages. Each step represents a life stage of your new product, starting with its development and ending with its decline. Understanding how your product responds to the market at each stage helps you manage sales, determine prices, and even predict profitability. So let’s dive straight into the product life cycle!

What is the Product Life Cycle?

Unfortunately, no new product or service lasts forever. As a product continues in the market, there will be fluctuations in awareness and popularity. That’s where the product life cycle comes in. The cycle simply describes your product or service at different stages of its existence. Each stage can reveal extremely useful information about our products, which allows us to react accordingly. For example, if you know that your product is gaining awareness, you’ll start to raise prices to match the demand. If your product is reaching a decline, you can introduce a new sale to bring back some attention. Without understanding the product life cycle, you might be missing out on some great opportunities to capitalize on highs or prepare for the lows.

Steps of the Product Life Cycle:

There are five stages to the product life cycle, each describing the “age” of your product or service, starting with product development and ending with its decline.

Stage 0: Product Development

The first stage is product development. It starts with your first ideas for your product or service and ends when you’re ready to introduce it to the market. At this stage, you’re focusing solely on research, such as looking up information about your target audience, the market you’re in, and your competition. If you’re an avid reader of our blogs, you might recognize this stage as market research (if you haven’t read that blog, feel free to check it out: Navigating Market Research). During this stage, no one (except maybe your friends and family) is aware of your new product. You're testing out your idea, trying different price points, and figuring out how to navigate in your specific industry.

Stage 1: Introduction Stage

This stage marks the start of your true “beginning.” This is where all that research and sleepless nights results in your perfect product or service. All that’s left now is actually marketing it. Creating awareness, responding to potential customers, and maintaining your social media are all highlights that stem from this step. Remember, your product or service is brand new to the market; you probably won’t see high profits. However, this is all part of the major investment you made when you decided to start your small business. Be patient, and you’ll soon see your product entering the next stage of its life cycle.

Stage 2: Growth Stage

The second stage is marked as the growth stage, where you’ll soon begin to see an influx of new buyers due to your initial promotion efforts. The more people who know about your service, the more attention it will receive. During this stage, you should be working on perfecting your product, thanks to the feedback provided by these new consumers. Make sure you’re paying attention to customer reviews -- whether good or bad, they can help you improve your product based on your buyers’ tastes. You might be lowering your prices, fixing some bugs, or adding new features. At this stage, you should also expect higher profits since more and more people will become aware of your product. However, don’t take this as a sign to slow down your marketing efforts! In fact, now’s the time to really boost your advertising efforts to gain more and more attention.

Stage 3: Maturity

If you imagine the product life cycle as a bell curve graph, think of the maturity stage as the peak. This is when sales don’t necessarily slow down, but reach consistency. You’ve established a loyal customer base, demand has become steady, and your initial excitement has slowed down. The market is now well-acquainted with your product, which means it’s harder to attract new customers. And although your profits may have stabilized, there might be other competitors who have taken notice of your new product and have decided to make their own moves, capturing new customer attention. You might be feeling as though your business has plateaued, but now’s not the time to become complacent. Now’s the time to update or change your game plan. New advertising methods, offering discounts to amp consumer purchases, and fine-tuning operations are vital to maintain competitiveness.

Stage 4: Decline

Unfortunately, there will be a time when your brand-new product or service reaches a decline. Nothing lasts forever, and soon your consumers start to explore newer products. Sales decline, the market becomes saturated, and production levels start to drop. But don’t take this as a sign of the end! This is just part of the reality of the world of business. Now’s the time to take a step back and review your choices. You can choose to revive, reposition, or retire your product. Reviving could look like rebranding or adding a new feature; repositioning could mean you’re looking to target a different market; and retiring means making the decision to gracefully leave the market. Now could also be the time to restart the product life cycle by creating a new product! Remember, nothing in business remains static, and responding appropriately to different changes is what makes great business owners.

In the vast world of entrepreneurship, understanding the product life cycle isn’t just a helpful tool, but a guide that can help you respond accordingly to changes in the market. From your product’s birth to its steady decline, each phase brings its own set of challenges and opportunities. As you experience your own product life cycle, remember to keep track of the data, listen to customer feedback, and embrace the changes that your new product or service brings to your business.

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