product data
15 min
Product Life Cycle: Definition & Phases
The product life cycle is a key concept in product management that describes the progression of a product from its launch to its withdrawal. It is crucial for companies to understand the different phases of this cycle in order to apply the right strategies at the right time and maximize the success of their products.
In this article, you will learn what the Product Life Cycle is, what phases it comprises and how retailers and webshops can use these insights to strengthen their market position and extend the life of their products.
Table of Contents
Introduction
Every product goes through a life cycle that takes place in different phases – from market launch to final decline. Companies need to be aware of these phases in order to manage their products optimally and apply the right strategies at the right time.
The product life cycle is a model from business administration that helps companies to understand the duration of the individual phases and to make strategic decisions based on the life cycle of a product.
In this article, you will learn everything you need to know about the product life cycle, the phases at a glance, the role of the Boston Consulting Group (BCG) and how you can extend the life of your products.
Key Takeaways
- The product life cycle is a crucial concept for the management of products and the development of successful marketing strategies.
- Each phase of the product life cycle requires different actions to maximize the success of a product.
- The BCG matrix and the product life cycle model are valuable tools for analyzing the success of a product and making strategic decisions.
- Companies must be flexible and adaptable in order to respond to the different phases of the product life cycle and the influencing factors.
- By deriving specific strategies from the product life cycle, companies can strengthen their market position and ensure long-term success.
What is the Product Life Cycle?
The product life cycle describes the various phases that a product goes through from its market launch to its withdrawal. It is a product life cycle model that is used in business administration to analyze the development of a product’s sales and turnover over time.
Companies use this model to determine the right time for marketing measures, pricing strategies and product innovations. The life cycle of a product generally comprises four to seven phases, each of which presents different challenges and opportunities.
Understanding the product life cycle is crucial for strategic decisions, as it shows how long a product will remain profitable and when it is time to invest in new products. The life cycle of a product depends on various factors, such as market trends, competitive pressure and technological developments.
The Phases of the Product Life Cycle at a glance
The product life cycle can be divided into several phases, each of which requires different strategies and measures. The four main phases are:
- Introduction phase
- Growth phase
- Maturity phase
- Decline phase
Let’s look at each of these phases in detail.
Phase 1: Introduction
The market launch phase begins as soon as a new product is introduced to the market. This phase is crucial as it lays the foundation for the future success of the product. In this phase, sales are often still low as the product is not yet known and potential customers first need to be convinced.
Marketing and sales play a central role in the market launch. During this phase, companies must invest considerable resources in advertising and promotion in order to increase awareness of the product, optimize their product information and attract initial buyers. New target groups must be addressed and convinced of the added value of the product.
A good example of this is the launch of a new smartphone. In the first few weeks after the market launch, a lot of advertising is placed to arouse consumer interest. The challenge in this phase is to convince the market of the merits of a completely new product and to assert it against established competitors.
Phase 2: Growth
As soon as the market launch has been successful and the product has gained recognition, the growth phase begins. In this phase, sales and turnover rise sharply as the product is established on the market and has gained a broad customer base. The beginning of the growth phase is often characterized by a rapid increase in market share.
Growth in this phase depends on various factors, such as market demand, the competitiveness of the product and the effectiveness of the marketing strategy. Companies use this phase to strengthen their market position, increase their relative market share and tap into new target groups.
In this phase, it is important to optimize production and expand distribution channels to meet the growing demand. A good example of this is a successful technical device that quickly gains popularity after its launch and whose sales figures increase rapidly.
Phase 3: Maturity
The maturity phase is reached when the product has reached its peak in terms of sales and turnover. In this phase, the product has an established market share and competes in a saturated market. The market is now saturated, which means that there are hardly any growth opportunities left and competition becomes more intense.
In the maturity phase, it is crucial to maintain market share and develop strategies to extend the life of the product. Companies must introduce innovations to keep the product attractive and ensure its relevance on the market. This can be achieved through product improvements, new features or special promotions.
An example of this is the introduction of new models or variants of a product that have been specially developed to maintain customer interest. At this stage at the latest, companies need to get creative in order to maintain their position, as competition is fierce and the product is at risk of being displaced by newer, more innovative alternatives.
Phase 4: Decline
The saturation phase occurs when the product has reached its maximum market share and there is no more growth. Sales stagnate and turnover slowly begins to fall as the market is saturated. In this phase, companies focus on extending the life of the product for as long as possible, for example by adjusting pricing strategies or expanding into niche markets.
The decline of the product begins when sales fall sharply and the product gradually loses relevance. This can be caused by new, more competitive products or by changes in consumer preferences. Companies must make strategic decisions at this stage as to whether to continue offering the product or withdraw it from the market.
A good example of this is a technological device that is replaced by newer versions and whose sales and turnover fall rapidly. Companies that react in time can redirect their resources to the development of new products and thus initiate the transition to a new growth phase.
Factors that influence the product life cycle
The product life cycle is influenced by various factors that determine how long a product remains on the market and how successful it is. These factors can be both internal and external and include:
- Market trends: Changes in the market, such as technological advances or changing consumer preferences, can have a significant impact on the life cycle of a product. A good example is the transition from physical CDs to streaming services, which has drastically shortened the life cycle of music CDs.
- Competition: Competition plays a decisive role in the life cycle of a product. New competitors can reduce the market share of existing products and shorten the life cycle. Companies must constantly monitor their competitors and adapt their strategies accordingly.
- Technological developments: Innovations and technological advances can extend or shorten the life cycle of a product. Products that are technologically obsolete are often quickly replaced by new, improved versions.
- Economic conditions: Economic factors, such as recessions or inflation, can affect the life cycle of a product by changing the purchasing power of consumers and influencing the demand for certain products.
- Regulations: Legal changes or new regulations can also affect the life cycle of a product. For example, environmental regulations can lead to certain products having to be withdrawn from the market.
These factors not only influence the success of a product, but also the duration of the individual phases of the product life cycle. Companies must be flexible and adaptable in order to react to these influences and keep their products successful on the market.
What role does PIM software play in the product life cycle?
In the context of the product life cycle, PIM (Product Information Management) software plays a crucial role, especially in the management and optimization of product data in the various phases. With PIM software, companies can efficiently manage and update central product information and keep it consistent across all sales channels.
This is particularly important during the market launch to ensure that all relevant data is correct and available in a timely manner. Even in the growth and maturity phase, PIM software helps to optimize product data and support targeted marketing strategies, which can ultimately extend the life and success of a product in the market.
Product Life Cycle Model
The product life cycle model is an important tool in business administration that helps companies to understand the progression of a product from launch to decline and to make strategic decisions. One of the best-known models closely associated with the product life cycle is the BCG matrix from the Boston Consulting Group.
Die BCG-Matrix teilt Produkte in vier Quadranten ein: Question Marks, Stars, Cash Cows und Dogs. Diese Klassifizierung basiert auf dem relativen Marktanteil und dem Marktwachstum eines Produkts.
Simple Explainer: What is BCG Matrix?
- Question Marks: These products are often in the market launch or early growth phase. They have a low relative market share but are in a high-growth market. Companies need to decide whether to invest in these products to make them stars or to phase them out.
- Stars: Products in this category have a high relative market share and are in a growing market. These products are often in the growth phase and generate high sales. Companies should continue to invest in these products in order to strengthen their market position.
- Cash cows: These products are typically in the maturity phase. They have a high relative market share, but market growth is low. Cash cows generate stable sales with low investments and often finance other areas of the company.
- Dogs: Products in this category have a low relative market share and are in a declining market. These products are often in the saturation or decline phase and should be removed from the market by companies in order to free up resources for more profitable products.
The product life cycle model and the BCG matrix are valuable tools for analyzing the success of products and making strategic decisions. They help companies to optimize their product portfolios and secure their market position in the long term.
Deriving strategies from the product life cycle
The different phases of the product life cycle offer different opportunities and challenges that companies must take advantage of in order to strengthen their market position and maximize the success of their products. Specific strategies can be derived from each phase that are tailored to the respective market conditions.
- Introduction: In this phase, the focus should be on increasing awareness and creating demand for the product. Marketing campaigns should aim to anchor the product in the minds of consumers and generate initial sales. Pricing strategies can initially be aggressive in order to gain market share.
- Growth phase: Once the product is in the growth phase, companies should adapt their marketing and sales strategies to maximize growth. This can be done by expanding sales channels, introducing new product variants or tapping into new target groups. The aim is to increase market share and consolidate the product’s position in the market.
- Maturity phase: In the maturity phase, the aim is to maintain market share and extend the life of the product. Companies can introduce product innovations, offer special promotions or improve customer service in order to increase the attractiveness of the product. At the same time, costs should be controlled in order to maximize profitability.
- Decline phase: In this phase, companies must decide whether to continue supporting the product or withdraw it from the market. If the market is saturated and growth is stagnant, companies can try to position the product in niche markets or continue to support it at minimal cost. However, if the product is no longer profitable, it should be strategically removed from the market to free up resources for new, more promising products.
By deriving strategies from the product life cycle, companies can ensure that they make the right decisions at the right time and secure their market position in the long term.
Conclusion
The product life cycle provides companies with valuable guidance on how to maximize the success of their products and react to changes in the market in good time. By understanding the life cycle of your products and deriving the appropriate strategies, you can ensure that your company remains competitive in a dynamic market environment.
It is important to regularly review your product portfolio and keep an eye on the phases of the product life cycle in order to be successful in the long term. The product life cycle is considered one of the most fundamental methods for evaluating the profitability and future viability of products and making strategic decisions accordingly.