What is Product Life Cycle & Why it is important to understand lifecycle of product?
Product Life Cycle Explained
Whenever a product is built, it goes through a lifecycle. For the product to become successful, the firm must understand the lifecycle of the product.
What is a Product Life Cycle?
Product Life Cycle describes how a product goes from the initial state of being introduced to the final state of being discontinued. Understanding the product lifecycle helps a business to gauge whether the product is a fit for the market or does it require a new direction.
Why is it important to understand the lifecycle of a product?
A product life cycle helps the business in the following ways:
Expansion Strategy: The product life cycle helps a company to understand how each product sits with the company’s portfolio. For a product in the decline stage, the company will either create a strategy to revamp or revoke it.
Resource allocation: A company decides how much resources - Manpower and Capital to allocate to a product depending on where the product is in its lifecycle. A company invests more resources while a product is in the maturity stage to renovate the product and incorporate customer feedback.
Promotional or Marketing budget allocation: As the product grows, the company invests in promotional campaigns to gain traction. The firm cuts all marketing budgets during the decline stage to utilise them for growing products.
There are four phases of the Product Life Cycle - Introduction, Growth, Maturity and Decline.
Introduction
During this phase, the product is introduced in the market.
The company invests in marketing budgets for the product and resorts to strategies like price skimming to attract early adopters.
The net cash flow is usually negative. The business does not make money from the product.
For example - Nokia launched one of the first portable handheld GSM devices in the late 1990s. Initially, the product had limited demand. Hence it launched very few models.
Growth
At this stage, the product gains popularity. The sales volume grows steadily, leading to an increase in profit.
The company aims to increase the market share of the product and works towards it by launching promotional events.
The company starts targeting a larger audience for the product. Users start increasing organically as well.
For example - As it became popular, Nokia improved the device and launched better features like games, SMS, 2G/3G internet etc.
Maturity
At this stage, the sales volume reaches a peak, and growth stagnates.
The company has started experiencing more competitiveness and has to develop new features to differentiate its product. They resort to customer feedback to identify ways to innovate further.
The company aims to maximise its market share and profit.
For example - As Nokia started gaining market share, it faced tough competition from other players like Apple, Blackberry and Motorola.
Decline
During this phase, the product reaches the saturation point and experiences negative growth.
Competition might start taking over. The product starts losing market share as well.
Only a few loyal users might still use the product.
For example - When Android and iOS came into the picture, Nokia failed to transform digitally. This led to a decline in Nokia sales, and eventually, it died down.
We can clearly understand the lifecycle of a Nokia Smartphone from the above example.
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What is the Product Manager’s role at every phase of a product life cycle?
It is interesting to know that during every phase of a product life cycle, the Product Manager has a different role to play.
Introduction: The Product Manager acts as a Subject matter specialist and tries to gauge the product market fit. He actively seeks insights from early adopters and the market in general.
Growth: PM roles changes to a Growth Strategist. He pulls levers to ensure the reach and scale of the product are growing.
Maturity: The role of the Product Manager starts getting all the more challenging as new competitors start capturing the market share. He acts as a Retention expert and makes efforts to differentiate the product and hold onto the market share.
Decline: A Product Manager's strategies are based on what is best for the business. He might either revoke the product from the market or find ways to resurrect the product. The PM might decide to revamp the product by introducing a new version.
When is a product lifecycle not useful?
Legal restrictions: The product lifecycle does not work for products protected by patents and trademarks. For example - Even if a product like Coca-cola has matured in the market and several competitors are offering similar products, it still dominates the market. The company still spends heavily on promotional events to keep up sales.
Geographical variance: A product might be successful in one region but might not work in another. It does not mean that the product has reached the decline stage. In such scenarios, the business needs to analyse carefully which regions they should keep the product alive and where they should exit.
Planned decline: A product might be knowingly made obsolete so that the sale of new-generation products picks up. For example - Whenever Apple introduces a new iPhone, it decreases the price of the older models and limits its production to push the latest device in the market.
-- TechnoManagers
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