The Product Life-cycle (PLC) is a model that describes the phases through which a product goes based on the sales of a product over the years. This model is useful to assess the kind of marketing mix needed to allow a product to gain traction over time or to avoid market saturation.
Why is the product life-cycle important?
Understanding which stages your product might be is critical to understand the kind of marketing mix to utilize to gain as quickly as possible traction and get to the growth stage.
Or if a product is already in the maturity stage, it helps marketers or managers to assess how to prolong the maturity phase and avoid market saturation.
Thus, with PLC managers and marketing strategist can make informed business decisions, by understanding which stage a product is going through. The primary phases of a product life cycle can be broken down in:
- Introduction and development stage
- Growth stage
- Maturity stage
- Decline stage
Introduction and development Stage
In this stage, a company will go through a period of high costs that will be needed to sustain the development and introduction of the product in the marketplace.
At this stage the sales volume is low, the investment costs are high, there is little or no competition, and demand has to be created by prompting customers to get the product.
A growth stage is characterized by strong sales, reduced costs, but also growing competition. As the public becomes more aware of those existing solutions, more players come into the market.
Usually, to compete in this phase, companies lower up the price of the product or undertake aggressive growth strategies to gain as much market share as possible.
In the maturity stage, costs due to investment in the product are generally lower, due to high production volumes and sales volumes. In this stage, though sales volumes also peaked, at the point of market saturation.
When that happens, a price drop might occur due to competing products. Thus, also profits will be squeezed. At this stage what will allow a company to keep generating substantial revenue and retain market shares is branding and differentiation.
In the decline stage, due to market saturation, sales volume will decline, the profitability keeps diminishing. It is critical that a company gains back its market share.
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