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 helps assess the marketing mix needed to allow a product to gain traction over time or avoid market saturation.
Understanding which stages your product might be in is critical to understand the marketing mix to utilize to gain traction and get to the growth stage as quickly as possible.
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, PLC managers and marketing strategists can make informed business decisions by understanding the stage a product goes through.
The primary phases of a product life cycle can be broken down in:
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.
Growth Stage
A growth stage is characterized by strong sales, reduced costs, and growing competition.
As the public becomes more aware of those existing solutions, more players enter the market.
Usually, to compete in this phase, companies lower the product price or undertake aggressive growth strategies to gain as much market share as possible.
Maturity Stage
In the maturity stage, costs due to investment in the product are generally lower due to high production 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, branding and differentiation will allow a company to keep generating substantial revenue and retain market shares.
Decline Stage
In the decline stage, due to market saturation, sales volume will decline, and profitability will keep diminishing.
A company must gain back its market share.
Tesla Case Study
To understand the application of the product life-cycle framework in the real business world, let’s take the case of Tesla.
When Tesla entered the market, it did so through a high-performing sports car, which was intended to tackle a tiny segment of the automotive market made of innovators.
This entry strategy enabled Tesla to showcase the EV technology while grounding it in an initial commercial use case.
Only after the release of the Tesla Roadster the company planned the Model S, which was used to tackle a more significant segment of the tech market, made of early adopters.
The Model S was also used by Tesla to enter the early majority market.
After the Model S, Tesla launched the Model 3, which was instead intended to tackle most parts of the early majority and start entering the early majority market.
Which is where Tesla is currently.
The Tesla Model 3 will be critical to reaching most of the late majority market while achieving mass market production, and potentially moving toward the late majority!
Product development, known as the new product development process comprises a set of steps that go from idea generation to post-launch review, which helps companies analyze the various aspects of launching new products and bringing them to market. It comprises idea generation, screening, testing; business case analysis, product development, test marketing, commercialization and post-launch review.
In his book, Crossing the Chasm, Geoffrey A. Moore shows a model that dissects and represents the stages of adoption of high-tech products. The model goes through five stages based on the psychographic features of customers at each stage: innovators, early adopters, early majority, late majority, and laggard.
A sales cycle is the process that your company takes to sell your services and products. In simple words, it’s a series of steps that your sales reps need to go through with prospects that lead up to a closed sale.
The sales funnel is a model used in marketing to represent an ideal, potential journey that potential customers go through before becoming actual customers. As a representation, it is also often an approximation, that helps marketing and sales teams structure their processes at scale, thus building repeatable sales and marketing tactics to convert customers.
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
A go-to-market strategy represents how companies market their new products to reach target customers in a scalable and repeatable way. It starts with how new products/services get developed to how these organizations target potential customers (via sales and marketing models) to enable their value proposition to be delivered to create a competitive advantage.
An entry strategy is a way an organization can access a market based on its structure. The entry strategy will highly depend on the definition of potential customers in that market and whether those are ready to get value from your potential offering. It alls starts by developing your smallest viable market.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.
According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.
In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
