Mufasa said it best: “We are all part of the great circle of life.”
All of us. Even products, services, and industries.
From the moment a new product hits the market, the clock starts on four distinct stages:
Businesspeople (especially marketers) use this product life cycle to understand and adapt to changing factors out there in the big wide world, from demand and profitability to customer awareness and competition.
Imagine you’re a toy maker, and you’ve got this great talking teddy bear . . .
Your bouncing newborn teddy bear (teddy cub?) starts its life by entering the market in the introduction stage. Like any newborn, its functionality and design are limited. Maybe you squeeze its paw, and it says either “Nighty night!” or the classic “I love you!” It’s certainly cute, but at this stage, customer awareness and sales are probably low—so low that there’s no guarantee your teddy bear will survive.
What do we do with our little ones to make sure they grow up big and strong? We educate them. Or, in the case of products, invest in R&D.
Maybe you manage to get your teddy bear up to ten phrases, perhaps with a better speaker and a more subtle paw button. You might also use this stage to sing its praises in promotions—internet ads, social media video snippets, and such. Anything you can do to clear the path to a brighter, more profitable future for your teddy bear.
Time to Grow
Congratulations! Your teddy bear survived the introduction stage! Now it’s entering the growth stage. This is when it’ll start making friends—that is, gaining awareness and popularity with consumers. It’s an exciting time for you, your teddy bear, and your company. You can mass produce your teddy bear now, and that means lower costs and higher sales.
Of course, none of that goes unnoticed. Competitors start to come out of the woodwork: teddy bears in different colors, teddy bears that say different phrases, teddy bears that are hypoallergenic for kids with sensitive allergies. Some of these might be new entrants to the market at roughly the same growth stage, but others are likely seasoned competitors that pose a bigger threat.
Alas, no product or service can stay young and innocent forever. Eventually, they all reach maturity.
Consumer awareness is high for your teddy bear now, but that’s largely because most of your targets have already bought one. Sales peak and start to slow. Rivalry drives prices down, making it harder to invest in R&D. Profitability takes a hit.
Destined to Decline
The golden years of growth and even maturity begin to fade as your teddy bear shifts into the decline stage. Newer, snazzier, next-generation teddy bears appear on the market. Some have microchips for bilingual phrases, or even voice commands!
Your teddy bear has come a long way, but it just can’t compete with that. Customer tastes are changing, and the market is taking a turn. The kids buying teddy bears now aren’t the same kids that were buying yours in the introduction stage. If your teddy bear is beloved, sales may fall slowly—if not, they’ll drop hard.
It’s now time to decide if your teddy bear should stay and try to regain some footing (with lower expectations) or make its graceful exit. Perhaps its life lessons can be applied to your next product or service.
It’s the Circle of (Product) Life
New companies—and entrepreneurs, in particular—are often excited about how their brilliant product or service will change the world. And to be fair, sometimes that really does happen, despite the eventual decline stage. Think where we’d be if Sony had never invented the Walkman, or if JVC had never brought VHS tapes to the world.
It may not move at a constant speed, but the product life cycle is inevitable. That said, it doesn’t have to be sad, and it certainly shouldn’t be a deterrent.
Understanding the product life cycle can help you see where your product is in its journey. It can help you understand the types of customers to expect at a given stage, how harsh the competition is likely to be, and how much you should invest in beefing up functionality. It can also teach you a lot about what to expect from a particular industry, or even make predictions about future generations of products or services your company will bring to market.