Just like human every brand and product has also its life time in this world. Some brands are born for very short time period and people may be customers or competitors rejected them and compelled them to die. For instance a social community website “ORKUT” that almost quit from the market due to its weak strategies and strong competitors like Face book and Twitter. But some brands live long lasting life that never end like Pepsi and Coke.
Product life cycle consist of different stages that a product or brand must occupies in its life. There is a chance of missing one or more stage in product life cycle i.e. one product can be directly shift from introduction stage to decline. Market rejects these products and compels to die.
There are five stages in Product Life Cycle:
1. Product Development or Research and Development Stage
2. Introduction Stage
3. Growth Stage
4. Maturity Stage
5. Decline Stage
All the stages are explained below:
Product Development or Research and Development Stage
This is the pre-lunched and very beginning stage of any product or brand. In this stage product is on the table of experiment and research. Manufacturers, in this stage try to make product according to customers need. Initial work done on this stage and research and development, that may any product need also done in this stage. Very heavy cost occurs in this stage and manufacturer bear only loss in this stage. This is not actual loss but this is pre-lunched expenditure. But if product fails in this stage then all the expenditure turned in to loss.
On graph Red line is showing sales made by that particular product or brand and in this stage sales line is on the X-axis and also parallel to X-axis it means in this stage product never make any sale as this is pre-lunched stage of product life cycle. Blue line which is representing profit is below the X-axis which means product in not earning profit it is in the loss.
In this stage company try to hide all the information regarding product from the market and its competitors because it is too dangerous for one company to spread product’s information before it launching. No marketing and advertising expense made on this stage because of secrecy. All the cost spend on this stage is development and research cost.
Read Article: What is CRM? What are the types of CRM Systems?
This is the second stage of product life cycle. After pre launched step, product development, this is the after launching step. In this step company launch its product in the market and start selling it. Now product is available in the market to all customers.
In this stage company try to invest heavy budget on marketing and advertising on product because this is the first step of product in the market and product needs advertisement and promotions.
In this stage company also bears more cost because of advertisement and marketing activities regarding product. Although product available in market and also starts selling but revenue is not enough to cover all the expenditure so we can say that product starts covering its all expenditures and cost.
In the graph, red line is just above the X-axis which means it just starts it selling and with the passage of time it will make more and more sale. And the blue line representing profit is below the X-axis which means no profits earns in this stage and all the sales are now covering previous cost.
After the introduction of product in the market, company knows the response of customer toward its product. If company found customers are appreciating its product and purchasing more units then product is shifting itself in to next stage” Growth stage”.
Growth is the third stage of product life cycle. In this stage company also make heavy investment on advertising and marketing of product because competition is high and product needs some support from company in term of advertising. For becoming no 1 product in the market, manufacturer try to invest more money on the product but product also return to the company. Now product is filmier with market and everyone knows about it. So product is now earning profit for its owner.
In the graph, red line is now vertically going upward which means product is now on the road. Product is generating more revenue and covering its all cast. Blue line representing profit ratio earned by the brand, is now getting above the X-axis and representing huge profit. Now product is in the profit. All the expenditure is covered and product is now bearing cost by itself.
With comparison to introducing stage, growth time period is little bit short. If market accepts it then product will quickly pass into growth stage. With proper backup and support in terms of advertisement, promotions and marketing related activities, product will quickly reach in next era.
After growth stage, next stage is maturity stage. Product is mature and very much familiar with market conditions and on top position. In the maturity stage, product enjoys it high market share and cashing brand name.
In this stage low investment required for advertisement and promotions because everyone knows about product and ad displays just for exposure and support. Advertisement made for sustaining positions not for make more sales.
Now product is earning high profit and on its peak time. Market conditions are mature. Competitors also know about product market share.
Graph showing red line parallel to X-axis but distance from X-axis is very high. In this stage red line remains constant and no variations occur in the graph. Blue line which is representing profit is same with sales line but distance with X-axis is low because profit cannot increase from sales. Profit line is on the peak and horizontal.
This is the last stage of gaining more market share. Product now cannot gain more market share each and every activity done just for sustaining market share.
Everything in this world has to die. Here die means quitting from the market. Product, after long time enjoying profit and sales, goes down in the market. There may be many reasons of it i.e. technology can be changed and new technology can make good product as compare to previous so in this stage customers change their preferences and shift to other product. Sales go down and profit also.
No need to invest more money on product in this stage. You will definitely not waste your 10 dollars to save your one dollar. Yes, manufacturers try to make other product more efficient and more attached with customers needs. Red line, on the graph, is now going down which means losing it sales which represent losing of market share. And same thing happened with blue line.
Different stages in the product life cycle represent different activate. it is not necessary that every product goes in the decline stage and then quit the market. There are numerous products those are in the maturity stage and continue it i.e. Pepsi cola, Coke, Nestle brand and many more. All stages have their own strategies and marketing Mix. with the help of above picture you can easily understand what a product need in one stage.
Got any questions? Or maybe, have something to add? Please leave a comment below and tell us what you're thinking. Cheers :)