Which stage of the product life cycle is most likely to have the highest profits?

When project managers refer to a product they’re working on as their ‘baby’, they’re not exactly wrong. Like a human being, a product is born, grows up, matures, and then passes. These four stages are known as its life cycle.

While some product lives are extended (how many versions of the iPhone have there been?), others are expected to pass through these phases before disappearing. This is generally because they are superseded by new products that meet consumer needs better. Think about how CD walkmen gave way to MP3 players.

The product life cycle not only explains how sales trends work over the lifetime of a product. It also helps dictate marketing efforts and how much support is needed to enable the product’s future success.

Stage One: Introduction

This is the stage where a product exits the development and testing phases and enters the market. Unless the seller or manufacturer is a household name, growth is generally slow at the beginning. The product may be first-rate and address a lot of consumer needs, but the public is not familiar with it, so demand will be lower. Other hurdles are:

• Vendors and in-house sales teams may not yet know enough about the product to sell with confidence
• There are no clearly defined distribution channels

Unless the product is a breakaway success, it may experience a rocky start. Characteristics of the introduction phase include:

• Low sales volumes that increase slowly.
• High costs due to marketing, consumer testing, advertising, distribution, and other awareness-spreading campaigns, especially if the sector is competitive.
• Customers must be enticed to try the product. This could be in the form of free samples, discount codes, rebates, or lower, ‘introductory’ pricing.
• Reduced profits due to the slower sales and the money that must be invested in advertising.

There is a silver lining behind all this cloudiness. At this stage, there is not likely to be much competition, and if the public embraces the product, the manufacturer has a rare opportunity to create a monopoly.

Example: Holographic projection technology was recently introduced into the market after years of being confined to science fiction. It allows consumers to take any flat surface and turn it into a touchscreen. There has been a lot of money invested in research and developing holographic projection products, which is reflected in the high prices that are making its adoption gradual. This is a good example of a technology product that is in its Introduction phase.

Stage Two: Growth

The introductory stage is over. The growth phase of the product life cycle is when brand awareness spreads and the market starts responding. Thanks to advertising and word of mouth, the product’s advantages and benefits are being recognized by customers and distributors, allowing it to become profitable and present a better return on investment. Depending on the strength of the response, the manufacturer may invest even more in marketing, introduce support services or start developing secondary products.

Although the growth phase represents progress, it still has risks for the newly launched product. For example:

• If public response is mostly positive, the competition may try to benefit by developing and promoting a competing product.
• Any marketing mistakes or performance problems will receive more attention and, as the saying goes, bad news travels fast

Manufacturers have to take special care during this stage to prevent competitors and negative publicity from diminishing or preventing product growth. Too many promising products have faltered this way.

Example: When the Microsoft tablet computer appeared in 2000, it sparked an interest that Apple capitalized on when it released its first iPad in 2010. Soon Samsung, Lenovo, and other electronics brands developed their own tablets. The iPad is one consumer product that, so far, appears to have staying power.

Stage Three: Maturity

Product sales peak during the maturity phase, which should be the longest part of its life cycle. This is when demand is at its strongest. The public has responded favorably and competitors have definitely taken notice. Once competing products start appearing on the market, the manufacturer may have to:

• Lower pricing due to increased competition
• Add new features to the product to make it more attractive to consumers than alternative products
• Offer incentives to distributors to keep ordering the product
• Adjust marketing materials to address the difference between the product and its competitors

During the maturity phase, there is little growth potential and manufacturer focus is on maintaining market share by extending the life cycle as much as possible before competitor-driven oversaturation occurs. Sales levels may experience a decrease at the beginning but should eventually stabilize.

Example: When laptop computers appeared, consumers loved them for their portability. They continue to be relevant because the manufacturers keep adding more advanced components, such as high-resolution cameras and touchscreen capability, but as a concept, the laptop is in its maturity stage, with competitive pricing and different brands to choose from.

Stage Four: Decline

During the decline phase, the product has essentially reached its saturation point. Pricing will either remain stable or decline slightly in order to remain competitive. This stage is where the manufacturer tries to lengthen the product’s lifecycle. They can make significant changes to the product to keep it in the market or withdraw it and move on to something else.

Example: When electronic word processors first appeared, they were greeted as a revolutionary change from the manual typewriter. Then along came personal computers, which allowed users to type, edit, and revise documents before printing them, sending word processors into decline. Today, word processing software has rendered these devices obsolete.

Lessons from the Product Life Cycle

Some marketing professionals say there is a fifth stage, which is when the product is being developed, while others believe that the life cycle only begins after the product is launched. Nonetheless, each life cycle stage has its own dynamics that affect the manufacturer’s advertising, support, and pricing strategies. Being cognizant of them is the recommended way of maximizing sales and profits.

Rose Keefe is an author and technical writer who has over ten years’ experience in supporting project managers in the manufacturing and construction sectors. One of her primary responsibilities was developing product manuals that supported efficient use of industrial equipment. She continues to write on the subject of time management and commercial productivity for trade websites and publications.