Tuesday, January 19, 2010

Product Life-Cycle: Developing Your Product Strategies

Understanding how markets change, and how they react to your own products and services is a vital part of management and marketing strategy. If you understand the Product Life Cycle, you will be ahead of many of your competitors!
If there is one thing that is certain in this life, that is 'Change'. Wherever we look, we see aspects of our life changing. This is clearly seen on the Internet. We see design, technologies, markets - and web sites - evolve, become the current fashion and then fade away.
This is a very general concept that applies to all products and services. The 'Product Life Cycle' is a description of what happens to anything that we produce and sell. It applies to all businesses, large and small. Understanding it and taking appropriate action is essential if you are to maximise the sales and profits of your business.
Products (and by this word, we also mean 'services') go through a cycle which can be described in 4 stages:
* Introduction: Characterised by a low level of sales and losses, as development costs build up. Sales are generally made to 'early adopters' in the market place.
* Growth: The product gets known more widely. There are few competitors, and profit margins tend to be good.
* Maturity: Here, sales are maximised. If the product has mass market appeal, this is when the bulk of potential customers will buy. Competition increases, and profit margins tend to fall.
* Decline: Shown by the dotted line on the chart. The product starts to 'show its age'. New and better competitive products emerge in the market. Sales fall and profits dip sharply.