As consumers, we buy millions of products every year. And like us, these products have a life cycle. Older, long-standing products become less popular over time, while conversely, demand for new, more modern products typically increases very rapidly after launch.
Because most companies understand the different stages of the product life cycle, and the products they all sell have a limited shelf life, most of them will invest heavily in developing new products in order to make sure your business continues to grow.
What is the analysis of the life cycle of a product
According to Chacón Vargas (2008), the analysis of the life cycle of a product (LCA) is an analytical method that contemplates and makes an interpretation of the potential environmental impacts of a product or service throughout its life cycle. LCA is the “compilation and evaluation of inputs and potential environmental impacts of a product system throughout its life cycle” (Marsmann, 1997). The analysis then includes the extraction of raw materials, production, transportation, distribution, use, recycling and final disposal.
Origin of the name "life cycle analysis" or "life cycle assessment"
Today the life cycle assessment (also called life cycle analysis, LCA) was the name given by the international community of experts in the matter in 1991, since the application of the methodology ACV is based on both objective and subjective elements (Werner, 2005).
Beginning of interest in life cycle analysis
One of the many research papers that took into account the impact or scope of a product was the one that Harold Smith presented at the World Energy Conference in 1963, in which he discussed the excessive amounts of energy for manufacturing. of chemicals.
Another study that can be considered as a pioneer and in which the phrase life cycle was applied was made between 1960 and 1970, to find out the energy requirements of some processes and systems (Bishop, 2000).
Stages of the product life cycle: explanation
A new product progresses through a sequence of introductory stages through growth, maturity, and decline. This sequence in the product life cycle is associated with changes in the marketing situation, which affects the marketing strategy and the marketing mix (Gorchels, 2005).
The four stages of the product life cycle are very well defined, each with its own characteristics that mean different things for companies trying to manage the life cycle of their particular products.
Introductory stage - This stage of the cycle could be the most expensive for a company to launch a new product. The market size for the product is small, which means that sales are low, even though it will be increasing. On the other hand, the cost of things like research and development, consumer testing, as well as the marketing required to launch the product can be very high, especially if it is a competitive sector.
Growth stage - The growth stage is typically characterized by strong growth in sales and profits, and because the company can begin to benefit from economies of scale in production, profit margins, as well as the amount of profit total will increase. This makes it possible for companies to invest more money in promotional activity to maximize the potential of this growth stage.
Maturity stage - During the maturity stage, it is established that the product and the objective for the manufacturer are now to maintain the market share that they have built. This is probably the most competitive time for most products, and companies need to invest wisely in whatever marketing operation they do. It is also necessary to take into account any product modifications or improvements in the production process that could give them a competitive advantage.
Decline stage - Over time, the market for a product begins to shrink, and this is what is known as the decline phase. This contraction could be because the market is saturating (that is, all customers who are going to buy the product have already bought), or because consumers are switching to a different type of product. While this decline may be inevitable, it may still be possible for companies to have some benefit from changing less expensive production methods and cheaper markets.
Product and benefit revenue can be represented as a function of life cycle stages, as shown in the following chart:
Stages of the life cycle of a product
Marketing a product: in its four stages
Introductory stage
In the introduction stage, the firm seeks to build product knowledge and develop a market for the product. The impact on the marketing mix is as follows:
- Product: the brand is established, the level of quality and protection of intellectual property is obtained, such as patents and trademarks. Price: they can be low penetration prices to increase their market share quickly, or high prices to recover costs. Development. Distribution: Selective until customers show acceptance of the product. Promotion: It is aimed at innovators and first-time users. Marketing communications seek to build product awareness to educate potential consumers about the product.
Growth stage
In the growth stage, the company seeks to build preference and increase market share.
- Product: quality is maintained in addition to additional features and support services can also be added. Price: this is maintained as long as the company enjoys increasing demand and with little competition. Distribution: channels are added as demand increases and customers increase. They accept the product. Promotion: It is aimed at a wider audience.
Maturity stage
At maturity, strong sales growth slows. Competition may appear with other similar products. The main objective at the moment is to defend market share while maximizing profit.
- Product: Features can be improved to differentiate product from competitors. Price: May be lower due to new competition. Distribution: Becomes more intense and incentives may be offered to encourage preference over competing products. Promotion: emphasis is placed on product differentiation.
Decline stage
When sales decline, the company has several options:
- Maintain the product, possibly rejuvenate it by adding new features and finding new uses. Collect the product, reduce its costs, and continue to offer it, possibly to a loyal niche segment. Discontinue the product, liquidate the remaining inventory, or sell it to another company that is willing to continue the product.
The decisions of the marketing mix in the decline phase will depend on the strategy selected. For example, the product can be changed if it is being rejuvenated, or it can be left unchanged if it is being collected or liquidated. The price can be maintained if the product is collected, or drastically reduced if it is liquidated.
Product life cycle: examples
Examples of various products can be provided to illustrate the different stages of the product life cycle more clearly. Here is the example of watching recorded television and the different stages of each method:
- Introduction - 3D TVs Growth - Blue discs - ray / DVRMature - DVDDeclive - Video tape
The idea of the product life cycle has been around for some time, and it's an important principle that manufacturers have to understand in order to make a profit and stay in business.
However, the key to production is not only understanding this life cycle, but also proactively managing products throughout their shelf life, applying the right resources, sales and marketing strategies, depending on what stage are the products in the cycle.
Income, profit and costs in the life cycle of a product
Product life extension
What can companies do to extend the product life cycle?
Extension strategies give the product more life before it goes into decline. Once again, companies use marketing techniques to improve sales (Schwartz, 2003). Some examples of the techniques are:
Advertising: trying to get a new audience or remember the current audience. Price reduction: make them more attractive to customers.
Increased added value: adding new features to the current product, for example improving specifications on a smartphone
Explore new markets: the sale of the product to new geographical areas or the creation of a version aimed at different segments.
New packaging: changes in the illustration of old packaging or subtle changes.
Importance of pre-planning
Knowing that the life of successful products and services is generally characterized by something like the pattern illustrated in Figure 1, it can become the basis for important life-giving policies and practices. One of the greatest values of the life cycle concept for managers is the point of launching a new product. The first step for them is to try to forecast the profile of the proposed product cycle.
As with so many things in business, and perhaps unique in marketing, it is almost impossible to make universally useful suggestions on how to handle personal matters. Without a doubt, it is particularly difficult to advise widely well on how to predict or predict the slope and life of a product. In fact, it is precisely because the orientation of the day-to-day is so little specific that it is not useful in anything, and because no checklist always has a very useful result by itself for someone for a long time, that business management It will probably never be a science (always an art) and will pay exceptional rewards to managers with rare talents, enormous energy, nerves of steel, great ability to take responsibility, and the accountability that goes with it.
But this does not mean that useful efforts cannot or should not be made to try to predict the slope and life span of a new product. The time spent trying this type of forecasting not only helps ensure that a more rational approach is brought to product planning and marketing. Also, as will be seen later, it can help create valuable lead time for important strategic and tactical moves after the product is brought to market. Specifically, it can be of great help in developing an orderly series of competitive movements, in expanding or stretching the life of a product, in maintaining a clean product line, and by the way, the death phase of old products and eliminate costs (Kotler, 2012).
Chances of failure
As noted above, the length and slope of the market development phase depend on the complexity of the product, its degree of novelty, its adjustment to customer needs, and the presence of competitive substitutes.
The more unique or distinctive the novelty of the product, the more time it usually takes to successfully achieve it. The world does not automatically walk in the man's path with the best mousetrap (Matthews, Jr., Buzzell, Levitt, & Frank, 2014). The world has to be told, pampered, drawn, in a romance, and even bribed (as with, for example, coupons, samples, free app aids, and I like it). When the novelty of the product is distinctive and the work it is designed to do is unique, the public will generally perceive it as something they clearly need or want.
This makes life particularly difficult for the innovator. He will have more than the usual difficulties in identifying the characteristics of his product and the issues of supporting communications or devices that imply value for the consumer. As a consequence, the more distinctive the novelty, the greater the risk of failure resulting from insufficient working capital to sustain a long and frustrating period of client creation solvent enough to make the proposition payment, or the inability to convince investors and bankers that they should put more money.
In any particular situation, the more people who will participate in making a single purchase decision for a new product, the more attracted they will be to this stage. Thus, in the highly fragmented building materials industry, for example, success requires an exceptionally long time to consolidate; and having it once captured, it tends to hold on tenaciously for a long time, often too long. On the other hand, fashion items consolidate clearly faster and in a shorter period of time. But because fashion is so powerful, recently some companies often involved in the slightest with the influence of fashion, such as industries (machine tools,for example) have shortened the stage of market development by introducing design elements and packaging fashions for their products.
What factors tend to prolong the stage of market development and therefore increase the risk of failure? The more complex the product, the more distinctive its novelty, the less influenced by fashion, the greater the number of people who influence a single purchase decision, the more expensive the greater the change required in the usual way by the customer of get things done, these are the most likely conditions to slow things down and create problems.
… Vs. the chances of success
But problems also create opportunities to control the forces deployed against the success of new products. For example, the newer the product, the more important it will be for customers who have a favorable first experience with it. The novelty creates a certain degree of special recognition for the product, with a certain number of people standing on the bench to see how the first customers get on with it. If your first experience is unfavorable, in some way, this may have repercussions out of proportion to the real magnitude of the guarantee of customer expectations. However, a favorable first experience or application will result, for the same reason, in obtaining a large amount of disproportionately favorable advertising.
The possibility of exaggerated disappointment with a bad first experience can raise vital questions regarding the proper distribution channels for a new product. On the one hand, making the launched product successful may require having (as in the early days of a home washing machine) many retailers who can give consumers considerable help in the correct use of the product and help ensure thus a favorable first experience for buyers. On the other hand, the channels that provide this type of help (such as small electrical appliance stores in the case of washing machines) during the market development stage may not be the most capable to market the product successfully,later when they help with creation and reassuring customers personally it is less important than wide product distribution. To the extent that channel decisions during this first stage are sacrificed, some of the requirements of the market development stage of some of the requirements of later stages, such as the rate of product acceptance by consumers from the principle, it may be delayed.
Upon entering the market development stage, pricing decisions are often especially difficult for the producer to conceive. Should you set an initially high price to get your investment back quickly, for example "frothing cream", or should you set a low price to discourage potential competition, ie "Foreclosure"? The answer depends on the innovation estimate of the likely length of the product life cycle, the degree of patent protection the product is likely to enjoy, the amount of capital needed to get the product from the land, the elasticity demand during the early life of the product, and many other factors. The decision that is finally made may affect not only the speed at which the product is received at the beginning,but even the duration of its total useful life. Thus, some products that are priced too low from the start (particularly fashion items such as a shirt or jacket a few years ago) can snag so quickly that they become short-lived fads. A lower consumer acceptance rate could often extend their life cycle and increase the total benefits they report.
The actual slope, or the speed of the growth stage, depends on some of the same things that make it successful or unsuccessful in Stage I. However, the degree to which patent exclusivity can play a critical role in Sometimes it is inexplicably forgotten. More often than one might unexpectedly expect, patent holders in strong positions may not well recognize the virtue of market development, making their patents available to competitors, or the market-destroying possibilities of not controlling more effective than its competitors in the use of these products.
In general terms, the more producers there are of a new product, the more effort goes into developing a market for it. The net result is very likely to be faster and steeper growth in the total market. The originator's shared market may fall, but its total sales and profits may increase more rapidly. This has certainly been the case in recent years of television.
On the other hand, the failure to establish and enforce adequate quality standards in the early days of poorly produced polystyrene and polyethylene drinking glasses and cups made inferior goods, which took years to regain confidence of the consumer and revive the growth pattern.
It is not very helpful to try to see in advance the growth pattern of a product and what it could be if one fails to distinguish between the industry pattern and the single company pattern by its particular brand. The industry cycle will almost certainly be different from the cycle of individual companies. Furthermore, the life cycle of a given product may be different for different companies in the same industry at the same point in time, and it certainly affects different companies in the same sector differently.
conclusion
Control of the duration of the life cycle phases
The duration of each phase of the life cycle can be controlled, to some extent. This is particularly true in the maturity phase: this is the most important to extend from a financial point of view, as this is the period when the product is at its most profitable point.
Typical tactics designed to extend the maturity phase include:
Increasing the amount of product used by existing customers (this is why food producers make recipe cards that use their ingredients).
Adding or updating product features.
Price promotions to attract customers who use a rival brand.
Advertising to encourage product judgment by people who do not use this product category at all.
Model Limitations
One criticism of the product life cycle concept is that it in no way predicts the duration of each phase, nor can it be used to accurately forecast sales.
Another is that the model can be self-fulfilling: If a vendor decides that a product is approaching its decline phase, and therefore actively ceases to market it, product sales will almost inevitably decline. This might not have happened if it had been managed as if it were still in its mature phase.
Also, it is possible that by aggressively improving a product, on a continuous basis, growth can continue for a long time. Just think of the computer market in the 1980s and 1990s: Successful producers launched new and better products month after month after month.
Successful marketers have to draw on a wide range of data and analysis to help them decide what phase a product is in, and whether that phase can be extended. And while this model is useful and challenging, they have to base their decisions on a good understanding of the facts.
Key points
The product life cycle model describes how products go through the four phases: introduction, growth, maturity, and decline after launch. Each phase requires a different combination of marketing activities to maximize the profitable life of the product. In general, this involves an early investment to help keep income safe later.
While the model does not predict sales, when used in conjunction with careful analysis of sales figures and forecasts, it provides useful guidance for marketing tactics that may be more appropriate at any given time.
Thanks
I thank my school, the Orizaba Technological Institute, my teacher Fernando Aguirre and Hernández for encouraging me to do this type of work, the habit of reading and creating articles is a promotion that I greatly appreciate, since it makes me aware of what I am able to do.
Bibliography
Bishop, PL (2000). Contamination prevention. Fundamentals and practice. McGraw-Hill.
International edition.
Chacón Vargas, JR (2008). Expanded and commented history of life cycle analysis (LCA).
Colombia: Magazine of the Colombian School of Engineering.
Gorchels, L. (2005). The Product Manager's Manual. Third edition. McGraw Hill Professional. Kotler, P. (2012). Market your way to growth: 8 ways to earn. John Wiley & Sons.
Marsmann, M. (1997). International journal of life cycle assessment. ISO 14040 The first project.
Matthews, JB, Jr., Buzzell, RD, Levitt, T., & Frank, RE (2014). Marketing: an introductory analysis. New York: McGraw-Hill.
Schwartz, G. (2003). Development of the theory of marketing. Cincinnati, Ohio.
Werner, F. (2005). Ambiguities in the life cycle of inventories in order to decide, the role of mental models and values. Springer.
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