What is the product life cycle?
When a company launches a new product, this new product is usually not a success right after. Indeed, the product has to go through different steps before dying. All the steps constitute the product life cycle. It includes five stages: product development, introduction, growth, maturity, and decline. Sales and profits are closely related to the product life cycle.
The product development is basically all the steps needed for a company to well elaborate a product. The target is to turn good product ideas into real products that will be able to succeed on the market. It is an important step before the launch of a product on the market. As the product development costs relatively a lot of money and the product is not on the market yet so profits are negative and sales are zero. The process is the following:
The introduction stage is simply the time when the product arrives on the market. As a consequence, sales are happening but they are slow. And profits are better than in the previous stage but still the company doesn’t make any profits because of the costs of product introduction.
Then the growth stage is the when the popularity of the product starts to rise, people are becoming more and more aware of the product so sales are increasing. Product introduction costs are now recovered and the company starts making profits.
Then the maturity stage is when both sales and profits are declining a little bit. Indeed, the product has reached its peak and logically it declines on the market compared to new competitive products that are arriving on the market. Moreover, the company faces more costs in order to try to maintain the product in this stage, so profits are declining as well.
The last step is the decline. Sales and profits are heavily declining. The stage is the death of the product. After that, company should try to find other products to launch and go through the same stages again and again.
Here is the visual summary of the product life cycle:
Let’s take an example: the film rolls made by Kodak. After the idea was generated and tested as a good product (the product development stage), Kodak launched the product on the market, this is the introduction stage. After that, people discovered for the first time this type of product, and they start liking it and buying it, this is the growth stage. Then, when the product was the most popular, that was the maturity stage. During the period of time, Kodak was the most profitable and sales started declining. And finally, as competitors introduced digital cameras, consumers didn’t need film rolls anymore, that was the end of this type of product, this is the decline stage.