The Product Life Cycle


Welcome back to our marketing mini series.  This week we are looking at how understanding and managing the product life cycle can impact your business.  If you missed out on other articles in the series you can check them out here:  Researching Your Market Segmenting Your Market

Most products have a life cycle.  From introduction they move into a growth phase, then reach maturity and eventually decline.  For some products this life cycle can be very rapid (remember the Rubik’s Cube?)  while others it may be long and drawn out (eg free to air television).

Products show different characteristics at each stage of their life cycle.  If you look at the following diagram and table, you will notice that as a product matures it tends to experience different industry trends, pricing structures and competition.

The Product Lifecycle

The Product Lifecycle

As an example, cast your mind back (if you can) to the American style drive-in cinemas that first appeared in Australia capital cities in the early 1950′s.  As is typical with a new idea, it took time to introduce this new American craze to Australians. Promotion was concentrated at attracting those people willing to innovate (the young and those already introduced to the idea through American films).  The product was fairly basic – a bulldozed paddock, screen and shed with little else.  The early prices were relatively high, creating some profits and attracting new operators.

By the mid 1950′s, drive-in cinemas had moved into the growth phase.  New drive-ins sprung up in the major cities and in every big country town across Australia.  the customers became more diverse – “come as you please in the family car”.  As competition increase, the cinemas vied for customers by enhancing the service through eateries, barbecue facilities, playgrounds, amenities and better quality films.

Drive-ins moved into the mature part of the cycle in the early 1960′s.  The market for drive-ins reached saturation point.  Those people who were likely to visit a drive-in had done so.  Competition concentrated on stealing each others customers, creating return visits and earning more out of each customer by providing new and varied services.

The decline started gradually with the introduction of television.  As the number of people who could afford a television increase and the quality of programs improved, the market for drive-ins audiences started to contract.  This trend continued as the price of televisions decreased, colour TV was introduced, and in the 1980′s the video cassette arrived.  The drive-ins fought the decline in the market by targeting special interest groups and so we saw R-rated films, sex and violence.  competition for a declining market was intense, forcing down prices.  Profits dropped and drive-ins closed.

It may be possible to extend the life of a product by finding new markets for it.  Denim was originally the garment that night soil carters wore, four wheel drive vehicles have at different times been military vehicles, utility/off-road vehicles, status symbols, and most recently safe family vehicles.  Sometimes a product can be remodelled, eg, Vegemite, Pears soap, creating a cycle-recycle pattern.

Cycle - Recycle Pattern

Cycle - Recycle Pattern

S0, what has the product life cycle got to do with small business?  There are three major ways the product life cycle can help you interpret the market place:
  • You may be able to capitalise on a product’s life cycle.

If you are looking to develop a new product or service, you may be able to jump on the bandwagon with an associated product.  For example, in the market for four wheel drive vehicles, an automotive related business could include bull bars in their product offering.  There are dangers in this however, as you will be dependent on another product outside your influence.  In this case, any decline in demand for four wheel drive vehicles will greatly affect the business.

  • You will understand the life cycle of your product or service.

You should be aware of where your product is in its life cycle.  If necessary, you may need to develop new products to counter the decline of your existing ones.  When the market for denim jeans became saturated, manufacturers branched out into denim jackets, skirts and other designs.

  • If you are thinking of entering a new type of business it is important to know whereabouts in the life cycle it is.

Many of the video outlet operators entered the video market at the mature stage.  New owners paid a premium for the outlets as the price was based on historical figures which showed rapid growth.  But what they were unaware of was that the market had reached saturation level and the nature of competition was likely to change.  Many outlets have since failed, hit by competitive pricing and declining profits, while others have merged into chains to obtain the benefits of lower video and DVD costs and cross custom.

Take a close look at your current business and the products / services that you offer.  Where are your key profit drivers currently in the product life cycle?  How should you react?  What opportunities are out there to allow you to get ahead of the curve.

Next week we’ll look at the tried and tested and often misunderstood SWOT analysis.

Virtual Business Advisor

How to find out more about your profit drivers and the three keys to growing your business?


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