What is ‘Product Life Cycle’?
The product life cycle (PLC) is a five-stage model by the German economist, Theodore Levitt. It looks at the overall time period from development through to launch, and then to the end of that product’s saleability.
Levitt defined these five stages as product development, introduction, growth, maturity, and decline. It shares how the product is received by the target market, how it forces your competitors to react, and indicates how your product should change as it moves down the product life cycle stages.
As a business, we need to find ways to support and maintain this process, so that we make the most out of every product across every stage of its life.
In an ideal scenario, there is a sixth stage at the end of the life cycle that Qualtrics would recommend adding on: Iteration — how we extend the product life cycle and how we create iterations so that ongoing feedback continually improves a product and creates a longer life span.
Why it’s important to understand ‘product life cycle’?
If you know what stage your product is in, or will be in, you can create a plan and develop strategies to make the most out of every stage. We know that a product will become unattractive at some point in its life due to many factors that we’ll explore. However, we can bear the PLC in mind and help our business to:
- Make better decision making based on how the product is performing at the moment
- Get the biggest return on investment when you launch your product
- Increase revenue back to the company
- Predict the future of your product and proactively try to make the most of the course, by shifting your marketing messaging and approach to connect with audiences
- Look at your product from different angles and market it accordingly
- Become an authority in the market and compete effectively against the market in a prepared way
- Make an impact with your product’s appeal, performance reputation, and your brand’s customer loyalty
The product development life cycle
From ideation, a product will go through several development stages internally before it ever sees the physical and online stores where the public can purchase it.
What the product development cycle does is help you to narrow down, filter out, and hone your ideas until we find what will equate to customer success.
Re-routing is part of the process, and it’s not uncommon to change direction multiple times or even go back to the drawing board. Often it takes multiple iterations and steps are repeated to get things right.
Let’s look at Levitt’s product life cycle stages in the next section to see how it takes the product development of a new product forward.
What are the product life cycle stages? (with examples)
You’ve created a fantastic idea, based on external data observations, customer pain-points, or an opportunity in the market for a new solution. Here’s where you progress to the next step – testing the concept with real end-users.
There are various ways to connect with your customers. Tools and platforms like Qualtrics Research Core provide different instruments to assess, validate and improve your ideas and perspectives.
To make sure the product life cycle will have a good start in the market, there are four sequential steps we’d recommend investigating:
Features: What should be included?
You’re likely to have a long laundry list of potential features for your new product. But what’s a necessity, and what’s just nice to have? (Read our free ebook about Product Concept Testing for more information.)
Customer research can help you narrow down your feature list and prioritize which items on it deserve a bigger chunk of your budget.
Function: How should it work?
How should your chosen features work together? What will the user interface of the product be like?You may be faced with a decision about whether to innovate on your product’s functionality or model it after an existing product that’s already familiar to users. Testing can help steer you towards the options customers will prefer.
Messaging: How should we market it?
Once function and features are established, you’re ready to bring in the product marketing team and decide how to present the product to its audience.
Price: What will customers be willing to pay?
Congratulations! You’re ready to send your product out into the world with a product launch strategy. This highlights the start of the interactions with the client in a sales format, and marketing is key here to position the product in advance of the launch and during release to the general public.
Since the product has yet to make a ripple in the market, sales can be slow and the demand will be low. Hence, businesses will spend the most money during this PLC stage on advertising, content marketing, and inbound marketing campaigns that raise awareness of this product life cycle stage.
The ideal scenario is if there has been momentum building up ahead of the release, so people are eager to buy the product and contribute to the intrigue on the release date.
For example, Apple customers have lots of hints of upcoming product releases as part of their product life cycle strategy. This happens during the annual company conference and through advanced reviews by influencers. At product launch, queues often occur overnight and stock is limited, which drives up demand and interest.
The growth stage is where the product life cycle really up to the market and ‘takes off’ as there becomes more demand for it. This leads to getting deeply rooted in the market and drawing the attention of other companies, who want to start competing with a similar product.
Since the market dominance with your product may become diluted by similar products, the prices may decrease as a result. However, the market demand increases, and your company can quickly respond to the increased interest from customers, so increased sales numbers balances this price reduction out.
Marketing activities should be around delivering the product and expanding your reach in the market, by using more channels and establishing your brand presence among competitors.
As the product life cycle really reaches its peak, this represents the stage where profits also peak and sales are at the highest level.
The market is saturated full of competitors who are competing for the same products, pricing is low and companies are offering customers low deals to be used over other market competitors.
Your supply has accumulated, but demand starts to level off, which means that you’ll have less to produce as a result.
As the product becomes stagnated, companies begin to innovate and create versions and off-shoots that cater to new markets, untapped customers and to stay ‘fresh’ and stand out.
Ideally, at this product life cycle stage, your brand is established and loved as the product leader in the market. Coca-Cola, for example, has market dominance in the fizzy drink market and is still popular with its customers, so its maturity stage is likely to be long-term and continuous.
In the final stage of Levitt’s product life cycle, Decline is what happens to all products eventually and is represented on the graph as the slow fall from the peak of the growth stage. This can happen for a number of reasons:
- There is too much competition
- The product is outdated or replaced by new technology or visions
- Customers lose interest in the product
- The brand image is damage
Sales fall, the company market share is reduced and low prices bring in less profit. At this product life cycle stage, it’s best to concentrate on your loyal customers who want to keep buying from you and making them have the best customer experience.
Some brands won’t survive against the competition or against new technological advancements. For example, Blockbuster’s product life cycle ended in 2010 when the company went bankrupt. This is because its business model of entertainment movies that you could watch in your home was based on unpopular rent charges and late fees.
This wasn’t sustainable as new contenders like Netflix’s Software as a service (SAAS) product life cycle. It offered subscription-based pricing and on-demand cloud-based videos. In an advancing technical world where online services are replacing in-house services, Blockbuster couldn’t compete.
One additional product life cycle stage that we would recommend adding on top of Levitt’s original product life cycle stages is Iteration. This looks at how we extend the product life cycle and how we create iterations so that ongoing feedback continually improves a product and creates a longer life span.
Some ways of doing this include:
- Creating new and engaging marketing campaigns
- Product bundling and other pricing initiatives
- Further product life cycle development or cross-selling
- Create new variations of the product with updated features or benefits
- View other market areas globally
- Extend their product into a range, each with its own product life cycle
The best way to do this is to gather data, feedback, and customer responses.
With your product launched, the next task is to set up and maintain an ongoing program of research. Monitor the response to your product using product satisfaction and loyalty research and customer satisfaction surveys, as well as sales and other operational metrics, to keep a pulse on how it’s performing.
Often this can serve as a pipeline for ideas on improvements to existing products, or even start the product life cycles for entirely new products. It’s just as critical as the pre-launch testing we do because it helps us improve what we currently offer.
How can Qualtrics help you with your product life cycle
We have experts working with us to develop our tools, advice, and products to support our customers and brands with their product life cycles.
To keep that process as efficient and effective as possible, product managers and product teams can use our range of free tools and analyses to streamline and organize each part of the product life cycle journey:
This is a popular market research approach for measuring the value consumers place on a product’s features, whether those features are presented individually or as a package. The conjoint analysis approach combines real-life scenarios and statistical techniques to assist in modeling market decisions.
Conjoint analysis is commonly used in product testing and employee benefits packages. Conjoint surveys will show respondents a series of packages where features are varied to better understand which ones drive purchase decisions.
MaxDiff (Maximum Difference) is an advanced survey research technique used to collect preference and importance scores for multiple items. Respondents are presented with samples from the full list of items to be assessed. They mark the item they prefer most and the item they prefer least in each set and repeat this exercise with different subsets of the items.
MaxDiff analysis is a type of Best-Worst scaling that relies on Paired Comparisons. As respondents mark their preference for specific items against a list of other items, MaxDiff seeks to find the ones preferred the most and how a ranking of the items shakes out. Using that knowledge, you can identify the features your program should be most focused on providing for customers, and the ones you can set aside.
Card sorting is a quick way to prioritize a long list of potential features. It’s great for creating a shortlist of features early on in the product life cycle development process.
The card sort technique helps you understand which product features most and least deliver value to a potential buyer or past customer. Card sort survey participants sort your list of potential product features so you have all the information you need to make important product decisions.
Product features are frequently characterized into easy-to-understand categories such as ‘must-have’, ‘nice-to-have’, and ‘don’t-need’ so you can see at a glance which ones matter most to different customer segments.
Concept testing is the investigation of potential consumers’ reactions to a proposed product or service — before introducing the product or service to market. At the right stage of the product life cycle, organizations look to launch a product or invest in the development of an idea, so concept testing is essential to identifying perceptions, wants, and needs associated with a product or service.
This method helps you understand how each of your product features is performing and how important they are to your customers. Needs-based analysis assesses current satisfaction and the importance of various product features so you can focus on the ones of most importance to your customers.
It allows you to spot product gaps and identify the features customers value that you’re not performing well on, so you can focus your investment on the improvements that will have the biggest impact.
Customer segmentation involves dividing your market into usable groups of potential customers by analyzing demographics, needs, beliefs, spending patterns, or other psychological or behavioral criteria.
It allows you to paint a detailed picture of different groups of customers or prospects so you can maximize your appeal to different target groups. Your market segments can be used in all kinds of contexts, from the start of a product life cycle with product research, to communications and promotions.
For more information on all the tools here and how they come together as a package for assisting with product life cycles, view our Qualtrics Product Experience information page.
Advice to help you understand where you are in the product cycle
As you can see, the product life cycle is complex and involves plenty of twists and turns. You need to know where you are currently to help adjust your marketing and financial investment accordingly. We would suggest considering the following in each PLC stage:
Introduction: Now that customers are in direct contact with your product, there’s a huge opportunity to collect experience data about the product’s performance, the marketing messages around it, and how it’s perceived in terms of value.
Growth: We’ve got hundreds of tools and ready-to-use and free templates that help you grow your product life cycles and business. These are based on best practices and tried-and-tested methods.
Maturity: How can you use the marketing model DRIP (differentiate, reinforce, inform and persuade) to help you gain more market share quickly? Read our free 2021 Market Research Global Trends report.
Decline: What are the signs of withdrawal and a changing market?
Iteration: You need to look ahead at the product’s future, look backward to understand lessons from the product life cycle so far and track where you currently are, and look at the present moment to understand what you can be doing now that can help your product perform as well as it can.
Managing your product life cycle in an integrated way
To keep the product life cycle on course, productive and within budget, it’s important to prioritize efficiency and accuracy in tracking performance and progress.
Qualtrics helps brands to manage everything within a single platform with the Experience (XM) Platform. This can help you do these tasks:
- Listen: Measure and baseline product experience from target customer segments throughout the entire product life cycle
- Understand: Prioritize and predict key drivers of product experiences, including product designs, feature preferences, messaging effectiveness, promotions, pricing, and more.
- Act: Track product experience against baselines and competition to identify where to invest for continuous product life cycle improvements, new market opportunities, brand extensions, and new product offerings.
13,000 of the world’s best brands must be doing something right! Try taking your product life cycle from initial idea to point of sale and see how that would work with a demo.
See the XM platform features and benefits and how you can use it to organize and succeed with your product life cycles.