The lack of profit in the introductory stage of the product life cycle is very often the result of

Every product we encounter has a life cycle.

The product life cycle has four stages, from its introduction in an office to the product’s decline and removal from store shelves. It’s imperative for a business to fully understand all four stages of the product life cycle. Misunderstanding or a lack of knowledge at any stage can lead to the product’s failure.

In a piece published in the Harvard Business Review, Joan Schneider and Julie Hall – partners in a firm specializing in product launches – found that 75 percent of consumer-packaged goods and retail products fail to earn as little as $7.5 million in their first year, a benchmark of a successful launch.

Part of the problem that Schneider and Hall found is that companies aren’t prepared for the marketing and advertising aspect of their product until it istoo late.

Companies will adjust and shape their marketing and advertising efforts around a product’s life cycle. It’s crucial that a company spends time and money wisely at each stage to boost growth and control a bigger share of the market.

Product Life Cycle Stages

There are four clearly defined stages in the product life cycle, and each stage has unique characteristics that generate different responses or stimuli for business.

Introduction Stage

When a product is launched, it requires a significant investment from a business. Although spending money in general isn’t indicative of a product’s success, a business has to allocate funds for research and development, develop an effective marketing plan, as well as spending time and money to get the product on retail shelves or online outlets.

At the introduction stage, more money will be spent than is brought in as consumers learn about the product and begin to purchase it.

Benefits

• If the product is original and has something proprietary, it can take advantage of limited competition in that market, garnering a bigger market share.
• If a product is highly valued by consumers, they may be willing to spend above market value to get their hands on it first. Think of the release of a new smartphone or a new video game system.

Challenges

• Sales are likely to be slow for most new products launched, especially if there isn’t a market for the product or if there’s a saturated market.
• As mentioned above, the introduction stage brings with it high costs and little return on investment. The ROI comes at the growth and maturity stage.

Growth Stage

The second stage of the product life cycle is considered the key stage for many businesses and manufacturers in establishing “a product’s position in a market, increasing sales, and improving profit margins.”

Businesses can achieve these gains with the development of consumer demand through advanced marketing and promotional activity as well as scaling up their business to reduce manufacturing costs. Depending on the product and market, the time between the introduction stage and growth stage can differ.

Benefits

• By taking advantage of economies of scale, businesses can reduce costs of manufacturing to meet improved customer demand, raising profit margins.
• As demand for the product rises, product awareness is raised through marketing, advertising and consumer word-of-mouth, which could drive even more demand and profits.

Challenges

• A new product that’s achieving success in the market is likely to face fierce competition from other companies already in that market or others looking to get a piece of the market share.
• Once the product is in the growth stage and faces more competition for market space, it could be forced to lower prices to stay competitive with the competition.

Maturity Stage

The third stage of the product life cycle can be a challenging time for manufacturers as they look to maintain their market share while growth slows down. It can be hard for businesses to maintain profit margins with the product as other companies get into the market with their own products and the market potentially becomes saturated.

Benefits

• Costs could continue to decrease as businesses continue to scale up and find more efficient ways to manufacture the product.
• In addition, differentiation and promotional offers could help keep or increase a product’s market share with consumers.

Challenges

• It’s more likely that with other companies looking to get into the market, the overall market share for the original product will decrease.
• Sales are also likely to peak, as growth slows and consumer demand hits its zenith.

Decline Stage

In the fourth stage of the product life cycle, the product fails to make the same kind of revenue and profits as it did before, though it could still be profitable, albeit with smaller margins.

Benefits

• At this stage, companies may be able to find cheaper production or cheaper markets to keep profit margins where they are or to find a different market to place the product, where it can keep selling.

Challenges

• Usually, the market is either declining or saturated, and consumers have either purchased everything they need of the product or have moved on to something newer and better.
• Sales and profits will likely fall, decreasing overall profit.

Limitations of Product Life Cycle

The traditional product life cycle theory does come with limitations.

It can be challenging for a business to determine a product’s stage in the life cycle. In addition, a rise or fall in sales may not signify a change in the life cycle stage. For example, a dip in sales during growth could be temporary and not a sign that the product is in decline.

Also, most products that fail skip the growth and maturity stage and jump straight from introduction to decline.

Ultimately, the product life cycle curve should be used as a rough guide for marketing management and sales decisions and not as fact.

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