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What is a product lifecycle?
The product life cycle is a marketing concept that can be used to describe products and product groups based on their market age. It is used to analyze the competitive position in a market and is divided into five phases.
Definition of product life cycle / declaration
The product lifecycle describes the time a product has passed from launch to market exit. The distinction is made in five different phases.
Depending on the phase, a product has different levels of profitability for a company and can be supported by specific measures. Specific measures can help to lengthen or shorten phases, for example.
Video: Explanation of the product life cycle
The five phases of the product life cycle
The introductory phase describes the market entry of a new product. For companies, the main concern here is to achieve a high level of awareness with the product as quickly as possible. This is usually achieved through advertising and PR measures. Typically, no profits are made during this time.
Usually either the demand is still too low due to the lack of awareness or it is not possible to meet all customer requests due to manufacturing or delivery bottlenecks. The end of the introductory phase is reached for a product when it exceeds the break-even point.
The measures taken in the introductory phase have had an impact and demand for the product is growing. At this stage, the company begins to make a profit. Awareness is also increasing and, in turn, increasing salespeople.
It is not uncommon for the first price adjustments to be made. At the latest when entering the mass market, the competition will also become aware of the product and the company must adjust to competing products.
In the ripening phase, the product reaches its maximum turnover. The phase is usually the longest in the product life cycle and is the most profitable for the company. Gradually, however, more and more competitors are entering the market.
Later in the phase, market shares and profits begin to decline. Companies can get through this Product variations or counteract increased marketing. Rationalizations in the production and sales process can also prove to be sensible, as a result of which costs can be reduced.
The longer a product has been on the market, the greater the likelihood that the market will eventually become saturated. From this point on, there will be no more market growth and profits will fall. Its end reaches the saturation phase at the point where the product no longer makes any profit at all.
Once a product has gone through the saturation phase, sales then drop sharply. Profits are no longer possible as the market itself is shrinking. Even marketing measures are usually no longer of any use here.
Companies have two options at this point. On the one hand, the product can be withdrawn from the market in this phase (Product elimination). In this case, the product life cycle has practically ended and the product has died. Alternatively, there is the possibility of a relaunch. For this purpose, after a considerable modification and realignment, it is brought onto the market again. Ideally, it runs through the product life cycle again.