What is the product lifecycle?
Launches get all the attention. But there is so much that happens before and after you release something new. A product evolves and changes based on market conditions, customer preferences, and technological advancements. The product lifecycle (sometimes abbreviated as PLC) refers to different stages of how a product evolves and performs over time.
The concept of a product lifecycle gained critical attention in 1965 when economist Theodore Levitt published an influential article titled "Exploit the Product Lifecycle" in the Harvard Business Review magazine. Levitt pointed out that although most business leaders were aware of the product lifecycle, few were incorporating it into strategic or even tactical decision-making. Levitt noted that decisions made today should consider the next stage ahead. His conclusion was that product strategy should include "some sort of plan for a timed sequence of conditional moves."
Understanding the stages of the product lifecycle is essential for all product builders. Although product lifecycle is usually referenced in universal terms, the details are always situational. PLC at a multinational corporation with a large portfolio of products and many resources will look very different from a scrappy startup with a small team. (Unless, of course, that startup enjoys wild success and becomes a multinational corporation.)
PLC is especially important in software, where new products can be built quickly and innovation occurs at breakneck speed. Understanding the concepts as a whole is a useful way to identify overarching patterns and evaluate how your product strategies may shift over time. This guide explores each stage of the product lifecycle in depth — so you can better understand your own product and use that knowledge to make sound decisions.
What are the stages of the product lifecycle?
The number of stages in the product lifecycle is not firmly prescribed. Levitt suggested that PLC has four stages: introduction, growth, maturity, and decline. More contemporary thinking maps it across five — adding development as a first stage.
But given the proliferation of products, especially in software where it is relatively easy to introduce and enhance offerings, we think it is worth adding a sixth to the list: saturation. Expanding PLC to include saturation allows for a more nuanced delineation between maturity and decline.
As we examine each of the stages, keep in mind that a variety of factors impact how a product moves through its lifecycle. Not all products reach every phase. Some products never make it to market and many flounder after launch. The product may not actually solve a real problem or there may not be enough demand to sustain a lasting business. The elements of a Complete Product Experience (CPE) — all of the touchpoints a customer has with your company while using your product — may be too weak to generate customer loyalty. Company size and the sophistication of the organization's product development discipline also impact each stage.
The development stage encompasses everything from early-stage ideation and research to planning and the actual building of a product. Typically company leadership sets the strategic direction, including a theory of how a new offering will create value — the vision for the product. This strategy is informed by market and customer research.
The core product development team (product managers and engineers) work closely together and prioritize building what will best achieve that strategy. For many years the proverbial wisdom was that you need only deliver a Minimum Viable Product (MVP), getting to market as quickly as possible with as little as possible. Today forward-thinking product teams focus on delivering a Minimum Lovable Product (MLP) — the minimum required for customers to love (not just tolerate) a product.
Examples of activities that occur during development include:
Creating an early-stage product roadmap
Prototyping and testing functionality
Delivering an initial offering or MLP
The introduction stage centers around the go-to-market strategy. This includes defining product positioning, a promotion plan, and timing for a launch event. During this stage product teams gauge how well they assessed product-market fit during the development stage by analyzing early market and customer feedback. The goal is to identify and act on opportunities to refine the MLP.
Some organizations choose a beta program, giving a small group of users early access in exchange for detailed information about their experience using it. Beta programs can be a valuable opportunity to make product enhancements before releasing to a larger audience.
Examples of activities that occur during introduction include:
Crafting a go-to-market strategy
Fixing bugs and enhancing functionality
Prioritizing features on the product roadmap
The growth stage is when customer demand for the product increases. Users are becoming familiar with your offering — folks are actively using and purchasing it. This is always an exciting time for product teams as momentum builds and you have the opportunity to deliver more value to more people.
The growth stage is typically when the market begins to expand. Other companies might want to capture a share of it for themselves. Establishing your product's place and demonstrating why it is the best solution becomes vitally important.
Examples of activities that occur during growth include:
Defining a longer-term product roadmap
Investing in paid advertising efforts
Scaling sales and support systems
Soliciting customer success stories
The maturity stage is when growth stabilizes. Products in this stage are well-known and loved by users. However, the return on advertising efforts often begins to diminish and sales (while steady) may soften. Competition is increasing and maintaining market share is critical. During the maturity stage, you may see product messaging that includes claims of being the "best" or "most trusted" solution.
If you are fortunate, maturity is the longest of the six stages. Product teams that enjoy lasting success focus on continual improvement — looking for ways to cut costs, attract new users, reduce churn, and grow existing accounts.
Examples of activities that occur during maturity include:
Focusing on innovation strategies
Improving user experience
Expanding customer marketing programs
Exploring cross-promotion and partnerships
The saturation stage is a plateau period. There is a glut of alternative solutions and users may be more interested in trying newer offerings over existing ones. Some people lump saturation in with maturity, but there are subtle differences that present unique challenges.
At this stage the product team has likely released many different versions of the product. Finding innovation opportunities (rather than rote enhancements to existing functionality) can be difficult. As new customer acquisition slows, product development efforts often shift to retaining existing customers. However, executive teams looking ahead may use this time to pivot and transform — cycling back to the development stage.
Examples of activities that occur during saturation include:
Developing add-on functionality
Making significant changes to user experience
Offering specialized services
Targeting new use cases
The decline stage is when demand for the product begins to diminish. There are a few reasons that decline may occur. Competitors may have outflanked you — in pricing, services, or functionality. The overall market size may have dwindled.
But decline does not necessarily mean the end. Product teams who were actively engaging in transformation efforts during the saturation stage may be better poised to reorient back to an earlier stage.
Examples of activities that occur during decline include:
Leveraging functionality to enter a new market
Adjusting pricing structures
Developing a plan to sunset the product
What is an example of the product lifecycle?
Real-world case studies make theories more tangible. Let's consider an example of a product at each stage of PLC — Microsoft Encarta. This case study is particularly interesting because it tracks a product through a transformational time in technology and shows how the product team adapted to changing preferences before it was eventually discontinued.
A digital encyclopedia was a pet project of Microsoft founder Bill Gates. Research began in the mid to late 1980s and was referred to by a code name: Gandalf. After approaching (and being rejected by) Encyclopedia Britannica about a partnership between the companies, Microsoft purchased rights to some of the content from another existing encyclopedia and began to build out a new multimedia offering. Product differentiation included high-quality graphics and interactive sound clips.
Microsoft engaged a marketing agency to help come up with the final product name: Encarta. It launched in 1993 as a CD-ROM that cost $395. Pricing was chosen based off of early focus group sessions where customers professed a willingness to pay up to $1,000. This figure aligned with the price point of a print edition of Encyclopedia Brittanica, which at the time cost $1,400 for 32 volumes and was released twice a year.
Encarta sold slowly at first. Noting that Compton's, another CD-ROM encyclopedia, sold a much higher volume with a significant discount (marked down from $395 to $129) Microsoft relented to pressure from internal sales teams and dropped the price of Encarta to $99 for a holiday promotion. It sold 350,000 units during the promotion and the price never reverted. Sales soared past one million units in 1994.
Microsoft began to distribute Encarta as part of a software bundle included with computer purchases. The editorial team of researchers and indexers grew throughout the late 1990s, adding new content to Encarta and translating the English-only encyclopedia into a variety of languages in order to reach international markets.
An online version of Encarta was released in 2000. In response to shifts in technology and consumer behavior, Microsoft made some of the content available for free. Wikipedia launched in 2001 — the entirely free online encyclopedia (edited by volunteers rather than paid researchers) rapidly overtook Encarta as the worldwide web proliferated. However, Encarta held steady in some international markets that did not yet have widespread internet access.
Microsoft transitioned maintenance of the product to a third-party and entries became outdated. In 2009 Microsoft further slashed prices to $22.95 before announcing that it would discontinue Encarta that year. Most people were no longer willing to pay for information that could be found elsewhere for free. Existing subscribers were offered a refund.
How to stay ahead of the product lifecycle?
Every product builder wants to stay ahead of the product lifecycle. It certainly is not possible to predict the future. But there are ways that you can anticipate it. As Leavitt shared in 1965, knowing and preparing for the various stage of PLC is the ideal way to avoid the pitfalls that await you.
It begins with understanding the various strategies that teams employ at each of the stages. Next you want to identify what stage your product is at — this might seem simple but there is often overlap in the middle stages. Then you can pinpoint growth opportunities that would make sense for your product. For example, you would not want to invest significantly in a product that is at the end of the decline stage as a last hope. It would make more sense to plan for retirement and refocus on what is next.
All of this requires that an organization has forward-thinking executive leadership, sound strategy, a robust product development discipline, and functional experts. With a solid structure in place, businesses are able to move from strength to strength with resolve — not wasting time on pointless distractions.
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