What is the international product lifecycle
The international product lifecycle extends the concept of the product lifecycle to global markets. In other words, it examines how the products are developed, marketed, and eventually phased out in different countries. As a product goes through its lifecycle internationally, businesses may adapt their strategies to fit local markets, competition, and consumer preferences.
How the product lifecycle works
The product lifecycle maps a product’s progression from Introduction to Decline. Businesses use this framework to inform pricing, marketing, and promotional strategies. The Growth stage is characterised by increasing sales and profits, Maturity calls for differentiation and customer retention efforts, while Decline requires decisions regarding the product’s phase-out or potential repositioning.
Stages of product lifecycle
1. Introduction Stage
When a product is first launched, sales are usually low and increase gradually. At this stage, company profits are minimal or non-existent as the product is new and unproven. Significant marketing efforts are necessary, as customers may be hesitant to try the product. Economies of scale are not yet realised because production capacity is not fully utilised.
The primary aim during the introduction stage is to build widespread awareness and encourage consumers to try the product. Marketing should focus on early adopters — those most likely to purchase a new product. There are two common pricing strategies at this stage:
- Price skimming: Setting a high initial price and gradually lowering it as the market develops.
- Price penetration: Setting a low price to quickly gain market share, then increasing prices as the product establishes itself.
2. Growth Stage
If the product meets market needs successfully, it enters the business growth stage. Sales revenue typically increases rapidly during this phase. Economies of scale come into effect as sales grow faster than costs and production nears full capacity.
Competition intensifies during growth as rival companies launch similar products. The market expands, sales increase, and the customer base grows. Price competition is generally limited since companies focus on attracting new customers rather than cutting prices.
3. Maturity Stage
Eventually, the market reaches saturation and sales growth slows. At this stage, price competition and promotional activity become more aggressive as businesses try to win customers from competitors. Weaker competitors often leave the market in a process known as the shake-out, leaving the strongest firms to dominate.
The main challenge in the maturity stage is maintaining profitability and preventing sales decline. Retaining customer loyalty is crucial. Companies often employ strategies such as market development, product improvements, or marketing innovation to sustain success and prolong the maturity phase.
4. Decline Stage
During the decline stage, sales and profitability fall. This is usually due to the arrival of new or substitute products that better satisfy customer needs. Several strategies may be used during decline, including:
- Reducing marketing efforts to maximise the product’s remaining life (known as milking or harvesting).
- Gradually withdrawing distribution channels and discontinuing sales in less profitable regions to prepare for product replacement.
- Selling the product to a niche operator or subcontractor, allowing the company to offload a low-profit item while maintaining service for loyal customers.
Factors determining a Product’s Life Cycle
Market Acceptance and Consumer Trends:
- Market Adoption: The extent of consumer acceptance influences product growth and its lifecycle.
- Consumer Preferences: Changes in trends can either prolong or shorten a product’s lifespan.
Competition and Market Entry:
- Barriers to Entry: Low barriers increase competition, often resulting in shorter product lifecycles.
- Global Competition: Ongoing innovation is essential to maintain market relevance.
Technological and Product Innovation:
- Technological Advances: Rapid developments in technology can render products obsolete.
- Product Innovation: Introducing new features can extend or rejuvenate a product’s lifecycle.
Economic and Business Environment:
- Economic Conditions: Economic downturns reduce demand and can shorten product lifecycles.
- Risk-Bearing Capacity: Strong financial stability supports the continued viability of products.
Other Factors:
- Regulations: Policies may necessitate product modifications or discontinuation.
- Distribution and Accessibility: Easier access to products helps increase market share.
- Planned Obsolescence: Intentionally limiting product lifespan can drive sales.
Limitations of Product Life Cycle
- Unpredictable Growth Patterns: The product lifecycle model assumes a predictable sequence of growth, maturity, and decline, which seldom occurs due to ever-changing market conditions.
- Inflexibility: Overreliance on the model can result in rigid strategies that fail to respond to sudden market shifts or emerging opportunities.
- Overemphasis on Stages: Businesses may concentrate too much on lifecycle stages instead of focusing on continuous innovation and adapting to evolving customer needs.
- External Market Factors: The model often neglects the impact of competitors, global events, economic changes, and shifts in technology or consumer behaviour.
- Limited Strategic Guidance: The product lifecycle provides few tools for proactive strategy development and real-time product management.
- Not Universally Applicable: It is not suited to all industries or products that undergo frequent updates.
- Self-Fulfilling Prophecy: Managers might prematurely withdraw products labelled as being in decline.
- Bias Towards New Products: Excessive focus on early stages can lead to neglect of established products.
- Delayed Data: Sales information can be slow to arrive, volatile, and challenging to interpret accurately.
How to use the Product Life Cycle
- Plan Marketing Strategies
Tailor marketing efforts to each stage of the product lifecycle:
- Introduction: Build awareness through promotions, trials, or premium pricing (skimming) to attract early adopters.
- Growth: Emphasise brand preference, expand distribution channels, and highlight unique features to differentiate from competitors.
- Maturity: Reinforce value, explore new messaging, or target different market segments to maintain customer loyalty.
- Decline: Reduce promotional activity, focus on niche markets, or consider repositioning the product.
- Guide Pricing Decisions
Set pricing strategies appropriate to each lifecycle phase:
- Introduction: Implement price skimming or penetration pricing strategies.
- Growth: Maintain prices while adjusting for competitive pressures.
- Maturity: Lower prices to remain competitive.
- Decline: Further reduce prices to clear remaining stock.
- Allocate Resources
Invest significantly in development during the introduction, reinvest during growth, optimise costs at maturity, and reduce or reassign resources during decline.
- Manage Competition
Build market authority during introduction, defend market share in growth, differentiate products in maturity, and focus on maximising profits or niche markets in decline.
Examples of product lifecycle
Development Stage
- Characteristics: High research and development costs, no revenue from sales, and a focus on refining and testing the product before its market launch. This stage often involves extensive prototyping and feasibility studies.
- Overview: Products in development may face delays due to technological challenges, regulatory hurdles, or lack of supporting infrastructure. Progress is typically slow, and there is uncertainty around eventual market acceptance.
Introduction Stage
- Characteristics: Low sales volumes, high marketing and promotional costs aimed at educating consumers, limited adoption, and gradually increasing demand.
- Overview: This stage involves launching the product into the market. Consumer awareness is low, and significant effort is needed to attract early adopters. Pricing strategies such as skimming or penetration may be used depending on the overall approach.
Growth Stage
- Characteristics: Rapid increase in sales, rising demand, growing customer base, emergence of competitors, and expanded distribution. Marketing focuses on building brand recognition and customer loyalty.
- Overview: As the product gains acceptance, companies benefit from economies of scale, improved profitability, and increased market share. Continued innovation may be required to stay ahead of competitors.
Maturity Stage
Characteristics: Slower sales growth, market saturation, heightened competition, and greater emphasis on product differentiation and customer retention. Updates and variations may be introduced to sustain interest.
Overview: This stage is marked by stable demand but limited room for growth. Businesses aim to protect market share and maintain profitability through efficiency, branding, and incremental improvements.
Decline Stage
- Characteristics: Decreasing sales, reduced profitability, the product becomes outdated, and potential withdrawal from the market.
- Overview: Demand declines due to newer alternatives or changing consumer preferences. Businesses must decide whether to discontinue, sell to niche markets, or extend the product’s life through repositioning or cost-cutting.
Importance of Product Lifecycle
- Strategic Planning and Decision-Making: The product lifecycle serves as a framework for adjusting marketing, pricing, and distribution strategies according to the product’s current stage.
- Resource Allocation: It assists in determining where to invest in areas such as marketing or research and development to maximise returns.
- Market Adaptation and Competitiveness: Tracking lifecycle stages and market trends enables businesses to remain competitive and respond proactively to changes.
- Profit Maximisation: The model helps businesses take advantage of peak profitability periods and plan timely product withdrawals.
- Product Development and Innovation: It supports continuous product improvement and informs the planning of new product launches.
- Sales Forecasting: Lifecycle analysis contributes to more accurate forecasting for production, stock control, and supply chain planning.
- Competitive Analysis: Offers valuable insight into competitor behaviour and broader market movements.
When to utilise the product lifecycle
- Marketing Strategy: Adapt advertising, promotion, and distribution approaches to suit the product’s current stage in its lifecycle.
- Pricing Decisions: Apply tactics such as price skimming during the introduction phase or reduce prices during the decline phase to align with market conditions.
- Product Improvement: Recognise when product updates, new features, or rebranding are needed during the maturity stage to maintain relevance.
- Market Expansion: Utilise the lifecycle framework to identify opportunities for entering new markets or developing product extensions to extend the product’s lifespan and sustain growth.
- Resource Allocation: Direct investment in marketing, development, and other resources according to the product’s lifecycle stage.
- Forecasting and Planning: Employ the model to predict sales, estimate revenue, and plan forthcoming product launches.
Product lifecycle strategy and management
The following are a few key strategies to manage a product lifecycle with seamless ease:
- Adaptation: Adjust product features or marketing to align with changing consumer needs.
- Promotion: Boost advertising in the growth phase to capture market share and drive sales.
- Cost control: Cut production costs during maturity to protect profit margins as competition intensifies.
- Product updates: Regularly refresh designs or features to extend the maturity phase, much like with the Apple iPhone.
- Exit strategy: In the decline stage, decide whether to reintroduce, phase out, or discontinue the product completely.
Advantages and Disadvantages of Product Lifecycle
Advantages
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Disadvantages
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Informed decision-making: The product lifecycle (PLC) enables businesses to anticipate changes and supports strategic decisions throughout a product’s lifespan.
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Uncertainty and unpredictable progression: The PLC is a conceptual framework rather than an exact predictor, as the duration of each stage can be difficult to estimate.
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Encourages innovation: Awareness of the PLC fosters ongoing product updates and improvements to maintain competitiveness.
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Not universally applicable: The PLC model may not be suitable for all products or industries, especially those with frequent updates or regulatory constraints.
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Optimised resource allocation: The framework assists businesses in allocating resources effectively based on the product’s lifecycle stage.
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Variability in sales data: The PLC depends on consistent sales data, which can be affected by external factors, complicating accurate forecasting.
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Effective marketing strategy adjustment: Businesses can tailor marketing approaches, including pricing and promotion, to align with the product’s current stage.
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Overlooks other marketing elements: The PLC primarily focuses on the product and may neglect the influence of other marketing mix factors.
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Risk management: Early identification of declining products allows businesses to take measures to reduce potential losses.
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Delayed data insights: Lag in gathering and analysing sales data can restrict the model’s usefulness for real-time strategic decisions.
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Improved market segmentation: The PLC helps in recognising different customer segments relevant to each stage.
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Risk of premature obsolescence: Companies may plan to replace a product too early, resulting in inefficient resource use.
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Increased profitability: Aligning business strategies with the PLC helps capitalise on peak profit opportunities.
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Complexity in certain sectors: External influences can significantly affect the lifecycle of financial products, making the traditional PLC model more complicated.
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What are the challenges of the product lifecycle
The following are a few challenges that are innate to a product lifecycle for businesses:
- Market variability: Products do not always follow the set lifecycle stages, leading to unpredictable sales and growth patterns.
- External influences: Shifts in consumer behaviour, economic conditions, and competitive pressures can alter the expected cycle.
- Risk of mismanagement: Companies may phase out profitable products too early or miss the chance to innovate, losing market share.
- Resource allocation: Investing in declining products or underfunding growth-stage products can hinder profitability and sustainability.
Conclusion
The product lifecycle is a fundamental concept that helps businesses manage their products strategically across different stages. With a well-defined PLC, businesses can greatly improve their marketing efforts, foster innovation, and navigate challenges effectively. So if you are considering financing options to support your product lifecycle strategies, explore business loans tailored to your needs. While doing so, it’s also important to compare the business loan interest rate offered by the lenders you’re considering. This will ensure cost-effective funding for your growth plans.
