Product Lifecycle

Product Lifecycle

The product lifecycle is a diagram of the typical sales volume of a product from the time of product introduction until the end of life.

When to use

The product lifecycle is used when planning new product production projects and when estimating sales and profit performance for future years.

Instructions

The product lifecycle is a graph or diagram that shows sales (and sometimes profits) generated by a product line over time. The typical product lifecycle has four phases introduction, growth, maturity, and decline.  Sales are relatively low during introduction. During the growth phase, they rapidly increase as the product establishes its market share. The product then goes into a mature phase where sales are high, but with little growth. Eventually, the product sales begin to fall. At some point, the sales start to drop rapidly indicating the product is in decline. The amount of time a product spends in each phase varies based on product characteristics, product promotion, and industry conditions.

Profits do not track proportionally with sales. The initial profit per unit sold may be negative until volume increases and the company gains experience making the product. Normally the profits grow rapidly during the growth phase as the sales volume is also growing. However, sales in the maturity phase are relatively flat, but the profits are usually shrinking. During the maturity phase, sales price is often falling due to competition, but costs keep rising due to inflation which squeezes out profits. By the time the decline phase starts, the profits are usually quite small and disappearing. 

A product lifecycle can be extended by introducing product variants or making other upgrades to the product so that it stays fresh in the eyes of customers. In addition, cost reduction and process improvement projects can reduce costs allowing the product to maintain acceptable profit margins. This applies in particular to products that are customizable are all sold with accessories that allow the product to be reconfigured.

Product lifecycle is important for project managers in that it provides constraints and objectives for new product development projects. It is used with strategic planning for determining when to launch a new product development project so that a new product is rapidly growing as an existing product enters the decline phase.

Hints & tips

• Plan new product projects to allow the product development time and product launch to support growth when other products are entering decline.
• Depending on the industry and product, the entire lifecycle may only last a few months (fad consumer products) or decades (industrial infrastructure products).
• A product manager should be constantly looking for ways to extend the product lifecycle with upgrades and enhancements.
• Business analysts will often be doing the data analysis of the product lifecycle and providing ideas for extending that lifecycle.