I recently ran across notes I had taken while reading a book that summarized management skills. I no longer remember the title or author’s name, but the book was an overview of all the subjects covered in an MBA program 20 years ago. Of course, MBA programs have changed a lot in this time frame, yet a lot of the basic tools we use for decisions have not changed.
For instance, managers need to understand finance and accounting. Managers need to know how to create a strategic plan. And managers need to understand operations, distribution, and supply chain. Managers also need to understand the product development process, including aspects of technology and marketing.
The Product Life Cycle
The product life cycle (PLC) is not a new concept, yet it supports the work of a product manager today still. Just like every living thing has a life cycle – birth, growth, maturity, and death – so do products. The PLC covers the introduction of a new product to a market, growth of the product in both market share and market penetration, maturity to a commodity-like product, and decline.
In the introductory stage of the PLC a product is first released for sale. Sometimes new products are new-to-the-world and sometimes they are only new-to-the-company. The decision to develop a new product, though, starts long before it is introduced to the market
Product managers are constantly on the lookout for new product ideas. They gather concept ideas from existing customers. Innovation managers also continually scan the horizon for new product opportunities. A new product might consist of a new technology applied to an existing market or a new market altogether.
I found a new product the other day – most likely an application of existing technology to a new market. My cats love gravy. They will drink the gravy out of the bowl and leave the particles of food behind. They really love a treat, called “Gravy-licious”. It is a crunchy treat with a “gravy” coating. At the store the other day , I found a 3-pound bag of regular food made entirely of gravy-coated particles. I knew it would be a hit – the bowl was empty in no time!
While gravy-covered treats and gravy-covered food are not radically different from my point of view (or apparently the cats’ view either), these are different products. Consider the scale of manufacturing for a treat versus that of a large volume food product. Also consider packaging, distribution, and promotion. Each element must be adequately addressed to introduce a new product to consumers.
During the growth stage, a new product is adopted by a majority of consumers in a market. Remember that adoption by a passionate few can then drive mainline purchases by your target market. In fact, product innovation leaders will gain insights to the quality, pricing, and feature sets of new products from the introduction and early growth stages.
Growth is characterized by extended promotion of the product. For a new-to-the-world product, profits begin to accumulate. Manufacturing is streamlined as are supply chain and distribution.
As the product continues to grow in market penetration, competitors enter the market. The term market penetration means that existing customers are buying more of the product and as many customers that want the product can buy it. Market saturation occurs when every customer who wants a product can – and does – purchase it.
This maturation of a market means that the product is becoming commoditized. There is often little differentiation among competitors and profit margins decline due to pricing pressures. A lot of companies take the strategy of lowest cost during the maturity stage which, unfortunately, sinks the whole market.
Fighting for the lowest cost leads to overall decline of the product – or death in the product life cycle. Manufacturers do not want to make a product that has no profit margin as there is greater utility for equipment to make another product. In some cases, it is more cost effective to sell a factory rather than continue to produce goods that generate financial losses.
Yet, a lot of product managers fail to recognize the signs of decline. Heroic efforts will not save a dying product. Instead, innovation leaders must take a long, hard look at customers markets, technologies, brands, competitors, and products to generate a strategic plan. Do you sunset the product or reinvest to launch a next a next generation new product? Not an easy decision.
Innovating in the PLC
One word that repeats itself when describing the product life cycle is competition. Even with a new-to-the-world product, we do not operate in a vacuum. Competition is working on new technologies and new promotions in our target markets. We must be ready – at every stage of the PLC – to address competitive threats.
Do you know your competition? Do you have a formal strategy to address new product competition? Are your profit margins strong against all product competition?
If you answered “NO” to just one of these questions, it’s time for a tune-up in your PLC! Join the self-paced Competitive Analysis course here. You will earn 2 PDH and save 20% with discount code “Intro” through 15 April 2021.
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