Most companies are aware of the four stages of product life-cycle management. These stages simply refer to a given product’s life within its market. Every product has an introduction stage, a growth stage, a peak stage, followed by a decline stage. It’s these four stages that most companies are familiar with. They could take decades to run their course, or could all transpire very quickly. However, on some occasions, there is a fifth stage of of a product's life. Some companies are completely unaware of this fifth stage, while others capitalize by grabbing market share and increasing revenue.
The Fifth Stage of Life-Cycle Management
Before going into this fifth stage, let’s first review the first four aforementioned stages. The graph below depicts what a product may go through in its market. In each of these stages gross profit is maximized relative to the position of the product within the market. These principles are straightforward and are commonly understood among brand marketing managers, product marketing managers and marketing and sales professionals.
In essence, the approach is to maximize the company's pricing strategies in order to take advantage of the various stages of the product's life. Companies typically have higher prices on introduction stages - until of course the product takes off in the market and is adopted by consumers. Here is what the product life-cycle management grid looks like.
In the above graph, the Y-axis (vertical) could represent millions of units sold, while the X-axis (horizontal) could represent number of years of sales.
The above video and table depicting a product's life-cycle is taken from the post: Your Product's Exit Strategy and the Final Stage of Product Life-Cycle Management
1. Introduction Stage: This is the product’s initial market introduction. Pricing is typically high as the product has yet to gain market acceptance.
2. Growth Stage: This is the product’s growth within its market as market acceptance increase. Prices start to decline as companies benefit from economies of scale in manufacturing. Gross profit is at its highest point.
3. Peak or Saturation Stage: This is that point in time where the market has fully accepted the product. Pricing is more competitive and margins start to decline. Increased competition has saturated the market as more competitors compete for the same number of customers.
4. Decline Stage: This is the product’s gradual end of life. Competitors leave the market as the product has fewer and fewer customers. Prices decline rapidly as does gross profit. For most products, the end is guaranteed, but for other product lines, there’s still another stage that follows.
5. Rebirth and Growth Stage: While the fifth stage is rare, it does occur on products from time to time. For those companies that decide to continue producing product, there is a wealth of gross profit to take advantage of. In this stage, all the competitors have left – believing the product line to be dead for good. However, there are still customers and with fewer manufacturers, those that still provide the product, are able to substantially grow gross profit.
Understanding the Fifth Phase of Product Life Cycle Management
Granted, the fifth stage isn’t guaranteed to occur. However, when it does happen, those companies that decided to continue to provide the product are now able to reap the rewards. With few competition, companies see gross profit once again rebound. So, what examples are there of such a rebound?
One such example is vinyl record makers – yes, vinyl records are still being manufactured today and the companies that manufacture those records are producing excellent profit off a product once thought to be extinct. Audio cassettes and compact discs (CDs) are dead in North America and Europe, but are sill going strong in the Middle-East and other parts of the world.
What is dead in one market may just be taking off in another. Other examples include companies that service outdated original equipment manufacturers (OEM) where the equipment is still in service across multiple industries. These companies are highly valued for their repair expertise, and in some cases, are the sole proprietor of the entire market on repairs of such equipment.
Another example includes wooden hockey sticks. Once the standard among NHL superstars wooden hockey sticks have been replaced by composite sticks with greater flexibility. However, there are still those devoted customers that insist on the famed wooden stick of the past. As such, the gross profit on the product line has perhaps never been stronger.
There are a myriad of other examples of products that were thought to be dead, only to be resurrected by a devoted customer base. Some of these products include ancillary repair parts for automotive manufacturers and other end-user consumers. The point here is not to imply that you build your company’s future around these products. However, some products can still produce substantial returns and need not be shut down completely.
A number of companies ride their product’s profit to the very end. When it comes to product life-cycle management, be sure to watch for those product lines that could enter the fifth and least recognized phase. It may just allow your company to capture substantial profit margins.
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