Do you use a fax machine? Do you read the newspaper delivered to your front door? Do you listen to music from a tape deck or CD player? Do you even know what a rotary dial telephone is?

All of these products are either dead and buried or headed that way. Products are expected to have a certain life cycle from birth to growth and maturity and decline. In devising an innovation strategy, product and engineering managers must be aware of and plan for product and process development within the expected industry life cycle. Let’s review the product life cycle.

Product Life Cycle

A company working in new product development (NPD) should understand the position of existing products and services on the product life cycle chart. As time increases after product introduction, a firm should deploy different internal strategies as well as varied marketing responses to competitor activities.

The product life cycle starts with Stage 5 of the NPD process – commercialization and product launch. Here, a new product or service is introduced into the marketplace. With new technology, markets and customers may need education to learn how to use the product. This is called the Introductory Phase of the product life cycle.

As consumers begin to see the benefits of the new product solution, and observe others in their social circles using the new product, product adoption accelerates. Companies begin to see revenues grow and product quality issues decline. This phase of the product life cycle is called the Growth Phase.

Growth of product sales moves the product category into a phase called Maturity. During this period of the product life cycle, there are many competitors and products are generally standardized throughout local and global markets. Commoditization is not uncommon during the maturity phase and companies compete on price. Because quality is generally acceptable and standardized, consumers realize few switching costs and usually perceive little or no difference among brands.

Finally, like the fax machine and rotary dial telephone, products fall into Decline. During the decline stage, there are few competitors since many companies are exiting the business. Profits are generally low as the industry suffers from over-capacity in production and manufacturing facilities. Firms discontinue investments in marketing and R&D.

Strategy in the Introduction Phase

Firms that are highly innovative may find themselves moving products and services through the introductory phase more than their competitors. These companies are identified as prospectors. A prospector strategy (see Chapter 1 of “NPDP Certification Exam Prep”) is risk-seeking and companies are anxious to develop breakthrough ideas.

During the introductory phase, firms should concentrate on the product’s minimally viable features. Primary customers during this phase are early adopters with high disposable incomes and a penchant for trying new things. These customers are lead users and are heavily invested in solving a particular problem. Thus, feedback from the early adopters frames future product improvement efforts.

Furthermore, early adopters are typically influential with a large social network. When an early adopter accepts features and benefits of an introductory product, mass market consumers will follow. Innovation teams should cultivate strong relationships with these consumers at the same time as identifying future market and technology opportunities.

Strategy in the Growth Phase

After the initial introduction to the market and acceptance by lead users, a product will generally move into the growth phase. The product quality is acceptable based on customer feedback and improvements have been implemented based on the introductory phase. However, as competitors have awakened to the opportunity presented by the new product, firms will need to focus strategic efforts on quality and marketing.

Quality improvements may be derived through improved product features and attributes. Likewise, quality may be improved through manufacturing processes to lower production costs. There is little financial risk for facility investment since significant growth is anticipated and economies of scale will offer higher profits for the firm.

An important strategic approach for companies with products in the growth phase is to effectively market their products and services. Advertising can differentiate one firm from a competitor at this stage. In addition, enhanced distribution may offer a short-term competitive advantage.

Strategy in the Maturity Phase

Because products are normally commoditized in the maturity phase, companies will tend to try to extend the life of products and services. New features are added to products of standardized quality to lure customers to the firm’s products over a competitor’s. Thus, marketing effectiveness is important to promote brand differentiation among a lot of mass market competitors.

A common strategy for firms with products in the maturity phase is to offer a full line of products. That is, companies may strip features (see “Economics of Innovation” for more details) to offer a product for a value-priced market, sell a standardized product into the mass market, and add features or service options for a luxury market. Because manufacturing capacity may be less stable at this phase (due to the large number of competitors), firms will try to keep both production and distribution costs low. Of course, offering a full product line to serve down-market and up-market customers will take advantage of any excess production capacity and the scale of distribution through various partners and suppliers.

Strategy in the Decline Phase

Firms are faced with only two choices during product sales decline: invest or divest. When the market trends indicate the end of a technology (e.g. film cameras or 8-track tapes), a firm should divest its assets. Unfortunately, this is a difficult strategy as the company may be forced to shutter plants and lay-off workers if no alternatives are identified for the manufacturing facilities.

On the other hand, a firm may choose to invest in the product with a “pivot”. For example, paper faxes have been replaced with email faxes and home newspaper delivery is replaced with an electronic version of the day’s news, weather, and events. An investment strategy takes considerable dedication by senior management and targeted customer research by the NPD team.

The Product Life Cycle

Firms that want to be successful with innovation programs need to understand the product life cycle in their industry. Products will progress through an embryonic introduction phase to growth and maturity. Eventually, new technologies or other product categories will force a product into decline. Companies can deploy different manufacturing, quality, and marketing strategies depending on the product life cycle stage.

To learn more about innovation best practices, please join us for an NPDP workshop. NPDP workshops are held monthly through guided webinars or at your own pace in a cost-effective self-study format. Registration for the October 2015 Houston workshop is ending soon so register now!

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