Mastering the Journey: Product Life Cycle Management (PLM) – From Introduction to Decline

Product Life Cycle Management (PLM) is a strategic approach that encompasses the entire life cycle of a product, from its conceptualization to its end-of-life.

Product Lifecycle Management can be defined as a product management method that allows it to be optimized throughout its existence, from its design to its production, up to its maintenance and recycling.

It involves managing various stages of the product’s existence, understanding customer needs, adapting to market changes, and optimizing resources for sustained success. Finally, we will give you some advice on the tools used.

Operations Management A Symbiotic Relationshipn with Corporate Strategy

The product life cycle is typically divided into four main stages

1. Introduction:

• Introduction marks the initial stage of a product’s life cycle.
• It begins with the product’s launch into the market.
• During this stage, sales are typically low as customers become aware of the new product.
• The focus is on creating awareness and building the product’s brand image.
• Companies may incur high marketing and promotional expenses to attract early adopters. Product features and marketing strategies are continuously refined based on customer feedback and market response.
  • Example: A company launches a new smartphone model in the market. Initially, it targets tech enthusiasts and early adopters who are willing to pay a premium for the latest features.
  • Formula and Calculation: The focus in this stage is on gaining market share and building brand awareness. The key performance indicators (KPIs) may include sales growth rate, customer acquisition cost (CAC), and market penetration rate.
  • Calculation: Market Penetration Rate = (Number of Customers of New Product / Total Market Size) x 100

2. Growth:

• In the growth stage, the product experiences rapid market acceptance and increasing sales.
• Customers become more familiar with the product, and its reputation grows.
• Competitors may enter the market, leading to increased competition.
• Companies may expand their production capacity and distribution channels to meet growing demand.
• Profitability improves during this stage due to economies of scale and increased sales.

• • Example: The smartphone gains popularity, and sales start to increase significantly. The company expands its marketing efforts and distribution channels to reach a broader customer base.
  • Formula and Calculation: In the growth stage, KPIs may include the sales growth rate, customer retention rate, and customer lifetime value (CLV).
  • Calculation: Customer Lifetime Value (CLV) = (Average Purchase Value) x (Number of Repeat Purchases) x (Average Customer Lifespan)

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3. Maturity:

• The maturity stage is characterized by stabilized sales and market saturation.
• The product reaches its peak market share, and competition intensifies.
• Companies may focus on product differentiation, customer loyalty, and cost optimization to maintain market position.
• Marketing efforts may shift from attracting new customers to retaining existing ones.
• Price competition may increase as companies vie for market share.

• • Example: The smartphone reaches a point where most potential customers have adopted the product. Sales growth slows down, and competition becomes intense.
  • Formula and Calculation: In the maturity stage, KPIs may include market share, customer churn rate, and profitability metrics like gross profit margin.
  • Calculation: Gross Profit Margin = ((Total Revenue – Cost of Goods Sold) / Total Revenue) x 100

Cost Optimization: Boosting Profits while Cutting Expenses

4. Decline:

• In the decline stage, sales start to decline due to various factors such as changing customer preferences, market saturation, or technological advancements.
• Companies may face challenges in maintaining profitability and may discontinue the product or transition to a new version.
• Rationalization of resources and cost-cutting measures become critical during this stage.
• Some companies may decide to exit the market, while others may explore new product opportunities to replace declining sales.

• • Example: The smartphone faces declining sales due to the launch of newer models and changing customer preferences. The company may decide to discontinue the product.
  • Formula and Calculation: In the decline stage, KPIs may include sales decline rate, product cost analysis, and return on investment (ROI).
  • Calculation: Sales Decline Rate = ((Sales in Previous Period – Sales in Current Period) / Sales in Previous Period) x 100

Effective Product Life Cycle Management involves continuous monitoring and adaptation to the changing dynamics at each stage. Companies must innovate, diversify, or exit strategically to optimize resources and achieve sustainable business success.

Read also: Life Cycle Management: A Comprehensive Guide to Success Across All Business Phases

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Tools for PLM