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Product life cycle management

Product life cycle management (PLM): introduction, growth, maturity, and decline (setup and example)

Product life cycle management

Product life cycle management (PLM): introduction, growth, maturity, and decline (setup and example)

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.

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The product life cycle is typically divided into four main stages

The product life cycle is a fundamental concept in business and marketing, representing the entire journey that a product goes through from its initial introduction to its eventual decline and discontinuation. This life cycle is typically divided into four main stages: introduction, growth, maturity, and decline. Each stage brings unique challenges and opportunities, requiring businesses to adapt their strategies and tactics accordingly to maximize the product’s success and profitability throughout its existence in the market. Here are the 4 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

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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

Here are some tools for Product Life Cycle Management (PLM) in each stage, along with examples, advice, and the reasons to use them. Please note that while examples and advice are provided, some tools can be used throughout multiple stages of the product life cycle.

  1. Introduction Stage:

Tool: Customer Relationship Management (CRM) Software

  • Example: A company launches a new software application targeting small businesses. It uses CRM software to track leads, manage customer interactions, and gather feedback from early adopters.
  • Advice: Use CRM software to build relationships with potential customers, capture their preferences, and identify potential pain points early on in the product’s life cycle.
  • Why Use It: CRM tools help streamline customer interactions, enhance lead generation, and provide insights to improve the product based on customer feedback.
  • Link: Salesforce CRM – https://www.salesforce.com/
  1. Growth Stage:

Tool: Sales and Inventory Management Software

  • Example: As the product gains popularity, sales increase rapidly. A retail company uses sales and inventory management software to ensure products are available in stock to meet growing demand.
  • Advice: Utilize sales and inventory management software to optimize stock levels, avoid stockouts, and efficiently manage supply chain operations during the growth phase.
  • Why Use It: Sales and inventory management tools streamline order processing, track inventory levels, and minimize carrying costs, ensuring smooth growth without stock-related disruptions.
  • Link: Zoho Inventory – https://www.zoho.com/inventory/
  1. Maturity Stage:

Tool: Product Data Management (PDM) Software

  • Example: A manufacturing company’s product has reached maturity. It employs PDM software to manage design data, product revisions, and ensure compliance with industry standards.
  • Advice: Implement PDM software to maintain a single source of truth for product data, streamline collaboration among design teams, and ensure accurate documentation during the mature phase.
  • Why Use It: PDM tools enhance data integrity, version control, and design collaboration, optimizing product development and compliance management in the mature stage.
  • Link: Autodesk Vault – https://www.autodesk.com/products/vault/
  1. Decline Stage:

Tool: Cost Analysis and Financial Management Software

  • Example: A tech company’s product faces declining sales due to the introduction of newer technologies. It uses cost analysis and financial management software to evaluate the product’s profitability and make informed decisions.
  • Advice: Employ cost analysis and financial management software to assess the product’s contribution to overall revenue, identify cost-saving opportunities, and determine whether to continue or discontinue the product.
  • Why Use It: Cost analysis and financial management tools help companies assess the financial viability of products in decline, allowing them to redirect resources to more promising opportunities.
  • Link: QuickBooks Online – https://quickbooks.intuit.com/

Using these tools in the respective stages of the product life cycle allows businesses to make data-driven decisions, optimize operations, and capitalize on opportunities for growth while navigating challenges during each phase of the product’s journey.

Photo credit: Tres West, CC BY-SA 4.0, via Wikimedia Commons

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