how product life cycle works

Last week we looked at how to identify the different attributes within a product and how to use this knowledge to develop a product which will be attractive to customers.

This week we finish off looking at products features, then we look at the product life cycle and its impact on features.

The augmented product features additional benefits and customer services that have been built around the actual product. These are often added to differentiate it from other offerings. These extra benefits are unlikely to represent the reason for purchase, but may be the reason for choosing one product over another.

For example, a customer might decide to use a particular bank because it offers a higher interest rate on their savings account or because bills can be paid from the account using the Internet or telephone. Another reason might be that it offers more interest if money is left in the account for longer than 12 months. Alternatively, the name and reputation of the bank might give the customer more reassurance than other banks do that their money is safe and problems will be rectified.

Product life-cycles

So far we have been talking about products as though they were fixed and immutable. We have discussed the three levels of a product — core, actual and augmented — and allocated different aspects of the product to each of them.

However, products are not immutable. What differentiates a product from its competitors in one year may not do so in another. A product which has been developed and introduces a unique feature will eventually be copied by competitors, or even improved on and surpassed.

The transitory nature of the uniqueness of product features means that it is important to develop a brand name which customers will trust even if the product itself changes over time.

For example, clothes may be fashionable only for one season, yet the designer houses that produce the clothes retain their relevance for the customer over a number of seasons and years. In this case, it is the designer name which is the brand and which encourages customers to carry on buying the clothes.

When a product with a new feature is introduced, competitors look at what has changed and whether it is successful. If it is, they will introduce that feature into their own products. Customers will then start to see a range of products with this particular feature and, if they perceive it as worthwhile, they will start to expect all products to have it. Once this happens, the feature ceases to differentiate the product.

In other words, it moves from the augmented level to the actual product level.

For example, in the USA all new cars come with airbags, usually for the driver and the passenger, and some manufacturers are now introducing side airbags as well. In the early 1990s very few manufacturers fitted airbags, yet now they have almost become a requirement. Not to have airbags would preclude manufacturers from competing at all.

So products will change and develop over time in response to customers’ needs and competitors’ activity, and some products will disappear altogether. They may be replaced by new and better products, or just withdrawn from the market. The Rubik’s cube puzzle was popular at one time.

However, once the puzzle was solved, there was little point in buying another one. The slide rule was bought by most schoolchildren (or their parents) up to about 30 years ago, but has since been replaced by the pocket calculator. It is still possible to buy slide rules, but they are much less popular now.

One way of examining the particular phases most products go through is to use the idea of a product life-cycle. This also demonstrates the likely financial implications as a product moves through the various stages of the cycle:

Phase 1 — introduction. Customers are wary because new products are often costly or have teething problems, so people may prefer to stay with familiar products rather than take risks. Sales are slow and restricted to those who want — and can afford — to try out innovations.

Phase 2 — growth. People begin to understand the benefits; the product has been tested and is more reliable and more available. Sales start to grow and competitors may enter the market, creating even more interest in and awareness of the product.

Phase 3 — maturity. At this stage, almost everyone who wants the product has got it; cautious people are buying now and others are updating their models. In the case of fast-moving goods, sales have settled down to a steady number of regular purchasers, with few people discovering the product for the first time.

Phase 4 - decline. Overall sales are declining, price wars may have broken out and new products are coming along as substitutes. There are too many competitors and firms may start to leave the marketplace.

With a fashionable product such as the Rubik’s cube this whole cycle can happen in the space of one or two years. With products which are less susceptible to fashion trends, such as Coca-Cola or garden fertiliser, the cycle may stretch over many decades.

Products can be given a facelift from time to time with new packaging or a promotional campaign to try to keep them in the mature stage of their cycle. These efforts remind customers and potential customers that the goods are still on the market and reassure them about quality and reliability.

Often products are phased out when income ceases to cover variable costs, or when sales fall below an acceptable level. This can happen in both the private and public sectors and when it does, it is more beneficial to invest the money in developing further new products.

However, there are examples of products which have entered a new growth phase: the glassware company Waterford Crystal nearly failed completely, but was rejuvenated by means of a successful marketing strategy.

In some instances, products have an expected or a natural life; for example, it is widely accepted that for mass-produced cars the life- cycle of a particular model is five years, after which customers expect new models. However, a loss-making product may continue to be supported if it serves a purpose in the overall product portfolio of the organisation.

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