There are two types of product cycle that are involved in the creation and maintenance of products. These are the product life cycle and the product development cycle. The product life cycle looks at the performance of the product in the market, and its market share. This is while the product development cycle focuses on the planning, development and evaluation of a product.
The product life cycle
The product life cycle is the set of commonly identified stages in the life of commercial products.
The stages which a product cycles through during its lifespan are: development, introduction, growth, maturity and decline.
The product development stage is the first part of the product life cycle. This stage is not only about building the product, but also includes carrying out research and testing.
Market and competitor analysis are the main focus of research at the development stage. These are done to get an idea of the potential growth for the product, and to build a business case to validate it.
Gathering feedback from test users and testing the product are also vital to the development of the product.
Once the development of the product is complete, it is ready for the introduction stage.
This is the stage in which the product is initially promoted. Public awareness is very important to the success of a product. If people do not know about the product, they will not go out and buy it. There are two different strategies you can use to introduce your product to consumers.
Firstly, you can use a penetration strategy. This involves setting prices very high initially and then gradually lowering them over time. This is a good strategy to use if there are few competitors for your product. Profits are high but there is also a great deal of risk. If people do not want to pay a premium, you may lose out.
The second pricing strategy is a skimming strategy. In this case, you set your prices very low at launch and gradually increase them. This is a good strategy to use if there are many competitors who control a large portion of the market. Profits are not a concern under this strategy. The most important thing is to get your product known and worry about making money at a later time.
The growth stage is where the market share of product starts to grow. Often at this stage a large amount of money is spent on advertising. You want to focus your advertising campaigns at your target audience and existing customers, and sell the benefits of your products to them. There are several channels to advertise your product. The advertising channels you choose to take will depend on your product, industry and the advertising budget you have.
You could look at creating targeted adverts on social media channels, such as Facebook and Twitter, or promoted videos on Youtube. Other digital media channels include using blogs and online newspapers to promote your product. You can also use more traditional advertising methods, such as TV and radio commercials, magazine and newspaper adverts. The more traditional channels are likely to cost more than the digital advertising options. The best and cheapest possible way for your product to be advertised is through word-of-mouth promoted from your customers; this can only be done when your customers trust and enjoy your product.
If you are successful with your advertising strategy, then you will see an increase in sales. After a period of a consistent sales increase, eventually your share will stabilise. Once you get to this point, you will reach the maturity stage of the product.
If your product completes the introduction and growth stages, then it is likely to spend a great deal of time in the maturity stage. During this stage, sales grow at a very fast rate, then gradually your market share will begin to stabilise. The key to surviving this stage is differentiating your product from the similar products offered by your competitors. When sales start to stabilise, you will need to go back to the development stage to analyse your product and sales performance in order to be able to innovate new features and services to help your company stay competitive in the market. If you do not restart the product life cycle here, you are more than likely to reach the decline stage.
This is the stage in which sales of your product begin to fall. Either everyone that wants to has bought your product, or new, more innovative products have been created that replace yours. To stay competitive, and keep your market share, you will need to reassess your existing product and iterate on its features. Ideally you would restart the product development cycle between the maturity and decline stage, to continue the success of your business. Some companies decide to withdraw their products completely from the market due to the sales downturn.
The product development cycle
The product development cycle consist of the following stages: plan, develop, evaluate, launch, assess, iterate or kill.
The planning stage consist of work that needs to be done before any development commences. You want to make sure you have a valid business case for the product and a solid strategic plan to give your startup the best chance of success.
To begin, market research and competitive analysis should be carried out to get an understanding of the market, and the key players in them. This research will need to answer questions such as:
- Who is your target audience?
- Is there a need for the product?
- Can it be validated by using analytical tools such as surveys, customer interviews or consumer spending figures?
- Who are the competitors in the market and how will the product be able to compete with them?
- What is the potential market share for the product?
- What will be the cost of production and the price points the product can be sold at?
Answering all these questions will be vital for your business case, by proving that there is a need for the product and there is profit to be made on it.
Apart from creating a business case, a product roadmap and strategic plan need to be written before development begins. They look at the product over the long term. They are both ‘live documents’, as they may change over time depending on the market, your competitors and business goals.
This is when the product, whether hardware or software, is built.
Unfortunately, building software is not straightforward. The product needs to be broken down into features, with specification and user stories for each feature.
Once the features have been defined with user stories and specifications, they should be ranked by difficulty and priority. This will help identify what features are needed most, and how difficult they are to create, helping a team estimate how time consuming it will be to create a minimum viable product.
In many cases, your first product release will not contain all the features you or your stakeholders wish for. The first release is likely to be an MVP (minimum viable product) containing the core features necessary for the product to be of use to your customers and succeed in the market.
You will need to manage resources and development to deliver a working product that contains the core features for success in a timely manner. This will ensure a great product release, and will enable you to evaluate the product and its features quickly, once it is live.
Early feedback is key to test the assumption made during the plan stage. There is no need to wait until the product is completed to perfection before you start evaluating its features; the sooner features can be validated, the better. If the feedback from the evaluation is that some features need changing, then tweak them.
How do you evaluate the product? Use key performance indicators as metrics to measure the success of the product.
Key metrics measure for product success
- Cost of acquisition
- Rate of revenue growth
- AARRR Metrics:
All these metrics can be used as part of the product evaluation.
Launching the product involves letting your target audience know the product is live. This can be done with press announcements and interviews, advertising, and creating public launch events. Soon after launch, you should assess your performance.
Assessing the product entails collecting metrics and analysing them, to gather insight into the performance of the product. A/B testing, challenging how to improve a return on investment and testing what variables make a customer return are a few possibilities for assessment and analysis.
Similarly to the evaluation stage, each feature of the product will need to be tested and evaluated to see if a feature is worth keeping and being iterated on or being removed from the product completely.
During the assessment stage, you will also need to support your marketing and sales efforts. This is done by assessing what effect advertising, social media and CRM (customer relationship management) campaigns have on product engagement and revenue. For example, does an email campaign activate more customers compared to a social media campaign? Or is the advertising campaign increasing customer signups?
Iterate and kill
Once assessment and evaluation of the product features is complete, a decision needs to be made on which features to keep and upgrade and which to remove.
The features that do not add any value to the customer, and fail to generate revenue, should be removed. This should be done in a well-planned manner, with customers being informed of the removal of features.
For the features that are kept, they will need to be iterated on and upgraded, to ensure competitiveness. This involves starting the product development cycle all over again.
Following the product development cycle and product life cycle will ensure your product can build a strong market share, and fend off competition, by continuously innovating.