Product and Industry Life Cycle

There is a well know concept in business theory called the bell-curve lifecycle.  It has been applied to virtually everything, but is traditionally used in the context of industry life-cycles, and product life-cycles within certain niches.  In most cases, the X-axis (horizontal) refers to time, and the Y-axis refers to profit or sales.

The basic premise is that over time, industries and products follow a bell curve through 4 stages. Introduction, growth, maturity, and decline.  And while it is used in many places, it’s markers are more or less identical across industries.

Nobody is sure who “invented” the concept, but it’s been proven time and again to be a pretty good benchmark for strategic planning. Many interesting arguments have been put forth as to determine how long each phase will last, but there is a common consensus that stages can be controlled by both outside factors (think regulation/deregulation or technological innovation) and internal factors (how good you do marketing your product and creating continued demand)

Introduction Stage

A good example of this might be electric cars or ultra-thin displays. In this phase, development costs are high, marketing costs are high, and as a result, consumer prices are high.  Customers tend to be early adopters, innovators, and evangelists. (The people who lined up for the iPhone the first day)

From a marketing point of view, the goal here is to position yourself as THE innovator.  Branding focus is extremely important here both because you need to get the word out about your product, and because in later stages, your brand will be one of the only factors that lets you demand a premium for your product.  Don’t underestimate the power of being marketed as the first mover…even if you weren’t.  Microsoft or Apple didn’t invent the window-style GUI, Xerox did.  I think you know how that one turned out 

Growth Stage

This stage is usually characterized by increased customers awareness and acceptance resulting in significant sales increases and ultimately profits.  This is also the time where competition starts to creep in for real.  The trick at this point is not selling your wares, but figuring out how to make MORE of them.  Usually you are still pretty sloppy in your production, and in the rush to scale and capitalize at the new found demand, the process just gets worse.

From a marketing point of view, you need to continue to educate the masses, hammer in your branding, and start to tee up differentiators you will use later.  In terms of customers, your innovators and early adopters are now in, but you haven’t quite reached mass market status.

Maturity Stage

This is where you want to be. Ideally, forever.  Profits are strong, demand is high, and your production is optimized. Even better, a well educated market is aware of you so marketing costs should be substantially lower. 

While more and more competition is coming in at this point, barriers to entry like a long learning curve and significant investment in production and marketing to reach this stage make it less of a threat.

With that in mind, where you really want to be is on the trip up to the apex, or extending it for as long as possible.  In many instances the small section at the top can be the largest part of the entire curve.  And this is where it is up to you and environmental influences.

A few good examples?  Heinz Ketchup.   It’s been riding the peak for about 70 years.  Another example? Coca Cola.  Another example? Diamonds.

Each of these brands were able to hit the summit and with either brilliant marketing (Coke) or brilliant strategy & marketing (DeBeers controlling the diamond supply, and then making her expect you to spend 2 months salary on one) just stay there.  However the best strategy can’t always override external influences that wreak havoc on many markets. 

For example, technology, war, and government/legal intervention are traditionally curve-killers.  The railroad killed the pony express, prohibition killed alcohol sales (well at least reportable sales) and war and tariffs have closed markets to even the most savvy producers.

Decline

The final stage of the life cycle is characterized by fierce price competition, declining sales volume, over-capacity, and commoditization. Companies finding themselves here either couldn’t cut the mustard in “renewing” the value of their product in customers minds, or external forces out of their control brought the market down.

Keep in mind that not all places in the world are in the same cycle at the same time.  Many manufacturers have found that by simply moving to a different target audience, they can warp back to earlier stages in the life cycle.  As countries economies grow, many items that were once out of reach for these locales (think cars or “lifestyle” items like iPods or personal computers) are now in high-demand in a country with a growing middle class.

Wrap It Up

Thanks for sitting through this admittedly dull article….but there is a method to my madness.  In the next four articles we will be taking each phase in detail and discussing different strategies and tactics for differentiating your product or company in the market.  If needed, we might jump into a related concept called the BCG Matrix which evaluates your specific product portfolio in terms or cash production, market share, and market growth.

Till next time.  Stay cool.