Product Management’s Role at Every Phase of the Product Lifecycle

 

Every product has a lifecycle that consists of various phases. And the demands placed upon a product manager often vary depending on the lifecycle stage their product is in. The product manager role requires the use of different mental muscles and skills for driving it to the next step in its lifecycle while being simultaneously led by the product strategy.

Identifying, acknowledging, and understanding which phase a product is in is just as critical as knowing what each stage requires. This post will define each phase—Introduction, Growth, Maturity, and Decline—and highlight what product managers should be focused on during each period.

Product Lifecycle Phase #1: Introduction

All products start somewhere, whether they’re spinoffs, or brand extensions of a popular offering, or something completely new from an unknown startup. Regardless of its origin story, a new product faces a particular set of challenges, some of which require the attention of its product manager.

What should product managers of newly-introduced products focus on?

When a new product is also novel (meaning it’s the first in its category), the main challenge is generating demand. People aren’t used to buying this product so the focus is on creating awareness and communicating its benefits so people want to actually buy it. This is also a critical juncture in confirming product-market fit; while market research and early trials may have corroborated your hypotheses, the validation comes when users actually spend money buying and using it.

Product teams must be nimble and reactive during this phase since there’s often a short runway to determine whether the product has legs or if the company should cut its losses and move on. Emphasizing different aspects of the value proposition, highlighting various features, and quickly quashing points of friction are all essential to keeping a newborn product viable.

And because there’s no competition, a key choice must be made regarding pricing—do you sell it for a higher price to eager early adopters because no other companies or products exist to undercut yours, or do you offer it for a low introductory price to help convince as many people as possible to give it a try?

Once the product begins gaining a bit of traction, product teams must understand who’s really using it and which aspects of the product are resonating most. Personas may evolve and roadmap priorities can shift based on this early usage data from real customers.

And while introduction may not be the most expensive phase of a product’s lifecycle, it is definitely its least profitable, since sales and revenue will be slight compared to the high costs of initial research and development, larger marketing expenses, and low sales totals. When those sales volumes start ramping up, a product is ready to graduate to its next phase.

Although product management may not be performing or directly managing many of the go-to-market tasks pivotal to this phase, they still serve an important role here. As the in-house subject matter expert, their job is explaining to everyone relevant what the product can actually do (which isn’t always obvious when it’s new) and why someone would want to use it. They should be a readily available resource to the marketing and sales organizations during this phase.

Product Lifecycle Phase #2: Growth

Once sales increase and the product has proven it has a market, it enters into its second phase. This is the stage when many companies really invest in marketing since they’ve identified which messages are resonating and which channels are best suited to reach the demographic that purchased early on.

Profit margins typically increase during this phase as economies of scale begin to kick in and (when applicable) manufacturing costs decline per unit with higher volume and fewer defects. But along with more sales comes more competition, as other companies realize there’s a valid market for the product and introduce their own offerings.

What should product managers focus on for growth phase products?

This influx of competitors can drive prices down to either match or undercut alternative products or expand the potential market of buyers. Product managers must manage this balance carefully to remain competitively priced without giving away margin unnecessarily.

The other key challenge for product teams is identifying who beyond their initial early adopters might want to purchase their product and which new features or changes are required to bring in that additional business. With this data in hand, they can prioritize the product roadmap to maximize sales during this land-grab growth phase.

And with so much money being spent on marketing and advertising that directly fuels growth, product managers must continually remember that some of that revenue and profit should be reinvested in product development. This is necessary in order to continue iterating and improving the product, not to mention ensuring it can continue scaling to support ever-increasing usage.

Because so much of “growth hacking” is all about mining data to uncover patterns and trends, this is a phase where a product manager’s technical skills can really shine and be of use.

Product Lifecycle Phase #3: Maturity

Product maturity might sound like a great goal, but for a product, it’s not always nearly as attractive as the growth phase. At this phase, new customer growth tapers off, competitors gobble up market share, and profits decrease as more companies claim a piece of the same pie.

Most who wanted to buy a product in your category already have and the influx of new buyers to the market slows to a trickle. The biggest challenge now is retaining as much of your customer base as possible while combating churn and attrition.

What should product managers focus on during a product’s maturity phase?

For product managers, the maturity phase is an opportunity to reduce costs while continuing the differentiation of your product from the rest of the market. Lowering the cost of goods sold (COGS) is all about creating more efficiency in every aspect of the operations, from keeping the development team lean and mean to automate customer support and onboarding tasks.

To stand out in a crowded field, product managers must be very selective in which features they invest in and how their value proposition evolves. The focus must be on enhancements with a high ROI that either enables them to charge current customers more for new add-ons or that opens up a new target market with a unique offering.

The product team’s focus on metrics is critical during the maturity phase, as it can make the difference between a longer maturity period with only minimal decline or falling off a cliff. Understanding user behavior and which actions result in continued usage and payment versus those that precede churn and abandonment can drive both feature development and prioritization discussions.

Focusing on user behavior may lead to the development of proactive nurturing campaigns, user-specific promotions, and pricing changes–all of which are designed to keep current customers happy and satisfied for as long as possible.

Product Lifecycle Phase #4: Decline

Everything eventually heads downhill, and your product won’t be the exception. The decline can be precipitated by either the entire market for a product dwindling—either due to a replacement solution or a reduction in overall demand—or it can just be specific to your offering, with competitors having surpassed your product in popularity, affordability, and/or functionality.

What should product managers focus on during a product’s decline?

Understanding which scenario is driving the decline is key to how a product manager handles the situation.

When the entire market is shrinking, product managers must explore how they can leverage existing technology and brand equity to pursue an entirely new market. While a decline specific to only your product may necessitate a different type of course correction.

While this kind of late-stage product pivot doesn’t often pan out, there are plenty of examples of companies that took their current assets and found success beyond their initial product offering and market. Some examples include:

• Apple switching its focus from a stagnant desktop computer offering to mobile devices
• Microsoft embracing the cloud, gaming, and subscription services while abandoning its smartphone aspirations
• McDonald’s selling healthier foods and salads to meet changing eating habits.

Another way product managers can stave off a rapid decline is offsetting churn with resurrection; figuring out how to get former customers to come back again or prompt inactive users to restart and resume activity. While much of this may be executed by marketing, product teams can play a key role in identifying the traits of former users with the most potential to come back and informing the messaging with which features those returning users tend to utilize.

Of course, there is one final responsibility product managers have. In the event, a declining product is beyond rescue, sunsetting and end-of-life processes become important. While not much fun, there’s an obligation—sometimes a legal and fiduciary responsibility as well—to provide as painless a transition as possible for remaining customers when it’s time to pull the plug. This may include exporting or transferring customer data, issuing refunds, finding new vendors and solutions for long-time customers, and providing excellent customer service to preserve those customer relationships for whatever lies ahead.

Conclusion: Enjoying the ride for as long as possible

Progressing through product lifecycle phases is generally unavoidable; while some companies and brands may last centuries, most products do not as they are replaced by better, cheaper, or simply different things. As a product manager, your job is to get your product to evolve from the introduction phase, maintain growth, squeeze as much value as you can, then minimize decline.

Of course, a common mistake is not acknowledging where in the lifecycle a product currently resides and tending to it appropriately. Jumping the gun on growth or denying the reality of a decline can turn a gradual descent into a free fall, cutting years of profit from the product’s overall lifespan.

Knowing that you’re fighting a battle every product eventually loses can be daunting. But the arc of a product lifecycle can last decades, so there’s no reason to fear the inevitable. The decisions you make and the job you do during each phase can significantly influence the length and success of each stage. Just as importantly, the skills a product manager needs change from phase to phase, so it’s imperative to continually demonstrate that you’re up to the particular task at hand, since not everyone is adept at changing gears when a product evolves to its next stage.

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What happens after OKRs?

 

you’ve made the leap to Objectives and Key Results. Congratulations. And you did it right. You wrote qualitative objectives that were aspirational and inspirational. They’re aligned to your strategic goals and the executive team is on board. Your Key Results are written as measures of behavior (your customers’ or your employees’), just the way they should be. Good work. Now it’s time to get the teams to work on those objectives but, wait a minute, did you notice what happened now that your teams are being managed to outcomes (yep, KR’s are outcomes)?

The prescriptive, feature-centric product roadmap they’ve been working from is gone. What do your teams do first?

Enter product discovery.

When well-written OKRs are given to teams as their new measure of progress and success those teams have to now figure out what the right combination of code, copy and design is that will result in those changes in behavior. The product roadmap that guided the teams before may certainly hold some promising ideas but how do we know that this set of features will deliver the KRs we seek? The short answer? We don’t.

Product discovery is the work your teams do to test their ideas. It’s research. It’s design. It’s experimentation. It’s proofs of concept. And much more. When these tests reveal promising changes in customer (or employee) behavior then we continue to invest in those ideas because we have clear, market-driven evidence that our ideas our working. Success is defined by our Key Results, not by the deployment of a specific feature. Teams work in cross-functional collaboration to propose ideas, test them, validate/kill them and move forward in the most objective, evidence-driven way they can.

OKRs will fail without product discovery.

If you’re considering implementing OKRs in your organization then you must also train your teams in product discovery. There are lots of ways to mess up the actual writing of the OKRs themselves, but, if done right your teams will no longer have a committed list of features to deploy (a roadmap). While there is no shortage of resources on product discovery, here’s a quick list of first steps once your OKRs are confirmed:

1. Gather the team — product, design, engineering at the very least — and present the quarter’s OKRs to the team with rationale of how they ladder up to the corporate goals.
2. Brainstorm ideas from everyone on the team on ways they believe the team can hit it’s KRs. Ideas in your old roadmap are absolutely fair game for this exercise.
3. Prioritize the ideas based on how likely the team believes they are to achieve the goals.
4. Identify the biggest risks to the top ideas in your list.
5. Design experiments to test those risks to see if they’re worth overcoming or too risky.
6. Implement the features that show the most promise from experimentation.
7. Measure the deployed features’ impact on your desired KRs.
8. Optimize those features that are working and deprecate the ones that aren’t working.
9. Repeat.

Objectives and Key Results, when done right, are the right alignment and goal-setting mechanism for building customer-centric, continuously learning teams. However, if your teams don’t know how to practice continuous learning, teach them how to do product discovery. It’s tactical, practical and builds the muscles they need to encourage a culture of continuous learning, improvement and agility.

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Jeff Gothelf

Boston Plot - Boston Matrix and product life cycle

 

The Product Life Cycle (PLC) has become a leading concept to successfully establish products and services on the market.

The PLC consists of different phases that allow managers to visualise the projected sales and profit development of their product portfolio.

This allows them to proactively plan the necessary marketing measures to extend the life cycle in phases where profits and market shares reach their highest point.

What is the Product Life Cycle?

The basic model of the product life cycle defines five different phases that a product passes through from market launch to eventual market exit:

The profit and sales performance during the product life cycle

Figure 1 Product life cycle and cash flow

Phase 1: Introduction

The first phase describes the market launch, which begins with the market entry of the product. From this point on, the product can be purchased by customers.

During the market launch phase, advertising the product is an integral part of a successful and sustainable marketing strategy to ensure consumers become aware of the new offer.

Managers must put special emphasis on explaining those products whose added value or function is not immediately clear to the customer.

Depending on the industry, product type and marketing strategy, products are often advertised before the actual sales launch and sometimes even offered for pre-order.

The video games industry is an example where companies have long adopted pre-sales processes to build customer anticipation before releasing a product. FMCG companies, on the other hand, make little to no use of such pre-order sales models.

The market launch phase is cost-intensive and thus negatively affects a firm’s profit curve. The reason for that is simple:

Companies must first invest more money in marketing activities than they can earn with the new product. Once the company starts to realize more sales, profits also start to rise, resulting in a positive profit ratio.

The end of the market introduction phase is marked by reaching the break-even point. The point from which the sales revenue cover the cost of selling the product.

Break-Even = Sales x Price – Sales x Variable Costs – Fixed Costs = 0

Note that not every product reaches the next phase of the life cycle. Many products already fail after their launch and/or never break even.

Phase 2: Growth

The following growth phase is characterised by a continuous increase in sales as more and more customers buy the product.

The growth phase is crucial for brands as they gain momentum and start to realize their first profits. Their focus then shifts from pure marketing to meeting demand forecasts to ensure they remain available across all retail channels.

In this phase, competitors also become increasingly aware of the product in question. If they see an attractive market entry opportunity, they will launch their own versions of it. This may result in price wars and imitations, which can harm the long-term success of the product.

Phase 3: Maturity

When the maturity phase is reached, the strong growth curve from the previous stage begins to flatten.

Most products reach their most profitable state in the maturity phase, as they are now established in the market and therefore no longer need to be promoted so heavily.

In the maturity phase, growth is achieved almost exclusively by poaching customers from competing products in the industry.

Brands need to continuously build and focus on their own brand and marketing messages to not fall victim of these approaches themselves.

Phase 4: Saturation

A decline in turnover and profits characterises the following saturation phase. Market growth completely ceases to exist.

Instead, companies strive for cost leadership in their industry. The aim is to offer products cheaper than other market participants to increase profits while sales stagnate.

If cost leadership is achieved and successfully sustained, the saturation phase allows firms to secure their market share and withstand competitors’ attempts to initiate price wars in their industry.

Phase 5: Decline

Finally, the product life cycle ends in the degeneration phase. It is characterised by an increasing loss of profit, turnover and market share, which can no longer be compensated for by a firm’s marketing efforts.

The focus in this phase is to bring innovations to market that satisfy the current needs of customers.

The FMCG industry is a great example in which companies are constantly launching new product features to revive their products’ life cycle: Razors get more blades, and snack bars launch with new flavours based on seasonal customer trends.

When the degeneration phase is reached, the basic model of the product life cycle ends; the product “dies”.

A way of visualising the idea of product life cycle in terms of market share and growth.

As a product moves through its life cycle the price elasticity of demand will also tend to change - this is shown in figure 2 below. As a product becomes more mature, it is likely that competition in the form of substitute products will increase which should make the demand more price elastic. This may well reduce the profit margin the firm earns on the product unless they are able to reduce costs correspondingly.

Figure 2 Product life cycle and elasticity

The Boston Consulting Group (BCG) Matrix

Based on the basic product life cycle model above, the Boston Consulting Group developed its own BCG Matrix. It aims to identify the strategic potentials of a company’s existing product portfolio.

The Boston Consulting Matrix

A core component of this analysis is to determine, in which of the four life cycle quadrants (stars, question marks, cash cows, poor dogs) a product is currently situated.

Companies can measure this by looking at the existing market growth and relative market share of their product.

Market growth = ((Current market size – Original market size) / (Original market size)) * 100

Relative market share = (Market share of a company / Market share of its strongest competitor ) * 100

Due to its strategic and quantitative orientation, the BCG matrix has become the preferred choice for companies to monitor the product life cycle over time.

Stars

Products with a high relative market share and high market growth are referred to as Stars.

Managers should invest in products within this quadrant to benefit from the fast-growing market segment for as long as possible and to enable further growth.

Question Marks

A product in the Question Mark stage has a low relative market share and high market growth. At this stage, products have usually just entered the market.

The question mark quadrant corresponds to the market introduction phase of the basic PLC model explained earlier. Further growth in relative market share is again achieved through investments in marketing activities.

Cash Cows

As soon as market growth slows down, but high relative market shares continue to be recorded, products are referred to as Cash Cows.

These products continue to generate substantial profits due to lower cost structures and represent the most profitable quadrant of the BCG matrix.

However, similar to the maturity phase of the basic PLC model, a higher market share can now only be achieved by poaching customers from existing customers. The market is saturated.

Poor Dogs

At the end of the product life cycle, products in the low market growth and relative market share range are referred to as Poor Dogs.

They are the problem products within a product portfolio and increasingly generate losses.

In this stage, the market exit or a product relaunch must be carried out to sustainably improve the financial situation of the product line.

This diagram highlights the typical product life-cycle pattern – however, there are variations of this pattern for fads (short-term products), style and fashion products as well as products that are essentially reinvented for the consumer and then go from maturity into another period of growth.

However, for the purposes of understanding the BCG matrix, we will concentrate on the typical product life-cycle curve only.

As you can see, stars and question marks only occur in the introduction and growth stages. While cash cows and dogs exist during times of maturity and decline. Therefore, new product portfolios categories will start off as either a star or as a question mark and then in the longer term will progress downwards (to either a cash cow or a dog).

In today’s market, many new products and technology breakthroughs are being adopted by the market much faster than previously, which then indicates the period of time that a product portfolio will remain as a star or as a possible question mark is decreasing.

Conceptually, the product life cycle, suggests that most product portfolios will categories will progress through different stages of rates of growth – from introduction to growth to maturity and then to eventual decline.

Introduction is very early growth, while a mature market should also have a small level of growth, usually almost in line with increases in GDP.

This matrix considers the two strategic parameters of market share and market growth when it allocates a priority to a product in terms of organizational focus and activity. In order to appreciate how this prioritization is assessed you need to understand how market share and market growth are interrelated.

Market Share

Market share is the percentage of either revenue or volume of sales that your organization has of the total market. In other words, the higher your market share, the bigger the proportion of the market you control and influence. The matrix also assumes that earnings rise as your market share does. This is not always the case and is one of the limitations of this analysis.

The Boston Matrix also makes a big assumption in its interpretation of market share and how it relates to profitability. It assumes that a high market share means that this organization is highly profitable for this product or service. It attributes this to the organization being well established and knowledgeable about the market, and having attained the advantages of the economies of scale.

This may have been a safe assumption nearly fifty years ago, but it is not necessarily the case today. There are many reasons why a product may be a market leader but not necessarily the most profitable. For example, it may be fulfilling the role of a loss leader in terms of the initial purchase, but then profits are made through the associated products. For example,

The leading manufacturer of desktop printers may have the largest market share but they may be prepared to make a loss on each printer sold because they make their profit from the sale of the proprietary printer cartridges that are sold subsequently.

The usual way that market share is expressed is as a ratio relative to your largest competitor, because this illustrates the extent to which you dominate the market. So if you have a 20% market share, and your nearest competitor has a 10% share the ratio is 2:1.

Whether a relative share is high or low depends on the industry. For example, in the Fast Moving Consumer Goods (FMCG) market the brand leader is often very stable and profitable. In fact, market share in FMCG tends to follow the '123 rule.' This means that the brand leader's share is double that of the nearest competitor and triple that of the next nearest.

Market Growth

Market growth is the percentage growth compared to the previous year. It is used as a measure of how attractive a market is to existing providers and potential new entrants.

High market growth creates an environment in which it is relatively easy for organizations to grow their profits, even if their market share remains the same.

In contrast, if your product is in a low growth market you will face intense competitive activity and your organization will need to employ significant effort just to retain its market share, even if it is an established provider. Often such market retention is only achieved by aggressive discounting, which makes such a low-growth market less profitable and unattractive.

The Boston Matrix uses cash flow as its means of categorizing an organization's product or service portfolio. It uses market share to illustrate how well a product or service can generate cash and it uses market growth to indicate how much future cash is required.

Factors influencing the Product Life Cycle

Regardless of whether the basic PLC model or the BCG matrix is used: The length of the product life cycle varies from product to product.

Companies can influence the product life cycle through clever pricing, branding campaigns, and after-sales activities.

But it’s not all driven by internal factors.

Changes in the political, legal or economic context can also influence the product life cycle just as much as the sudden market entry of competitors or substitute products.

Conclusion – The Product Life Cycle as a strategic planning tool

The key advantage of the product life cycle is that its concept can easily be applied to the real world.

Businesses can evaluate their product portfolio using either the basic PLC model or the BCG matrix, taking into account market data and internal data points.

Depending on which phase a company’s individual products are in, marketing investments must be made, or new products must be researched and developed with the foresight to avoid a loss of sales.

The concept of the product life cycle can also be used to define specific recommendations for forward-looking marketing tactics. Yet, decision-makers should always take a holistic view in such an analysis.

This is because the changing market conditions also have a direct and indirect impact on the lifecycle stages of their products.

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