Product life cycle is a business term that refers to the stages in the progression of a product, from the conception of the product to the time the product starts to show inevitable signs of retrogression. A similar example is the life cycles of a butterfly: the processes they go through, starting from fertilization to the formation of the eggs, the caterpillar, the pupa and adult. Eventually, the butterfly will start to show signs of wear and tear until it dies. Knowing the various stages of the life cycle, the signs to look for and what to expect can be likened to the product life cycle in business. In this case, the subject is a product or service and the importance of this process includes the fact that it allows the manufacturers and various businesses to gauge the stage of production, which enables it to apply the relevant marketing principles.
A role of product life cycle in business is its usefulness as a measure of the state of a product in correlation to the expectations of the consumers and the manufacturers. For example, it helps to consider the case of a product in the form of a smartphone that has been introduced into the market. The phone is received with much anticipation by the consumers and hailed as the most innovative smartphone yet. As the months progress, other phone companies bring out their own similar versions of the smartphone, diminishing the dominance of that particular smartphone on the market. Aside from this, the consumers are already yearning for a smartphone that will offer more than this one can.
The makers of the smartphone know that they have to monitor the various indicators as the phone goes through its various stages in order to know when to discontinue the product and introduce another updated version of the phone, or a new one all together. This knowledge gives the manufacturers of the phone a strategic advantage over the other phone companies. It allows the company to gain as much as it can from the product in terms of sales without losing competitive advantage over other companies by allowing the product to outlive its usefulness, and possibly losing some customers to competitors with better products.
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Another importance of product life cycle in business is the fact that it allows the company to target its marketing effort based on the particular stage at which the product is in its life cycle. For instance, the marketing campaign at the introduction of the product will differ for the type of marketing drive during the middle of the product life cycle in business. Knowing this is a crucial factor in the formulation of marketing strategies.