New products and services are the lifeblood of all businesses. Investing in their development isn’t optional – it is crucial to business growth and profitability. But embarking on the development process is risky and it requires change which typically is stressful on an organization. It needs considerable planning and organization.
A critical first step in product development is being able to identify where the existing products or services are in their lifecycle – it’s critical to an enterprises profitability. Effective research into your markets and competitors will help you do this. There are five key stages in the lifecycle of any product or service:
- Development – at this point your product or service is only an idea. You’re investing heavily in research and development.
- Introduction – you launch your product or service. You’re spending heavily on marketing.
- Growth – your product or service is establishing itself. You have few competitors, sales are growing and profit margins are good. Now’s the time to work out how you can reduce the costs of delivering the new product.
- Maturity – sales growth is slowing or has even stopped. You’ve been able to reduce production and marketing costs, but increased competition has driven down prices. Now is likely to be the best time to invest in a new product.
- Decline – new and improved products or services are on the market and competition is high. Sales fall and profit margins decline. Increased marketing will have little impact on sales and won’t be cost-effective
You can extend the lifecycle of a product or service by investing in an “extension strategy”. You could: