Successful products go through a predictable 5-stage life cycle from introduction to decline. It’s important for CPG companies to get the most from their products at every stage of that cycle.
The product life cycle describes the process a product goes through from development to retirement. All businesses need to manage the product life cycle effectively if they want to be successful, but this is especially important for companies that deal with consumer packaged goods (CPG) products, such as clothing, cosmetics, electronics, and seasonal items.
Past sales history is typically not a reliable indicator of future demand for CPG products, and companies that deal with these products need to embrace strategies to optimize their life cycles. This guide looks at the life cycle stages for CPG products and examines strategies businesses can use to meet the challenges of each stage, and improve the length of the life cycle.
The Life Cycle of CPG products
Successful products, including CPG products, go through five different stages during their lifetime. Keep in mind that not all products go through all five stages — products that are not successful often jump straight from introduction to decline, for example. But successful products that have some shelf longevity tend to see their development and popularity progress through these stages over time:
- Development: Often lasting years, this stage includes ideation, research, building, and refining the product.
- Introduction: Once the product has been developed, it gets introduced to consumers through marketing to build brand awareness.
- Growth: If their products meet a need and strike an interest with consumers, companies work to increase their market share as their sales and profits increase.
- Maturity: Companies with CPG products in this stage tend to shift their focus from building to maintaining market share.
- Decline: Revenue decreases due to increased competition, industry innovation, and changes in consumer preferences.
Determining where CPG products are in their life cycle is not always straightforward. An increase or decline in sales or demand doesn’t always signify a change in the life cycle stage. The typical life cycle curve only serves as a rough guide to long-term product demand and life cycle placement.
To be successful, companies that work with CPG products need tools that can help them make effective forecasts of product demand and life cycle development. They must also be proactive about meeting the specific challenges of each stage of the product life cycle.
Developing a Minimum Viable Product
The main risk of the development stage is that companies incur costs without collecting revenue. To move CPG products through this phase as quickly as possible, companies may want to prepare a minimum viable product for launch.
This step accelerates the time to profit and allows companies to create a build-measure-learn-feedback loop. They build a minimum viable product, measure its success with customers, learn from their potential customers, and integrate the feedback into future development of the product.
The risk of taking this approach is that companies may dilute their brands if they release subpar products. Businesses need to balance the desire to shorten the research and development stage with the need to create the best products possible.
A Strong Marketing Strategy
Nearly 80% of new consumer products fail during the introduction stage, and this is often due to insufficient marketing support. Although the introduction phase starts to bring in profits, sales are typically low during this stage. To safeguard profit margins, businesses should leverage market research to reduce costs or focus on increasing market share through innovation to reach the maturity phase more quickly.
Improving the Customer Experience
After a successful introduction phase, consumers know about your product and should be ready to buy. But if you want your market share to grow, you need to offer a high-quality customer experience.
To move through this stage successfully, businesses need to invest in customer service and support. Ideally, they should implement a formal feedback process and have strategies in place to implement feedback in effective ways.
Businesses cannot expect to ride the wave of consumer demand through the growth stage and into product maturity. Instead, they need to pay close attention during this phase or risk skipping growth and moving to decline.
Staying in Growth Mode During the Maturity Stage
Companies that reach the maturity stage need to maintain their commitment to growth and implement strategies that will help them stay in this stage as long as possible. Keep in mind that some products don’t leave this stage for decades.
At this point, distribution channels should be set, but they need to be continually optimized. Companies need to focus on differentiation and diversity during this stage. The competition is well aware of the potential, and they will sweep in and steal market share if a business’s products fail to stay enticing.
Companies need a flexible product management framework, and they may even want to dedicate specialists to lengthening the life cycle of their products.
Avoiding the Decline Phase
Dips in revenue don’t necessarily signal a move to the product decline stage. CPG companies need to be able to spot the differences between down cycles due to seasonal factors and revenue declines due to a loss of market share.
Overcoming Short CPG Product Life Cycles
Beyond techniques that help optimize each stage of the product life cycle, CPG companies may want to look at strategies that can help overcome the notoriously short life cycle for CPG products.
Orienting CPG inventory management around agility can help significantly. Companies that deal with CPG products should build and design rapid-response supply channels that can quickly react to shifting demand. They may also consider direct-to-consumer websites that facilitate the ability to launch new products at a faster pace by going over the retail channel.
Contact Logility for help optimizing the life cycle for CPG products
At Logility, we can help you improve customer satisfaction, gain greater visibility into sales patterns, and understand more about the impact of demand patterns on your supply chain. To learn more about life cycle planning and meeting the other challenges of working with CPG products, contact us today.
Vice President, Product Marketing
Lachelle Buchanan is the vice president of product marketing at Logility, where she leverages over 15 years of experience in unifying the expertise of product development teams with the market insight of sales teams for successful new product introductions. After spending half her career in marketing and the other half in supply chain, Lachelle is most passionate about bringing teams together to solve complex supply chain challenges and delivering value for customers. Owing to a passion for advanced Sales & Operations Planning, Lachelle has Oliver Wight certifications in Integrated Business Planning (Advanced S&OP), Demand Management, Integrated Supply Chain Management and Product & Portfolio Management.