Imagine waking up to discover that just 17 of your 220 SKUs generated 80% of your profits. For Flieber CEO Fabricio Miranda, this was one of many harsh reality checks in his past e-commerce career.
From that moment on, he began to manage his brand as a portfolio of products, carefully considering the lifecycle phase of each one to maximize growth and profitability
Because the truth is, the steps that got you to early success with a couple of products, aren’t enough to build an enduring brand. As a product matures, you need different strategies to stay profitable.
Unfortunately, this is where many retailers hit a roadblock. They continue funneling time and resources into their original bestsellers, even after those products have hit their sales ceiling. And by limiting their focus to one or two bestselling products, they fail to spot the opportunities for new products or increased revenues and profits through optimization.
Successful brands do it differently. They know how to guide a product through its natural lifecycle, while carefully adjusting their strategies to optimize sales at each stage. They look at products as a whole, rather than focusing on each one individually, when making their decisions.
In this article, we’ll explain the different stages of the product lifecycle and share proven tactics to help you increase your product portfolio ROI, every step of the way.
Product lifecycle management (PLM) is the process of guiding a product along its journey from product development to maturation. Successful PLM involves adapting a product’s production, promotion, pricing strategy, and more, to meet consumer needs and market conditions as it passes through different phases of growth.
The five stages of the product lifecycle are: research and development, early stage, growth, maturity, and decline.
The term ‘product lifecycle’ originated as a theoretical framework used by economists to describe a common pattern most successful products follow.
In a 1965 article published in the Harvard Business Review, economist Theordore Levitt codified these phases into four distinct stages: development, growth, maturity, and decline.
Changing market conditions have since led to the creation of an additional stage, known as the ‘early’ or ‘introduction’ stage. This stage involves a more aggressive marketing strategy, brand messaging, and hands-on product improvement.
The product lifecycle theory can be applied to a variety of industries, but it's specially applicable to retail and e-commerce. Here’s how each of the stages is commonly defined today, through the lens of modern commerce.
Traditionally, the goal of the research and development (R&D) stage is to estimate the size of the market, prototype your new product, and improve upon it until it’s ready to go to market.
But these days, there are tools for that. Through a combination of customer feedback and quick market analysis, you can easily get a test batch up-and-running on a marketplace like Amazon.
From there, it’s all about understanding the early signs of market fit, before ramping up your product in the early or introduction stage.
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Also known as the introduction stage, this is where the product is literally introduced to the market. It’s also where the rubber meets the road, and your hypotheses are put to the test.
And the stakes are high. If you lose sales at the beginning, you risk the entire launch.
Use service level agreements (SLAs) designed in partnership with your suppliers to ensure fast delivery. Stockouts can be devastating at this critical stage, so take extra steps to synchronize your sales pace and inventory as demand grows.
In this stage, brands will use every element of the shopping experience to delight customers, including delivery, unboxing, and a strong focus on collecting positive customer reviews. They may also gift products to social media influencers as a way to gain initial traction.
But it’s important to note that both successful and unsuccessful products have their issues at this stage. For those that don’t take off, dead inventory, trapped capital and extra costs can quickly eat into your profits.
For those that do, you’ll find the opposite challenge. More often than not, you won’t have enough time to bring in a new batch if the product is a quick success. This can lead to stockouts and lost rankings that are hard, or even impossible, to regain.
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By this stage, you know which products are your new best-sellers. Now, it’s time to double down.
No matter which way they look, your ideal customer should see your product everywhere. Marketing, listing optimization, and pricing are all crucial to winning prime real estate on Amazon, in Google searches, and anywhere else shoppers can encounter your product.
But growing your market share also means anticipating growth in demand and ordering larger batches from suppliers. These may take longer to be delivered, so the more careful you are in the demand planning process, the better the results.
For multichannel retailers specifically, this phase can be extremely complex. It requires strong sales forecasting and inventory management across multiple channels and locations. And the pace required is often fast.
With expansion, pressure on margins also increases, making strategies for streamlining operations to minimize costs and maximize ROI just as critical. Priorities often include refining a product’s sales forecasts and optimizing lead times to minimize storage and shipping costs, while capturing any surges in demand.
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Also known as the saturation stage, the maturity stage of the product lifecycle tends to be the most profitable.
Now that your product has emerged as the winner, you can adjust your prices and reduce your investments in advertising. With a more predictable sales pattern, you can also negotiate better prices (larger batches) with suppliers.
However, with increased market saturation, new customers may be harder to come by and loyal customers may want new reasons to continue using the product. This may require you to introduce new features, reduce prices, or make new marketing efforts to maintain sales.
Other common strategies to prolong the maturity phase include finding repeatable and/or higher volume revenue streams, for example subscriptions or orders from big box retailers. These tactics can help increase customer LTV and increase your bargaining power with suppliers.
As quantities grow, brands may also focus on optimizing their retail operations to manage costs, including strengthening their inventory planning, supply chain, and distribution strategies.
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The decline stage is also known as the exit stage. When a product reaches this point in its journey, demand begins to wane.
This can happen for a number of reasons, such as a competitive or saturated market, an outdated product getting replaced by a newer edition, or because a product simply loses popularity.
At this phase, brands may choose to retire the product, reduce its inventory to align with its declining sales pace, and/or introduce a new product in place of the old one.
It's important to keep an eye on your sales velocity acceleration (or deceleration) to evaluate whether you’ll have trouble phasing out your product. One strategy to extend the decline phase while keeping margins healthy is to reduce the range of offerings on a declining product, for example going from multiple to a limited number of colors, sizes or flavors.
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While the five stage framework is an excellent model for understanding a product’s lifecycle, the reality of product lifecycle management is often more complex — especially for the modern e-commerce business.
The barrier to entry is currently higher than ever. Many products and categories are oversaturated, and competition is stiff.
Here are just some of the factors that can cause unexpected variations in a product’s lifecycle.
Each sales channel has its own rhythm. For example, you might see more Amazon sales during Prime Day compared to other times of year, whereas the biggest peak on your website may come during Cyber 5.
The bottom line is that sales can rise and fall quickly in e-commerce. For multichannel businesses, you’ll want to keep a close eye on all channels (ideally in one place) so you can stay ahead of unexpected fluctuations and maximize your margins at every step.
Sometimes the nature of the product itself brings about unique lifecycle management challenges. For example, if you sell high quality iPad cases like our friends at ZUGU, you’re going to see a natural decline in products created for older models. The key is to make sure you have a clear plan for guiding the product from introduction to maturity, and eventually exit.
Every market is different. Even the smallest idiosyncrasies can have a big impact on a product’s lifecycle. Consider cars with manual transmission and instant coffee, for example. These two products are all but dead in the US, but still wildly popular in many countries overseas. To make the most of your product’s lifecycle, you need to understand how its sales patterns may differ from market to market.
A strategically managed portfolio unlocks the potential for expansion into new markets. But managing multiple products across multiple channels isn’t easy.
To effectively capture ROI, a strategic approach is necessary. Let’s explore practical and proven ways to maximize your product portfolio.
Once your business reaches a certain size, you end up spending more on customer acquisition costs (CAC), advertising, storage, and more. All of which can eat away at your margins.
Although products at the growth phase will bring in the bulk of revenues, that doesn’t always translate to what’s most profitable for the wider business. To understand where your best margins come from, you need full visibility into your entire portfolio.
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High Potential |
Low Potential |
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Stars Low (but positive) margin, high growth, high sales contribution |
Question Marks Low (but positive) margin, high growth, but low sales contribution |
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Cash Cows High margins, low growth, high sales contribution |
Dogs/Pet Projects Low (negative) margins, low growth, low sales contribution – get rid of them! |
Most brands get traction with one or two best-sellers, but growing means evolving from a few successful products to a wide range of them — or hitting a ceiling.
A diverse portfolio presents more opportunities, but also more complexity. Varied suppliers, sales patterns, and long lead times can make managing your product portfolio a lot more challenging.
If you’re using legacy inventory software, or manual methods like Excel spreadsheets and manual inventory formulas, important data can start slipping through the cracks. You’ll need a smarter, faster way to stay on top of your analytics.
This is a scenario we’re all too familiar with here at Flieber. When our founder, Fabricio Miranda, created his first profitability report, it was a major wake-up call. “Up to that point, I didn’t even know what my top 20% of profit-generating SKUs were, since I had no system to clearly identify them,” he says.
Fabricio was running a one-year-old, top 400 Amazon Seller business and discovered the following about their 220 SKUs:
Once he realized he could generate 60% of his sales and over 400% of his margin from 43 instead of 220 products, he re-committed to following the golden 80/20 rule and created a tighter system for maintaining a balanced product portfolio.
With a better understanding of each product in your portfolio, you can invest in the right promotions at the right time to capture as much ROI as possible.
Once you’ve got a scalable system in place, do it like 3M. They have an enduring goal called the 30/4 rule. It states that 30% of their revenues in any given year must come from products launched in the previous 4 years. For companies in growth-mode, that can be even more aggressive.
As each product moves from inception to maturation and finally declines, you need to keep a close eye on your entire portfolio in order to grow your sales and profits along the way.
And for that, Flieber can help.
Flieber is the sales and inventory platform that provides a complete 360-degree view of each and every SKU in your product line. With real-time sales data and customizable forecasting, you’ll know exactly when to push or pull a product.
Find out how Flieber can help. Access the full-featured trial for free today.