If there’s one common thread between a startup getting ready for its first product launch and a scaleup releasing its latest product update, it’s this: They have a product they’re working to market and sell.
Every single product goes through a series of changes over the course of its lifetime. Understanding those changes and when they could occur will help you forecast how they will impact your business. Neglecting to forecast how a product’s life will play out can make the difference between those companies that succeed and those that fail.
The four primary stages every product goes through include Introduction, Growth, Maturity and Decline (anchor link). But before any product can be introduced it has to be developed, so let’s start there.
Stage 0 - Development: Minimum Viable Product (MVP)
So you have an idea that you want to bring to market. Before you begin developing your product, make sure you’ve done your market research. You need to know the market you’re going to be selling to inside and out. Which needs are you addressing? Who are your primary competitors going to be? How will you differentiate yourself in the minds of your target customers?
Addressing these questions is critical because investing time and money into developing a product that has no real viability is a huge waste. Your goal during the development stage should be to reach a minimum viable product (MVP). This means that the product has enough features to satisfy the market you plan on introducing it to and to gain feedback from early customers.
Stage 1 - Introduction: Realizing Product-Market Fit
Once you have developed a minimum viable product, you need to be ready to bring it to market. That means you need to be prepared to launch a product that you may not feel is completely ready.
Reid Hoffman, the founder of LinkedIn, once said, “If you’re not embarrassed by the first version of your product, then you launched too late.” That’s because it’s more valuable to introduce a product early and learn from it than it is to wait until it’s perfect and expect immediate returns. Doing this will help you achieve the goal of the introduction stage, which is to achieve product/market fit. The Masters of Scale episode titled “Handcrafted” with Reid Hoffman illustrates this perfectly.
In it, Brian Chesky of Airbnb discusses a conversation he had with Paul Graham, Co-Founder of Y-Combinator, a start-up incubator, which cultivates and invests in early-stage companies. Paul encouraged Brian to go out and meet every single one of Airbnb’s customers while they were still small enough to do so. That way they could get to know them, learn from them, and build a product directly for them. Obviously, that is not a process that will scale. Costs will be extremely high and sales will be low. However, this set Airbnb up for success when they entered their Growth Stage.
Stage 2 - Growth: Achieving Economies of Scale
For most companies, the growth stage is when product/market fit has been fully realized and they begin generating demand for their product. The amount of time and money invested in product development is significantly reduced and the focus shifts to crossing the chasm and reaching economies of scale. This is typically when companies receive Series B or Series C funding that is used to invest in marketing and sales to reach a mass market.
Airbnb spent time with their customers during the introduction stage to understand what they liked and what they thought could be better. Using this information, they built a great experience into their product that their existing and future customers would love.
Their devoted customer base of evangelists made it easy for Airbnb to increase public awareness and generate demand. This enabled Airbnb to penetrate the market and achieve rapid growth.
Stage 3 - Maturity: Brand Differentiation
During this stage, it is common for costs to decrease as companies achieve economies of scale, but this does not mean that growth is any easier. Every company that has reached this stage has proved that they have a successful product — and for every product that succeeds, there will be multiple attempts to duplicate it. This increased competition forces prices down which reduces profitability.
In order to counteract the negative impacts of this stage and to avoid entering decline, one of the most influential things you can do is differentiate your brand. Salesforce’s CEO Marc Benioff has stated that your brand is your most important asset. Your competition can and will duplicate the features of your products but they cannot replicate the way people identify with your brand and your personality. This differentiation creates loyalty and prevents emerging competitors from stealing customers.
Stage 4 - Decline
As market saturation begins to set in, products will enter the decline stage. During this time profit becomes more of a logistical challenge as companies seek reduced production costs and cheaper markets. And unfortunately, this stage will be unavoidable for every product, but not every company.
What I mean is that every product in its current state will grow, mature and decline, but a company can update their existing products, add new features or introduce entirely new products to avoid succumbing to the same ailments afflicting their declining products. Doing so will restart the product lifecycle and ensure that the company lives on.
And When Your Product Comes Full Circle? Start Again.
Understanding and planning for the product life cycle is an important process for a company to go through. It will help guarantee the success of an individual product and set the stage for growth and scale. Iterating on your products restarting the product life cycle will maintain the health of the business as a whole and ensure continued success over a long period of time.
Topics: Revenue Operations