How to Gauge Amazon Product Lifecycle
Selling on Amazon means conducting a significant amount of research to learn about the market, demand, and competition for any products you are interested in selling. This is especially crucial for private label brands developing their own products, because research will show whether it's worth investing years of time and money.
Unfortunately, some e-commerce stores stop there. They find a successful product and focus on improving their management and logistics. But, as the market grows and changes, their sales eventually drop and they lose money. This is one of the reasons only 2 out of 10 small businesses survive the first 5 years. Businesses that fail to adapt and evolve their products cannot continue to thrive as the market changes.
Continuing product research is necessary to develop a storefront that continues to change to meet customer needs, and which continues to sell products that are in-demand.
Every product has a lifecycle, although some products have a longer lifecycle than others. Some also go through stages where they are 'born', 'die', and come back again. Understanding your product, where it is in its lifecycle, and when it is likely to 'die' will also help you with every area of your business because you can offer relevant customer service, better product pricing, and make better marketing decisions.
More importantly, understanding product lifecycle will enable you to integrate product lifecycle management (PLM) to prevent dead stock.
Understanding the 4 Stages of Product Lifecycle
Every product has four stages in its lifecycle:
The product is completely new to the market and must establish value and worth. Marketing policies must establish why the product is needed or what it needs to offer to create interest. Here, there is typically little to no competition. The primary challenge is creating a demand and convincing potential consumers that the product is worth their money. These products are high risk, but successfully introducing a product establishes you as the originator, and therefore the primary brand.
The product is being adopted and possibly duplicated and re-sold by other suppliers. Here, the audience is increasingly aware of the product and their concerns revolve around quality, whether the product will meet their expectations, and which supplier offers the best deal. There is a high demand for the product and it is set to keep growing. Products in the growth phase are low risk and low competition, but offer a high return.
The product has saturated the market, there are many retailers selling similar models or options, and the competition is high. The audience is aware of the product and its benefits, and marketing focuses primarily on differentiating from the competition. New features, styles, and colors are often added during this stage. Some products can remain in this stage nearly indefinitely. Mature products are medium risk, depending on your marketing team and ability to compete inside of the price niche you choose.
The product is either no longer wanted or needed, market demand is shrinking, and sales are dropping. This may be because the product was replaced by a newer, better idea, because of changing cultural perception, or any other factor. Here, product sales will continue to drop, and marketing challenges should revolve around connecting with the remaining consumer base to move product out of the warehouse before it becomes dead stock. These products should not be invested in.
These four stages of product lifecycle apply to nearly any product. For example, the iPod. When Apple first introduced the iPod in 2001, their primary goal was convincing people that they needed it. It reached the growth stage quickly, and then remained at maturity until around 2015. As phones develop more storage, fewer consumers feel the need to own the additional device. Apple released their last iteration of the iPod in 2015, and sales have been shrinking by an average of 20% per year ever since.
Fads and Trends
Some products move through the stages of introduction, growth, maturity, and decline very quickly. These are known as fads and trends. For example, the fidget spinner appeared in January of 2017, and by March, accounted for nearly 17% of all online toy stores and 14% of Amazon's most purchased products. By June, both sales and interest in fidget spinners showed a significant drop, meaning that the fad was over almost as quickly as it began.
Some products move into the maturity phase and simply stay there for decades or even centuries. For example, a pair of classic oxford shoes will likely not go out of style within our foreseeable lifetime.
Charting Amazon Product Lifecycle
Understanding where your product is at in its lifecycle will help you to make decisions that benefit your business. You can achieve this by analyzing a few simple factors:
- Growth – a product with heavy upward growth is growing, one with steady profits is mature
- Competition – How saturated is the market?
In most cases, you can easily determine where a product is in its lifecycle. However, different types of products move through their lifecycle at different speeds. For example, most electronics are only truly saleable until the next model comes out, meaning that they have an average lifespan of 18-24 months, sometimes less. Other products, like fashion, might be tied to a single season. And others, like parts and accessories for vehicles, are tied to the lifespan of that vehicle.
Inventory Management Tactics to Handle Product Lifecycle
Understanding your product's lifecycle allows you to make choices for that product that will improve sales, reduce costs, and help you to better manage stock and investment.
Price is directly affected by demand and quality. Products that do not yet have a demand must be priced to sell to an audience that isn't yet aware they need it. Products in the growth stage can be priced based on demand and quality. As demand grows, consumers begin to seek out different types of products in the niche based on their personal shopping preferences. Products in the mature stage must be priced competitively inside of their niche. Products in the decline stage must either be priced low to sell, or priced high if there is a need for them but little to no competition (for example, parts for a machine that is now out of date).
PLM enables you to take steps to manage stock so that you can best meet demand and avoid over or under stocking. This is especially important as products move towards the end of their lifecycle or when they are first being introduced.
- Introduction – New products can be difficult to predict, which makes them risky, but data shows that they make up an average of about 27% of total sales. While completely new products rely on marketing insight to predict demand, most products are similar to previous ones in some way. For example, new computers or technology, new tools, new clothing, etc., can all be charted based on the success and lifecycle of other similar products. If you have a new product that is replacing a similar function to one that you already have, charting that products lifecycle can be a valuable tool in predicting demand.
- Growth – Products in the growth stage are typically in high demand and (unless they are a fad or a fast trend) are not likely to die out quickly. Investing in larger volumes of inventory to meet rising demand can help you to cut costs and avoid selling out, which can cost you the Buy Box, ranking, and customers.
- Maturity – Inventory management should be aimed at meeting a steady demand (which may go up and down based on season or external factors), and should largely be aimed at balancing order costs with storage costs to reach an economic order point to cut costs.
- Decline – Stock should be phased out, orders should be smaller, and if you haven't already, adopted an inventory management strategy to meet this, adopting Just in Time inventory, where you purchase the minimum amount of stock to meet demand, can be helpful in reducing risks.
Maximize the efficiency of your inventory by using tools that eliminate human error. For example, Skubana uses your sales velocity and stock levels to predict reorder points, so you can reorder when stock drops below a certain level and not before, allowing you to reduce ordering costs, prevent stock buildup, and prevent stock-outs.
Product lifecycle affects demand, customer perception, and availability. There are also several marketing strategies you can use to extend product lifespan, create new niches, and stand out from competitors.
- Introduction – Convince consumers that the product has value. Market the product based on the value it brings to the consumer.
- Growth – Offer a quality solution that meets or exceeds consumer expectations. Market the brand, quality, reliability, and other selling points of the specific version of the product rather than the product itself.
- Maturity – Differentiate product or seller from competitors via pricing, quality, packaging, etc. Market based on brand, quality, and reliability. Use sales and coupons to drive sales. Continue market research to determine new audiences, such as adding eco-friendly packaging or making it child-proof. Add new features, versions, colors, and styles to prolong the lifespan of the product.
- Decline – Pitch the product to the remaining audience based on demand. Focus on pricing, availability, or need for the product.
Marketing tactics must change to match the lifecycle of the product, because as public perception changes, ads must as well. A marketing tactic that works well for a product in the growth stage might not help it in other stages. Tactic fatigue happens when a marketing tactic no longer works for the product, which means that you must continue to research new marketing techniques throughout the lifespan of the product.
Continued Growth as a Business Model
Public demand constantly changes with trends, as new technologies appear, and as perception regarding production, consumption, waste, and other ideologies constantly change. This affects how products are in demand and why they are in demand. A shift in perception can move a once thriving product into decline almost overnight. For this reason, businesses must invest in continued growth and a diverse range of products to ensure the continuation of the brand, even if a top-selling product becomes outdated.
Continuous product research is necessary to ensure that you have the capacity to replace old products as they age, continue to market your products throughout their lifespan, and adapt existing products to changing market demand. This can be achieved using existing sales data, or using existing products' sales curve and lifespan to chart your lifecycle for upcoming products.
Understanding Amazon product lifecycle can help you to make better decisions for your products, make changes throughout the lifespan of those products to extend their marketing, and manage inventory to reduce costs, improve sales, and enable your store to continue growing, even as the market changes.
Chad Rubin is the co-founder and chief executive officer of Skubana, a multichannel e-commerce software the enables brands to unlock growth by unifying their back-office operations.