The Product Life Cycle

The Product Life Cycle

Products do not sell indefinitely in the market.  Products pass through four stages in the market known as a product life cycle.  The stages include:

1. Introduction during which costs are high and sales volume is low
2. Growth during which sales volumes increase significantly and profitability begins
3. Maturation during which sales volumes reach their peak and profits flatten
4. Decline during which sales volumes decline and profitability diminishes

Product life cycles vary in length.  Some products thrive in the market for 10 years while others last only a few months.  Innovative organizations continually develop new products to introduce when other products enter the maturation phase and before their sales decline.   This strategy of continual product development and introduction insures overall sales volume is maintained even when one product line begins to decline. Organizations need to have products in all stages of the life cycle at all times to ensure that income is steady.

Why is Product Development Important?

Product development is a tool used to open new markets, expand sales of current product categories, reposition a company and/or improve profitability.  Product development centers its efforts on utilizing an organization's existing skills sets in a way to expand their market presence and allow for more selling opportunities.

1. Opening New Markets:  An organization can open a new market by developing a new category of products.  For example, an organization producing tabletop linens that wants to enter the holiday market would develop a Christmas collection of ornaments, stockings, gift bags and Christmas-themed table linens to attract buyers in the holiday market.

2. Expanding Sales of Existing Products:  To increase sales of an existing product or product line, an organization can develop related items in the same theme to offer more selection to their buyers.  For example, if the top selling items are carved wood candleholders they would expand the selection of candleholders by adding new heights, colors, diameters, and patterns as well as adding complementary products such as votive candle holders. By offering a larger selection of items they will generate larger orders from their existing customers who buy the original candleholder.

3. Repositioning a Business: Repositioning a business often requires new products be developed to meet the demands and tastes of the new market niche.  For example, a company situated in the local tourist market that wants to position itself as an export company will research export markets to identify popular product categories appropriate for their techniques and materials and will develop new export collections based on the opportunities identified through their market research.

4. Boosting Profitability: A successful product is one that not only sells well but also makes a profit.  Product development involves careful analysis of pricing and costing; products are designed to maximize their perceived value and keep costs down.  For example, a hand-woven cotton cushion cover that sells well but is not profitable can be used as the starting point for developing a range of home accessories. New cushion covers can be designed to use the hand-woven textiles on the front of the cushion cover where it is most visible to consumers and a less-expensive machined fabric can be used on the back of the cushion, an area that is not as important to consumers.

Components of a Successful Export Product

A common question is “what makes a product sellable?” Buyers in the global market look for a variety of components when selecting their products and placing orders. These components are the building blocks of product development. They are the focus of market research and analysis. They are the key elements of design for products. The components include:

1. Function - a utilitarian purpose for the lifestyles of the target market (see product categories in the next section for more information)
2. Size - a variety of sizes meeting the standards of the target market
3. Color - a selection of colors including traditional, neutral and trend colors
4. Pattern & Texture - a variety of patterns and textures from simple to complex, particularly patterns reflecting the origin and function of the products
5. Prices - competitive prices in relation to the products' quality and design
6. Packaging - attractive hangtags with interesting product information and goods which are easy to pack and ship without breakage
7. Story - a great selling tool, buyers are increasingly interested in how a product was made, who made it, under what conditions and any additional positive social or environmental impact the product has.

Understanding Your Target Market

Market Fundamentals

Good knowledge of your target market is essential for developing a sellable product.  Understanding the lifestyles, buying habits and interests of your end customer will help you to develop a product that sells.  Focusing on the key components of a successful product - function, size, color, pattern/texture, packaging, price and story - will contribute significantly towards good product development.

Market research includes studying two different aspects of the market:

1. Market Fundamentals- aspects that don't change quickly in the market, such as global buyer expectations for quality and customer service, market segmentation, and standard product categories.
2. Market Trends -  demands that fluctuate with more frequency, such as colors, motifs and lifestyles.

All market research should also carefully study prices to insure your pricing is aligned with the market.

Global Buyer Expectations:

Buyers in the global marketplace have certain minimum expectations when selecting products. The expectations are often referred to as Universal Market Demands. Because the global market is full of competition, if your products don't meet these qualifications then buyers turn to other options.  These expectations include:

1. Product Design - Buyers are looking for unique and innovative products; they value functional products more than decorative products; they want products adhering to market standards of size, material and finish.
2. Price - Buyers want prices that are competitive with comparable products in the market; prices must match the quality and design of the items (high quality products can sell at a higher price, etc); buyers also are looking for prices that are stable and won't change dramatically during the year. Price is often the most critical factor in a buying decision.
3. Quality - Buyers are looking for good quality products and, most importantly, buyers require consistent quality.  This is an area of constant challenge for artisans.  Quality is measured in terms of good workmanship, color, size and design.  If a buyer orders 10 red baskets of 12cm diameter they will expect that all 10 baskets are red and are 12cm in diameter.  When developing a new design it is imperative to know you can produce it with consistent quality, particularly when producing large quantities.
4. Delivery - Buyers expect delivery on-time - every time.  Any delays in delivery must be communicated to buyers immediately.  Buyers also expect you to produce and ship an order within 90 days and to fulfill re-orders in the same timeframe, or faster.  Buyers also expect you to organize all shipping and packing for delivery without any breakage.
5. Service - Buyers need to know the factors affecting your business so they can plan around them.  Communication is key to attracting and retaining customers.  Customer service involves quick, clear and thorough communication.  Communicate all information, especially any problems or delays.  Good communication and good customer service can resolve any problem or delay.

Market Segmentation

The global marketplace can be divided into different classes or segments. To understand them better, they can be located on a graph that shows price, volume and design/quality.  The result is a pyramid with the "mass market" at the base, the "mainstream market" in the middle, and the "high-end or luxury market" forming the peak.   Determining where your product falls on this pyramid helps define the price, volume and design expectations of your buyer.  Most artisan-made products fall in the mainstream market.

Mass market - This market is driven by price.  Buyers are looking for the lowest price and will sacrifice quality and unique design in order to obtain a low price.  Sales volumes and purchase orders are very high (ex. 10,000 units per item).  U.S. retail stores in this market include Wal-Mart, Target and Kmart.

Mainstream market - Consumers in this market are looking for a balance between price and unique design.  They are willing to pay more for a product and in return they expect the product will be of better quality and more unique than mass-market products.  Volumes are large to moderate (ex. 1,000 to 100 units per item).  Retail stores in this market include Pottery Barn, Macy's (and other department stores), Sundance, Anthropologie and VivaTerra.  Most fair trade and artisan-made products fall within this mainstream market.

High-end or luxury market - Consumers in this market are driven by quality and designer brands.  They seek out the newest fashions and will pay a premium price for products made by known designers.  Volumes are small and exclusive.  Buyers are looking for the highest quality product with the most exclusive, innovative design.  Retail stores in this market include Neiman Marcus, Saks Fifth Avenue.

Tips for researching these markets:

Most fair trade and artisan-made products fall within the mainstream market.  A careful study of prices, product standards (size, labeling, etc) and popular product categories in this market is recommended.

Many design trends originate in the high-end market and then migrate to the mainstream market and mass market.  Study the high-end market for trendy colors, design motifs, shapes and textures.

Familiarity with the mass market is helpful but perhaps not as important as the mainstream and high-end markets.  Keep in mind that many customers will shop at mass-market retail stores for some items and in the mainstream or even high-end markets for others

See our list of product trend and market research resources for helpful websites and publications for researching these markets.

Researching Market Trends

Trend and Market Research

Understanding market fundamentals (buyer expectations, market segmentation, product categories) provides a general knowledge of the market from which to begin more specific research for your particular product and target market. The next step in your research is to look at market trends and prices. The important questions to answer in this stage of market research include:

1.      What are popular market niches?  What product categories have the highest sales currently?  What lifestyle trends are most popular?

2.      What are the prices of comparable products in the market?

3.      What are the industry standards for the product category you are developing?  What sizes are standard?  What packaging or labeling requirements must be met?  Are there any other regulations, such as material content, that need to be adhered to?

4.      What design motifs and colors are in the marketplace now?  What colors and motifs are forecasted to be popular in the future?

Market research should inform the product development process, not lead it.  The information gathered from market and trend research should be used to inspire and influence your design process.  Products studied during your research should never be copied.

Resources for Market and Trend Information

Market research can be conducted in several ways, including first-hand exposure to markets, and browsing printed publications and online resources.  Fortunately, there is an abundance of information, both written and images, available online that can be accessed without fees.  The following research resources are recommended for hand-made, artisan-based enterprises and their product development teams.

Trade Publications:

A trade publication is a periodical (usually monthly or quarterly) magazine, journal or newsletter printed with the intention of target marketing to a specific industry or type of trade or business.  Trade publications are specific to product categories.  For example, "Tabletop Today" is available for the tabletop and gourmet market.  Trade publications are intended for professionals and businesses, not the general public or end consumer.

Trade publications include articles, reports and images and are a great source for information about market and sales statistics, trade shows, leading companies, top-name product designers, and other market trends such as design motifs, color trends, and successful product categories.

Trade publications are available by subscription.  Most trade publications maintain websites that offer a limited amount of information for free.  Online subscriptions are usually available as well as online access to "members only" information for paying customers.  One of our favorite trade publications, "Home Accents Today", offers a lot of useful information for free.

Research the publications' websites before investing in a subscription to any trade magazine.  Subscription rates tend to be high and often the free information is sufficient.  Look for complimentary copies of trade publications at trade shows.

Here are the websites of Trade Publications that we recommend:

Lifestyle Magazines:

A lifestyle magazine is a periodic (usually monthly or bi-monthly) publication with articles, editorials, interviews, photos and images pertaining to a specific lifestyle or interest of consumers.  There are lifestyle magazines about fashion, home design, gardening and outdoor living, cooking and health.  Lifestyle magazines might also be about "green living" or luxury lifestyles.  "Green living" refers to a relatively new lifestyle trend where people make lifestyle choices based on minimizing their impact on the environment. This includes a focus on ecological, organic, or fair trade products.

Lifestyle magazines are an excellent source of design inspiration regarding colors, textures, motifs and patterns.  They give the reader an idea of how products are used in daily life. They show the interiors of people's homes, their gardens, and their kitchens as well as how people dress and use fashion accessories. Lifestyle magazines do not contain many market statistics and reports but when read regularly they are good sources to track trends.

Lifestyle magazines are available in print by subscription and at many retail stores, including bookstores, grocery stores and airport magazine shops. Lifestyle magazines maintain information-rich websites where most or all of the information is available for free.

Attached is a list of top recommended lifestyle magazines for hand-made, artisan-made products.

Some Lifestyle magazines we recommend:

Trade Shows:

Visiting professional trade shows is a productive way to conduct market research for product development and marketing.  It is also an excellent forum for identifying customers.  Trade shows should be selected based on the product category and niche markets where you are focusing.  A company offering home textiles should focus on a home textile show or the home textile and decorative accessories sections of larger trade shows.

When visiting trade shows you observe, first hand, what products are in the market, what is selling well (which companies are busy writing orders), how products are displayed and packaged.

At trade shows the exhibitors are either manufacturers or distributors.  Most companies will be located in the country where the trade show is being held (US companies at US trade shows, etc) but in some cases overseas manufacturers exhibit at global trade shows.  The attendees of trade shows are retail buyers, press and designers.

Trade show management companies maintain websites to promote their trade shows.  These websites often have useful search functions to search for exhibiting companies by product categories.  This can be a practical way to find websites with product information related to your product category.

The following is a list of U.S. trade shows recommended for hand-made products.  Trade shows are also a good place to pick up industry reports and attend seminars and lectures on pertinent industry topics.

New York International Gift Fair:  www.nyigf.com

California Gift Show: www.californiagiftshow.com

Atlanta International Gift Fair: www.americasmart.com

San Francisco International Gift Fair: www.sfigf.com

Chicago Gift & Home Market: www.shopchicagomarket.com

Las Vegas World Market: www.lasvegasmarket.com

Sante Fe International Folk Art Market: www.folkartmarket.org

Retail Stores:

The easiest ways to see what products are in the marketplace and gather information about pricing, sizing and product designs is through retail stores. Retail stores include actual stores you can visit in person.  An increasing number of retail stores also maintain websites.  These websites are the easiest and most accessible way to learn about products currently in the market and to identify comparable retail prices. Many retailers also have mail-order catalogues that are printed and distributed to individual customers.

To see a list of recommended retail stores for conducting tracking trends and researching products, view our list of resources for trends and market research.  The stores on this list are organized by their position in the marketing pyramid described in our section on market segmentation and include notes of what product categories they specialize in.

Note:  When comparing prices, US retail prices must be divided by 5-8 to arrive at the FOB price.

Specialty Industry Reports:

Industry reports are exceptional sources of the latest information on market trends.  Industry reports are often very costly and only affordable for the most established businesses.  The companies that compile these reports often release abbreviated versions of the reports to entice people to buy the complete report.  These summary reports are often excellent sources of information.  See industry report websites for recommended companies to watch.

Your Customers

One of the best sources of market input is often your own customers, particularly if the goal of your product development project is to expand sales of an existing product line.  Write to your customers and ask for their feedback on your products.  Be specific. Ask them what additional products they might be interested in buying from you.  Ask what color ways sell best in their stores. Get feedback on your pricing. Ask about their best selling product categories and best selling items.  Inquire if there are any quality issues that you need to address when developing a new line. Keep a file with this type of feedback from your customers. Ask them when you see them in person at trade shows or when they visit you. 

Product Development Step-by-Step

Developing a New Product Line - Six Steps

What is a product line?  A product line is a selection of individual items, usually within one product category, with complementary functions, sizes, colors, patterns/motifs and prices.  A product line normally consists of 5 to 25 items.

What is a product collection?  A product collection is a selection of product lines, sometimes representing multiple product categories, with complementary functions, sizes, colors, patterns/motifs and prices.  A company may have only one or several collections.

The process of product development follows six basic steps.  These steps should be preceded by a good understanding of your target market through market research as suggested in the section on researching market trends. The time and resources invested in each step will vary from one product to another but all stages are are necessary whether you are developing a custom designed product requested by a customer or are creating an entirely new product concept for your company.  (Note: The following steps outline the process for creating a single product line.  In the concluding section we suggest ways to combine product lines to make a collection. )

Step 1:  Define objectives

It is always good to articulate the objectives of each new product development project, whether they seem obvious or not. Objectives may include:

• Creating a custom product line based on a buyer's request
• Expanding an existing "best selling" product into a broader product line
• Developing a new category of products, perhaps to enter into a new market or niche
• Improving product designs to increase the profitability of a product line
• Developing products to re-position a company

Step 2:  Develop your concept

This step is also known as "idea generation" and many people consider it to be the most creative part of the product development process. During this step design concepts are researched and selected.  Design concepts may include colors, textures, motifs, shapes, materials, techniques, product categories or stories.  Multiple product lines can be inspired from a design concept.

Note: If you are working on custom designs for a buyer, this stage of the product development process might be quite short.  Your buyer usually provides the design concept, including categories, colors, and motifs and may even send specific product sketches.  If this is the case, then you can skip this idea generation phase, although it might still be helpful to create a concept board with the provided design ideas.

Some ideas for design concepts include the following.  It is not necessary to select ideas in each of these categories.  A design concept may include only a few ideas or it might be a more complex concept with many more.

• Colors. You might be inspired by a single color or perhaps a combination of colors. Colors might be neutral and soft, such as warm beige, light browns, and pale grey. Colors might be edgy and trendy, such as bright orange or clear turquoise.
• Textures. Smooth, shiny, rough, bumpy, nubby, sharp edges, soft edges, etc. Smooth, shiny textures with sharp edges will give a product a very modern, contemporary feel. Rough, bumpy textures with soft edges will give a product a more organic, natural feel.
• Motifs. Finding unique motifs indigenous to your own culture and applying them to new materials or new shapes is an excellent way to make a traditional design look new. For example, take motifs from traditional ceramics designs and apply them to embroidered or woven textiles. Or borrow designs found in architecture, for example carved wood patterns in doors, and apply them to glazed ceramic plates.
• Shapes. Look at forms of traditional products, such as ceramics or wood. Think of ways to apply to simplify those shapes to make them look more modern. Try changing the scale of those shapes, making them bigger or smaller, to give them a new look.
• Materials. Most product lines incorporate one or two primary materials. Collect samples and swatches of those materials to use as inspiration in your design concept. Select materials that are unique to your country or region. Try new combinations of materials, such as wood and metal, or textiles and wood. Combining materials is an excellent way to differentiate your products.
• Techniques. Highlight a craft technique that is special to you or your community. Find the best quality examples of that technique. Are their new ways to apply the technique? Can an embroidery technique normally made with cotton be made in wool or even leather instead? Try the technique in non-traditional colors and see if it gives it a new look.
• Product Categories. Normally, a single product line remains within one product category and a product collection can incorporate multiple categories. Select those categories.
• Stories. Begin collecting the stories behind your design inspirations. They will be helpful when creating your marketing materials later.

Where do you find ideas for design concepts?  Look for inspirations locally in your own communities and culture, and then compare those concepts to your market research.  Do those ideas complement opportunities that you identified in the market?  Do your colors coordinate with the traditional, neutral or trendy colors seen in the marketplace?  Do patterns and motifs relate to products observed in your market research?  You want to find design concepts that are unique, innovative and new to the market.  However you also want your concepts to be relevant to the market's tastes and demands.

Local sources of design inspiration can include any of the following:

• Museums, particularly museums with historical collections of hand-crafted items
• Art galleries
• Traditional costumes & utilitarian objects
• Indigenous plants & trees
• Regional geography & geology
• Local architecture
• Books & magazines, including lifestyle magazines

Create a concept board with your design concepts.  Collect photographs, magazine images, postcards, color copies of book pages, fabric swatches, samples of materials, quotes, and other inspiration that define your concept and attach them to a piece of cardboard, large piece of paper or even to your wall.  This will keep you focused as you develop individual items in the product line or collection.

Step 3:  Create product sketches and prototypes

Using your concept board as the design direction, it is time to create your product line.  First make a map or list of products in your line, then develop sketches of the items, and finally create prototypes of a few of the items.

First, list the individual items that will be in your product line.  Every product line will be different but here is one example of how to map a product line:

1.      Define the products.  For example, tote bag, purse, coin bag and cosmetic bag.

2.      Determine how many sizes will be offered for each item.  For example, a small and large tote bag, one size of purse, small and large coin bag, and one size of cosmetic bag.

3.      Decide if you will offer different styles for each item.  For example, a simple style tote bag and a fancier, more complex style with more handwork.

4.      Select specific color ways.  For example, this line might be offered in a black/white, blue/green, and a yellow/orange.

With this product map in hand, begin making sketches of all the items in the collection.  Include dimensions, patterns, and colors.  After making sketches of the products you might find that some items need to be added to the collection and others removed.

Develop prototypes, or samples, of a few of the items.  Determine what aspects of the sample are most difficult to make, where are areas that might be especially fragile. What parts take the most time to make, what parts take the least.  If a sample doesn't look right the first time, try again.  It often takes several attempts to get a sample right.

At the end of this step, you should have a few samples to give your colleagues and buyers an idea of the product, its design features, materials, motifs, etc.  Use sketches to illustrate the complete product line.  Don't invest in making samples of the full product line until later.

Step 4:  Get input!

Before completing the product line, it is really important to solicit input from your colleagues and buyers.

Send a photo of the new sample along with a scanned image of the sketches of the full product line to your buyers.  Ask if they would like to see your concept boards.  Let them know you are working on a new product line and ask them if they have any feedback to offer you.  Do they like the designs?  What are competitive prices for these items?  Are the colors appealing to their market?

Review the samples with someone in charge or production to troubleshoot any problem areas for producing the item in larger quantities.  Consult with the person responsible for packing products for shipments.  Determine if there are any ways the design should be modified to reduce shipping costs or prevent unnecessary shipping breakage.

With this input, return to your sketches and prototypes and make any suggested changes.  Then finalize your designs.

Step 5:  Price your product.

Working closely with your production team, determine the costs of producing your product and the entire product line. Compare these prices with the price of comparable products in the marketplace. If your products are prohibitively high priced consider redesigning the product to reduce production costs. Include all aspects of the product in the pricing - including hangtags, labeling and packing costs.

Step 6: Develop a full set of samples and create marketing materials

Make at least two complete set of samples.  Photograph the samples to have a good set of photographs to use in marketing materials and to have available to email buyers. Develop promotional materials describing the product line, its inspiration, where it is made, who made it, the materials and techniques. Give codes to all new items. Create a price list of FOB prices and terms of reference.

Remember to keep a set of counter samples of all your new product designs.  Counter samples are samples that stay in your office or showroom and are used as a reference for quality control and production to insure consistent quality when fulfilling an order. Keep counter samples for a long time. These samples become your design archive.  Some day you may find a buyer that likes a design that you created 10 years earlier.

Congratulations, you now have a new product line!

Developing a Product Collection

Merchandising a product collection involves developing several product lines that share either design or function features.  A product collection might include a line of home accessories, a line of fashion accessories and a line of tabletop linens all made with similar design motifs, color ways and techniques.  A product collection could also include several product lines within the same category, such as gourmet and table.  This collection might include a line of ceramic tabletop items, a line of tabletop lighting and a line of tabletop linens all sharing some similar design motifs and color ways.

Product Development Planning

Planning and Managing Product Development

Making product development a continual part of your business requires both human and financial resources as well as planning.  The following is a list of ideas of how companies have made sure that product development as a regular part of their work.

• Create a product development budget in your annual planning. Include sufficient funds for creating samples, market research and hiring outside design help, if necessary.
• Select a cross-functional product development team. Product development requires input from people with knowledge in marketing, design and production. Marketing staff provides market research and feedback that they hear from customers; designers help develop concepts and product designs based on current trends; production insures that the products can be produced sustainably.
• Designers can come from your staff or from outside your organization. Sometimes an organization might have a staff designer work in collaboration with an outside designer. When selecting an outside designer, make sure that they have demonstrated experience and success in your target market. A designer with experience in the local fashion market might not be your best choice for designing an export home accessories collection, for example.
• Establish a product development calendar and schedule. Create a goal at the beginning of the year of how many product lines you intend on developing. Put those goals on a calendar, indicating when you expect to complete the lines. Use a product development timeline to insure that you allow sufficient time to develop the products.