Relevant to business models that rely on selling a product or service that can only be sold once, the product life cycle describes each stage that the product goes through, from beginning to end. Understanding these stages allows you to identify where your product is currently positioned regarding its profitability so that you can anticipate upcoming sales and prepare to take action for when sales and profit start to decline.
Figure 3.3: The stages of the product life cycle in relation to time, profit and loss.
The first stage of the product life cycle is the development of the product. As indicated in Figure 3.3, the development phase is created at a loss. In real projects, there may be a steeper increase of losses generated by the software development before costs start to decrease toward the end of the product development.
Key trends:
Increasing losses occurred through development costs
Extensions to development due to missed deadlines and/or unknown factors