Most entrepreneurs have heard the old saying, “It takes money to make money,” at one point or another in their journey. That sentiment is never more relevant than when applied to the product development team process. The truth is, regardless of the industry, product development life cycle costs are often underestimated — and that can lead to big problems down the road.

In order to get your digital product ideas off the ground, you need resources, planning, and, of course, funding. Strategic partnerships can be vital in getting your product off the ground, but what happens after the launch? How do you ensure that your product stays afloat and continues to grow?

The answer is simple: you need to keep investing in it. This blog post will explore the different stages of the product development life cycle and what costs are associated with each step. We’ll also discuss ways to reduce these costs without sacrificing quality or results.

Defining product development life cycle: What is it? 

Let’s start with a basic definition. The product development life cycle (PDLC) is the process organizations use to create new products or services. It includes every stage a company must go through to take an idea or concept and turn it into a physical product, service, or solution. The cycle typically starts with simple brainstorming research and ends with post-launch support, but there are many steps in between. Businesses must consider the entire journey, from start to finish, if they want to bring a new product to life. For the purpose of this article, we’ll divide the PDLC into six distinct stages. Note that these stages will vary slightly depending on the product or service being developed.

1. Idea Generation

Every great product was once nothing more than an idea. It is the first and arguably most crucial of the product development life cycle stages. It’s when business owners brainstorm and research to develop new product or service concepts that fill a need in the market.

Idea generation can be a long and challenging process, but it’s worth it to take the time to get it right. After all, the success of your product depends on it. If you’re having trouble finding new ideas, consider these brainstorming techniques:

“Give me the same thing, but different”

Plenty of products we use today started as similar versions of other products. In this technique, you start with an existing product or service and try to improve upon it. That could mean making it more affordable, user-friendly, more accessible, or adding original product features.

For example, when Airbnb first launched, it was just a copy of existing hotel booking websites. But what made Airbnb different was that it offered an alternative to traditional hotels by connecting people with extra space in their homes with travelers looking for a place to stay.

“Think outside the box.”

This technique lets your imagination run wild and come up with ideas completely out of the ordinary. This could mean developing a new product or service that’s unlike anything else on the market. These ideas are often the riskiest, as they’ve never been done before, and there’s no guarantee they’ll be successful.

The popular messaging app Snapchat is an excellent example of an outside-the-box idea that paid off. When it first launched, Snapchat was nothing more than a way to send disappearing messages. But what made it unique was that it was geared toward teenagers and young adults looking for a more private way to communicate.

Marry two ideas

In this technique, you combine two existing ideas or concepts to create something new. This could mean developing a product that serves multiple purposes or targets a specific niche market.

Let’s take UbearEats as an example. After seeing the wild success of Uber, their ride-sharing service, the team behind UbearEats saw an opportunity in the food delivery market. With UbearEats, users can order food from their favorite restaurants and have it delivered to their doorsteps in minutes.

They essentially took the Uber model and applied it to the food delivery industry. By marrying two existing ideas, they could create something new and innovative.

2. Product definition

A vague product concept or two-line pitch is insufficient to bring a new product to market. To move forward, you need to have a clear and concise definition of your product or service. Here’s when businesses take their ideas and flesh them out, coming up with detailed descriptions of what the product will look like, how it will work, and who it’s for.

The ideation stage is all about taking your concept and making it a reality. To do this, you’ll need to answer these essential questions that address strategy and feasibility:

What problem does your product or service solve?

Who is your target market?

What are your competitors offering?

How will you make money?

What are your long-term goals for the product?

Answering these questions will help you fine-tune your concept and give you a better idea of what your product should look like.

3. Prototyping 

Next up is prototyping. This step is where businesses take their product definitions and start to create a visualization of the product. It will give you a better idea of what your product will look like and how it will work. In a digital setting, this could mean creating wireframes or plans.

Prototyping is an important step in product development, as it allows you to test your ideas and see if they’re viable. If something doesn’t look quite right, you can make changes to the prototype before moving on to the next stage. We’re still working on paper here, so there’s no coding required just yet, just focus on product design.

For example, if you’re launching a new mobile app, you might create a mockup of the interface to get an idea of how users will interact with it. Having a professional designer make your prototypes will give you a more accurate representation of the final product.

If you don’t have the budget to hire a designer, plenty of online tools can help you create basic prototypes. Once you’ve completed your prototype, it’s time to put it to the test.

4. Initial design 

The holy grail in these early development stages of product development is known as the MVP or minimum viable product. This version 1.0 is the bare-bones version of your product that you’ll release to the public for feedback. It’s important to note that an MVP is not a prototype; it’s a fully functioning product with enough features to satisfy early adopters.

The goal here is to get your product out there as quickly as possible and prioritize functionality so you can start gathering feedback in the next stage. A famous example of this is Amazon. In the early days, Amazon was nothing more than a basic online bookstore. But it was enough to get people to use the site and provide feedback on what they wanted to see. Jeff Bezos would buy books from distributors and ship them himself to customers who had ordered them. It wasn’t the most efficient way to run a business, but it allowed him to learn what people wanted from Amazon. He then used this feedback to improve the site and add new features.

5. Validation 

Once your MVP is live, the testing phase begins. You’ll start to get feedback from real users and see how they interact with your product. It’s important to note that you can’t just sit back and wait for feedback to roll in; you need to be proactive about it. Tell your followers about your Beta release, and give them a way to provide feedback.

The key word here is validation. You’re not just looking for feedback; you’re looking for feedback that proves your product is worth pursuing. This validation could be in the form of user engagement data, conversion rates, or even revenue. This phase should attract early adopters and, hopefully, potential investors.

You can use their feedback to improve your product before launching it to the broader public. For example, if you find that users are having trouble understanding your app, you can make changes to the interface or add tutorials. One popular way to test digital products is with A/B testing. This method consists of releasing two versions of your product, A and B, and seeing which one performs better. For example, you might release two versions of your app, one with a monthly subscription cost and one with a credit-based system, and see which one people prefer. The goal here is to get your product ready for launch. Once you’re confident it’s ready, it’s time to take it to the next level.

6. Commercialization 

After the product launch, start thinking about post-launch support. This last step is the stage where most organizations overlook that they need to spend a fair amount of money on keeping the product running. Your product might be live, but that doesn’t mean your work is done. You’ll need to monitor it for bugs and security issues, as well as update it with new features. Depending on the size of your product, you might need a team of people to do this.

It’s important to find a partner who can provide post-launch support at a reasonable cost. You don’t want to spend all your profits on keeping the product afloat since you’ll also need a budget for a marketing strategy, customer support, and so on.

After your product’s been on the market for a few months, you’ll also need to do a post-launch review. Here is when you take a step back and assess how your product is performing. What’s working well, and what needs to be improved? How is the team coming along? The key thing to remember here is that your product is never truly “finished.” There will always be room for improvement, so don’t get too comfortable. The best products are the ones that are constantly evolving to meet the needs of their users, and if you’re not tuned into their needs, this period could turn into the decline stage.

Standard costs associated with a product’s development lifecycle 

If you don’t want to run out of gas before reaching the finish line, you must be mindful of the costs associated with each stage of a product’s development life cycle. Here are some of the most common ones:


The first and most obvious cost associated with new product development is labor. You’ll need to pay your team members, including designers, developers, testers, and so on. Depending on the size of your product, you might also need to hire a project manager. If you’re outsourcing any of the work, you’ll need to factor in that cost as well.

Labor is often the most expensive part of the product life cycle, so it’s best to be mindful of how you spend your money. If you’re a startup with little to no capital for employees, you can look into hiring freelancers or using an internship program. Alternatively, you could offer equity in your company in exchange for services.

Production costs 

Another cost to consider is materials. These include things like licenses, software, and hardware. Some businesses also have overhead costs, such as office space and equipment. And don’t forget about taxes. Depending on where you’re located, you might need to pay VAT or GST on top of your production costs.

For instance, someone building an AI chatbot will need to buy a Natural Language Processing software license. They might also need to pay for things like domain names, hosting, and security features.

It’s also important to understand that your cost during this phase will depend on the number of iteration loops your prototype goes through. The more loops, the higher the price tag. While getting things right on the first try is nearly impossible, you should aim for as few iterations as possible to keep costs down.

Testing costs

It’s not over yet. Once your product is built, you’ll need to test it to make sure it’s actually usable and will perform well when it goes to market. Depending on the size and complexity of your product, this could be costly. You might need to hire someone specifically to audit your product, or you might need to pay for access to a professional testing platform.

You should also budget for things like user research and surveys. You can hire consumer participants to look for bugs or use online tools to survey your user base. This will help you understand how people use your product and what areas need improvement. 

And once you do find areas that need improvement, you’ll need to go back and make changes to your product, which will add to your costs. Hopefully, the developer who worked on your MVP will still be available to make the changes, but if not, you’ll need to factor in the cost of hiring someone new. 

Post-launch support costs

Finally, you will need to account for post-launch support. Budget for costs like bug fixes, security updates, and customer service. In the case of larger products, like social media platforms or big apps, you might need to hire a dedicated support team.

You should also budget for regular maintenance and updates. As your product grows and evolves, you’ll need to add new features and make changes to existing ones. And as your user base grows, you’ll need to scale your support accordingly. Digital products might use cloud-based storage, which will increase in demand as you add more users. For example, AWS (Amazon Web Services) charges monthly for the amount of data you store, and the price increases as you add more users.

The final cost to budget for is the pivot. Many companies find that their product doesn’t quite meet the needs of their target market, so they need to make changes. That could mean anything from a complete redesign to adding new features or changing the revenue model. Pivots can be costly, so it’s important to keep some extra money in the budget for unexpected expenses.

What you need to know about costs

We all know that cash flow is critical for any business’ survival, so you must take an approach to product development that doesn’t cripple your company with upfront costs. There are a few ways to do this:

Good setup and planning create the best outcomes.

As you can see, the product development process is a highly segmented process with many moving parts. It’s essential to clearly understand what you want to accomplish before you start. Otherwise, you’ll likely end up going over budget.

Creating a detailed product roadmap is a great way to keep everyone on the same page and ensure that your product meets all the necessary requirements. Set a budget for each development phase, and make sure you include a contingency for unexpected expenses.

Don’t underestimate post-production costs.

When we talk about “each phase of product development,” that includes post-production support. Too many businesses blow their entire budget on building the product and then find themselves unable to pay for customer support, bug fixes, and other crucial expenses. However, post-production costs are just as important as the initial development costs, and they should be budgeted for accordingly.

Make the money you spend worth it: Ensuring a favorable ROI

The best way to ensure your product development budget is worth it is to focus on getting a positive return on investment (ROI). That means that the revenue generated by your product should exceed the costs of developing and supporting it.

There are a few ways to ensure a favorable ROI:

Develop a plan that includes trajectory and goals:

Use key metrics like customer churn and lifetime value to track whether or not your product is on track to meeting its goals. Analytics tools can help you track these metrics and adjust your product as needed.

Make sure you do thorough market research to get a solid understanding of potential customer needs to avoid building something they don’t want. This seems obvious, but not understanding the target audience is one of the most common mistakes companies make. They build a product that they think is great, but it turns out that their target market doesn’t actually need or want it.

Work with external partners.

From investors to developers, working with the right partners can make a big difference in your product’s success. Finding partners who share your vision and are committed to helping you achieve your goals is vital. They should also be able to provide valuable insights and feedback throughout the process.

Investors want to see a return on their investment, so they’re more likely to support a product with a clear path to profitability. Developers can help you save time and money by building the product more efficiently. And finally, external partners can provide valuable feedback to help you improve your product.

Be selective about who you choose as a partner. Find an organization that fills a role you actually need. For example, if you’re looking for someone to help with marketing, find an agency specializing in your industry rather than a jack-of-all-trades firm. The most important thing is to ensure you’re working with partners committed to your success. Ask for referrals from trusted associates, and look for organizations with a proven track record.

The big takeaways 

Product development is often more expensive than most entrepreneurs realize. You’ll need to look beyond the initial development costs and factor in post-production support well after your product hits the market.

Don’t “go with the flow” when it comes to money. The best thing you can do to prepare for these costs is to plan and budget meticulously from the start. Have a clear understanding of what you need to spend and why. This product strategy will help you make informed decisions about your product, avoid going over budget, and ensure that you get a positive investment return.

Finally, don’t forget the importance of external partners. Look for innovative organizations that share your vision and can cover multiple bases for you. They will save you time and money in the long run and increase your chances of success.

At SWARM, we specialize in digital product development and have a team of experts who can help you every step of the way, from discovery to launch. Contact us today to learn more.