Product life cycle refers to the market response to a new product over a period of time. It is based upon the biological life cycle and shows the different stages through which a product goes from development to decline. In order to achieve the desired level of profits, the introduction of the new product at a proper time is crucial.
Stages of Product Life Cycle
Product life cycle comprises four stages:
Stages of Product Life Cycle
Product life cycle comprises four stages:
- Introduction stage
- Growth stage
- Maturity stage
- Decline stage
Introduction Stage
The product has just been launched in the market; sales will be low until consumers become aware about the product and its features. Here, the company’s core focus will be on establishing a market and arising demand for the product. At this level the total initial cost incurred by the company will be high as substantial research and development costs have been incurred in getting the product to this stage, also marketing costs may be high in order to test the market, undergo launch promotions and set up distribution channels. Therefore, it is highly unlikely that the company will make profits at this stage.
The product has just been launched in the market; sales will be low until consumers become aware about the product and its features. Here, the company’s core focus will be on establishing a market and arising demand for the product. At this level the total initial cost incurred by the company will be high as substantial research and development costs have been incurred in getting the product to this stage, also marketing costs may be high in order to test the market, undergo launch promotions and set up distribution channels. Therefore, it is highly unlikely that the company will make profits at this stage.
The marketing strategy that can be used at this stage will be:
- Price skimming may be used if the product is a new invention and has no competitors
- Competitive pricing: Companies base their prices according to competitors? prices. may be used if it already has lot of competitors.
- Low pricing may be used if the aim is to penetrate and gain the market share.
- At this promotion is done with intention to build brand awareness. Therefore, samples/trials are to be provided which would be helpful in attracting early and potential customers. Promotional programs are more essential at this stage.
Growth Stage
This stage is characterised by rapid growth in sales, profits and competition also begin to increase. The product becomes well recognised at this stage and some of the buyers repeat their purchase patterns. Here, the company seeks to build brand preference and increase its market share.
The marketing strategy that can be used at this stage will be:
This stage is characterised by rapid growth in sales, profits and competition also begin to increase. The product becomes well recognised at this stage and some of the buyers repeat their purchase patterns. Here, the company seeks to build brand preference and increase its market share.
The marketing strategy that can be used at this stage will be:
- Prices are maintained or increased as company gets high demand at low competition
- Prices may be reduced if faced by stiff competition
- Distribution channels to be enhanced due to increase in demand
- Persuasive advertising may be used
- Quality is maintained and additional features or services are added
- Distribution channels to be enhanced due to increase in demand
Maturity Stage
At this stage, the sales keeping growing but at a declining trend. Brand awareness is high and also competition is fierce. Increased competition results in decrease in market share and decrease in prices. The primary objective at this stage is to defend the market share and maxmise profits.
The marketing strategy that can be used at this stage will be:
- Additional features to be introduced to differentiate between competitors product
- Promotional pricing can be used as an option
- Incentives to be offered to consumers
- Repetitive advertising is done to remind the consumers
- Prices can be reduced in order to retain consumers
Decline Stage
As the markets saturate, the sales will decline. Sales might also decline to change in consumer preferences and obsolete technology. Overall profitability also falls.
The marketing strategy that can be used at this stage will be:
- Maintain the product, add additional features and find alternative use of the product
- Reduce cost by transferring production to cheaper markets and reducing advertising cost
- Discontinue product and liquidate all inventory
- Sell the product to a competitor
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