It is claimed that every product has a life cycle. It is launched; it grows, and at some point, may die. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.
The different stages in a product life cycle are:
Introduction Stage
In the introduction stage, the firm seeks to build product awareness and develop a market for the product. At this stage:
1. costs are high
2. slow sales volumes to start
3. little or no
4. demand has to be created
5. customers have to be prompted to try the product
6. profit is not earned at this stage
The impact on the marketing mix is as follows:
• Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained.
• Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.
• Distribution is selective until consumers show acceptance of the product.
• Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.
Growth Stage
Next, consumer interest will bring about the Growth stage, distinguished by increasing sales and the emergence of competitors. The Growth stage is also characterized by sustaining marketing activities on the vendor's side, with customers engaged in repeat purchase behavior patterns.
At this stage:
1. costs are reduced due to economies of scale
2. sales volume increases significantly
3. profitability begins to rise
4. public awareness increases
5. competition begins to increase with a few new players in establishing market
6. increased competition leads to price decreases
At this point in time, mostly loyal customers purchase the product.
In this stage, the firm seeks to build brand preference and increase market share.
• Product quality is maintained and additional features and support services may be added.
• Pricing is maintained as the firm enjoys increasing demand with little competition.
• Distribution channels are added as demand increases and customers accept the product.
• Promotion is aimed at a broader audience.
Maturity Stage
Arrival of the product's Maturity stage is evident when competitors begin to leave the market, sales velocity is dramatically reduced, and sales volume reaches a steady state.
At this stage:
1. costs are lowered as a result of production volumes increasing and experience curve effects
2. sales volume peaks and market saturation is reached
3. increase in competitors entering the market
4. prices tend to drop due to the proliferation of competing products
5. brand differentiation and feature diversification is emphasized to maintain or increase market share
At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.
• Product features may be enhanced to differentiate the product from that of competitors.
• Pricing may be lower because of the new competition.
• Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.
• Promotion emphasizes product differentiation.
Decline Stage Continuous decline in sales signals entry into the Decline stage. The lingering effects of competition, unfavorable economic conditions, new fashion trends, etc, often explain the decline in sales.
During this stafe:
1. costs become counter-optimal
2. sales volume decline or stabilize
3. prices, profitability diminish
4. profit becomes more a challenge of production/distribution efficiency than increased sales
As sales decline, the firm has several options:
• Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
• Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
• Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.
A product life cycle is to assert four things: 1) that products have a limited life, 2) product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, 3) profits rise and fall at different stages of product life cycle, and 4) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.
The different stages in a product life cycle are:
Introduction Stage
In the introduction stage, the firm seeks to build product awareness and develop a market for the product. At this stage:
1. costs are high
2. slow sales volumes to start
3. little or no
4. demand has to be created
5. customers have to be prompted to try the product
6. profit is not earned at this stage
The impact on the marketing mix is as follows:
• Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained.
• Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.
• Distribution is selective until consumers show acceptance of the product.
• Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.
Growth Stage
Next, consumer interest will bring about the Growth stage, distinguished by increasing sales and the emergence of competitors. The Growth stage is also characterized by sustaining marketing activities on the vendor's side, with customers engaged in repeat purchase behavior patterns.
At this stage:
1. costs are reduced due to economies of scale
2. sales volume increases significantly
3. profitability begins to rise
4. public awareness increases
5. competition begins to increase with a few new players in establishing market
6. increased competition leads to price decreases
At this point in time, mostly loyal customers purchase the product.
In this stage, the firm seeks to build brand preference and increase market share.
• Product quality is maintained and additional features and support services may be added.
• Pricing is maintained as the firm enjoys increasing demand with little competition.
• Distribution channels are added as demand increases and customers accept the product.
• Promotion is aimed at a broader audience.
Maturity Stage
Arrival of the product's Maturity stage is evident when competitors begin to leave the market, sales velocity is dramatically reduced, and sales volume reaches a steady state.
At this stage:
1. costs are lowered as a result of production volumes increasing and experience curve effects
2. sales volume peaks and market saturation is reached
3. increase in competitors entering the market
4. prices tend to drop due to the proliferation of competing products
5. brand differentiation and feature diversification is emphasized to maintain or increase market share
At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.
• Product features may be enhanced to differentiate the product from that of competitors.
• Pricing may be lower because of the new competition.
• Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.
• Promotion emphasizes product differentiation.
Decline Stage Continuous decline in sales signals entry into the Decline stage. The lingering effects of competition, unfavorable economic conditions, new fashion trends, etc, often explain the decline in sales.
During this stafe:
1. costs become counter-optimal
2. sales volume decline or stabilize
3. prices, profitability diminish
4. profit becomes more a challenge of production/distribution efficiency than increased sales
As sales decline, the firm has several options:
• Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
• Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
• Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.
A product life cycle is to assert four things: 1) that products have a limited life, 2) product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, 3) profits rise and fall at different stages of product life cycle, and 4) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.
No comments:
Post a Comment