Showing posts with label decline. Show all posts
Showing posts with label decline. Show all posts

Thursday 5 January 2017

THE PRODUCT LIFE CYCLE




Understanding the characteristics of each part of the life cycle places a manager in a position to make preparations and responses that increase the chances of better product performance.



Fig. Plc: Basic representation of the normal product life cycle.
                 
                 
                                                 
Stage 1: The introduction period. The introduction chapter is the period a good or service is brought to the market as a never-before offered production. The marketing effort, naturally, leans heavily toward making potential consumers aware of the product and its merits. There is great expenditure on activities like advertising, sales promotion and distribution as the marketer entices the audience to try the product.

In the introductory phase, sales are low and no profit is to be realistically expected. It is a spending period. Pricing is likely to lie somewhere between recovery of some product development and marketing costs and allowing many to buy.

Stage 2: The growth period. The marketing strategies of the introductory stage begin to pay off with grown product knowledge and acceptance, and a steep rise in sales. Experience, economies of scale and the advantage of being the pioneering producer result in lower costs and good profits. Production has to cope with the increasing demand not only to avoid disappointing consumers but also to not give signals that there is room for more players. However, sensing healthy fortunes, competition does start creeping in at this stage, making it necessary to from-time-to-time revise strategy, including slightly lowering price.

In the growth segment of the life cycle, a big portion of the market still exists that is yet to buy the product for the first time ever, but it keeps shrinking.

Stage 3: The maturity period. The market is now saturated and each of the many competitors now in the market tries to grow mainly by grabbing customers from the others. There are basically no first-time consumers and the market is buying as much as its purchasing power can. Price wars and product differentiation become more common.

Overall profits markedly fall as prices now have even thinner margins. Some producers simply seek a stable market and a decent return.

Stage 4: The decline period. As radically better or cheaper competing products emerge, less and less of the existing is bought. If the current product can also be made more competitive, say, by significantly lowering production costs so that it has a more attractive price, this stage could be held at bay for some time or made more gradual. Whatever the case, eventually, further decreases in both profits and sales make operations uneconomic and the product has to be discontinued.         

Conclusion

There is no standard length for any of the four stages of the product life cycle. How long any of the segments is depends on such dynamics as the type of product, amount of competition and marketing strategies employed.




        Rupert Chimfwembe                              5 January 2017