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How the Product Life Cycle works:
=> The line graph shows the standard product life cycle. At the introduction stage, product sales are low. They rise significantly during the growth stage, and then level off at the maturity stage, before eventually falling during the decline stage until the product is withdrawn from the market. i) Introduction Stage: - The introduction phase is the first time customers have been introduced and persuaded to try a new product that directly affects product sales, profit margin. - This initial stage involves introducing a new item or service to the public; honing in on a target market; developing a market strategy, usually through an investment in advertising and marketing to make consumers aware of this product and its benefits; choosing between high skim pricing to recover development costs, or low penetration pricing to build market share rapidly, if there are already competitors. - During the introduction stage, there is often little to no competition for a product, as competitors may just be getting a first look at the new offering. However, companies still often experience negative financial results at this stage as sales volume tend to be lower; promotional pricing may be low to educate potential consumers (innovators and early adopters) about the product, build product awareness; the high cost of manufacturing, marketing campains and the sales strategy is still being evaluated. ii) Growth Stage: - If a product successfully enters the market, it then moves to the growth stage. - The second phase consists of choosing to invest heavily in advertising if the product faces heavy competiton; refining product by improving functionality based on customer feedback; growing profit margins, new distribution channels and doing a special promotion which is aimed at a much broader audience (the majority of the product’s users). - Financially, the growth period of the product life cycle results in increased public awareness about the product, sales and higher revenue as costs are reduced due to economies of scale, so profitability rises. However, competitors begin to offer rival products potentially forcing the company to remain or decrease prices and experience lower margins. For example, electric vehicles are experiencing a growth stage in their product life cycle as companies work to push them into the marketplace with continued design improvements. iii) Maturity Stage: - The maturity phase represents the peak sales volume for a particular product. Ideally, this is the most profitable stage in the product life cycle, with sales revenue exceeding expenses from marketing, manufacturing, and personnel. - Depending on the good, a company may begin deciding how to innovate its product or introduce new ways to capture a larger market share and maximize profit. This includes getting more feedback from customers, and researching their demographics and their needs. - During the maturity stage, competition is at the highest level as rival companies have had enough time to introduce competing and improved products, meaning that branding, price and product differentiation becomes even more important to maintain a market share. Sales levels stabilize, and a company strives to have its product exist in this maturity stage for as long as possible. iv) Decline Stage: - The final product life cycle stage involves decline. Most products will eventually fade from the market, often due to obsolescence, shifting consumer behavior and a company is overtaken by a competitor with a better value proposition, product quality, or marketing strategy. - Should a product be entirely retired, the company will stop generating support for it and will entirely phase out marketing endeavors. Alternatively, the company may decide to revamp the product or introduce a next generation, completely overhauled model. If the upgrade is substantial enough, the company may choose to re-enter the product life cycle by introducing the new version to the market. - Either costs are too high compared to sales, so the product is discontinued, or the company continues to offer the product to loyal customers, while reducing costs to a minimum. The price is either maintained, or greatly reduced to liquidate stock if the product is discontinued. It’s possible for a product to enter the decline stage but not disappear entirely for some time. For instance, the typewriter began to fall into decline with the advent of the electronic word processor and then computers, laptops and smartphones. => The stage of the product life cycle impacts the way marketed to consumers. A new product needs to be explained, while a mature product needs to be differentiated from its competitors. The article is based on reference sources: https://www.twi-global.com/technical- knowledge/faqs/what-is-a-product-life-cycle#HowDoesitWork; https://www.investopedia.com/terms/p/product-life-cycle.asp#toc-how-the-product- life-cycle-works; https://www.shopify.com/blog/product-life-cycle.
