PRODUCT LIFE CYCLE
Products like human beings have life cycle-products (product life cycle) pass through stages as they age. Some products may move rapidly through the product life-cycle, while others pass through those stages over long time period.
STAGE OF PRODUCT LIFE CYCLE
The following are the stages of product life cycle:
INTRODUCTION STAGES
In the market introduction stage, sales are low as a new idea is just being introduced to market. At this stage customers do not know about the product, therefore promotional effort is geared towards telling or informing them about product benefits, and the objective is to build primary demand.
Skimming or penetration price strategy is usually adopted while product offering can be one or few but not many and the market structure is normally a monopoly or monopolistic competition.
The introductory stage usually is associated with losses or no profits due to much money spent for promotion, product and place development. All these investments are for the hope of future profits.
GROWTH STAGE
Sales volume rises rapidly during the growth stage as new customers make initial purchases and early buyers make a repeat purchase of the product. The innovators begin to make substantial profits as more and more customers buy. Promotional efforts especially advertising and word-of-mouth should be used to persuade hesitant buyers to make trial purchases.
One major challenges of the growth stage is the attraction of competitors, who rush into the market with similar offerings. A product that built enviable market share during the market introduction may start losing sales to competitive product. In order o compete effectively, a firm may need to improve and modify its product, build brand familiarity since the market situations have change to either monopolistic competition or oligopoly. Additional spending on promotion and distribution may also be necessary.
Promotional effort is now aimed not only at informing and persuading but reminding customers while distribution becomes more intensive.
MATURITY STAGE
At maturity stage, industry sales level off and competition get tougher, industry profits go down because promotion costs rises and more competitors cut price to attract business. Tougher competitors remain while other new firms may still enter the market at this stage but the less efficient firms that are unable to cope with this pressure drop out of the market. However, later entries skip the early life-cycle stages especially the profitable market growth stage this makes it more difficult and expensive for them.
Price – setting at this stage meet competition especially n oligopoly while competitors products look similar thus pushing the marketing. Situation towards pure competition. Based on this most firms to differentiate their products by focusing on attributes such as reliability, quality, service and other unique benefit through heavy promotional activities.
Some other firms may take over wholesale function to enable such firms monitor the market and intensify distribution.
DECLINE STAGE
At this stage, innovations or shifts in consumer preferences bring about an absolute decline in industry sales. Price competition from dying products becomes more vigorous but firms with strong brands may still be making profits even to the end.
Firms are forced to cut prices due to fall in sales and profit decline sometimes losses. Manufacturers gradually drop the declining items from their products lines and search for alternatives, if they have not done so. Most firms think it wise to consider price increase, consolidate distribution by dropping some outlets, reduction in advertising to only loyal customers.
IMPORTANCE OF PRODUCT LIFE CYCLE CONCEPT
1. That it is dangerous to rely on only one product or too few lines of products. No product lives forever.
2. To know the appropriate time for product improvement and modification.
3. To know the structural changes that occur in the market at different stages of a product life, so that in develop offensive strategies against competitive pressure.
4. Formulation and implementation of appropriate promotional strategies for each stages of the product life-cycle.
5. To know the structural changes that occurs in the market
6. Development of appropriate pricing strategies necessary for the achievement of marketing objectives at each stages.
7. Proper timing of new – product introduction the earlier the better.
8. To know how to control and regulate costs and expenses associated with a product over the stages of its life-cycle.
9. To know how the product life-cycle can be extended at profitable stage.
10. To know how and when to phase out a dying product or products.