Each product will have a life cycle. Using examples, illustrate each stage in the Product Life Cycle outlining the possible challenges and strategies which may be employed to sustain the sales and profitability of the product.
What is a Product?
A product is anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy the customer wants or needs. A product is more than just a tangible goods, it is a service (haircuts, home repairs etc) or idea. However, in marketing product is not just looked at as something that is tangible, but it allow for communicating with the targeted audience on matters such as packaging, branding, highlighting the product tangible benefits, the massaging of the customer’s ego as to why they should have a particular product.
Product can be viewed at three levels, such as Core Product – it addresses what the buyer is really buying, the Actual Product – which features characteristic such as quality, brand, design etc., and the Augmented Product – it is the additional consumer services and benefits that are built around the core and actual product, which includes things as the after sale service, installation, warranty etc.
A Product can also be divided in two main classification based on the types of consumer that used them. These classifications are Consumer Products – which are bought by final consumers for personal, and Industrial products – which are those purchased for further processing or for use in the production of other goods and services. For example, flour that is used as an ingredient in the making of pastry like bun, bread etc.
The Product Life Cycle
The Product Life Cycle (PLC) is a useful tool employed by marketers to know and determining at what stage a product is in its life. Most Product Life-Cycle curves are portrayed as bell-shaped (See figure below).
The product life cycle has four (4) very clearly defined stages, each with its own characteristics that mean different things for business that are trying to manage the life cycle of their particular products.
1. Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new product. It is a period of slow sales growth as the product is introduced in the market. Profits are non-existent because of the heavy expenses of product introduction, although it will be increasing as the product moves on to the growth stage.
2. Growth Stage – The growth stage is typically characterized by a period of rapid market acceptance and substantial profit improvement. strong growth in sales and profits, and because the company can start to benefit from economies of scale in production, the profit margins, as well as the overall amount of profit, will increase. This makes it possible for the company to invest more money in the promotional activity to maximize the potential of this growth stage.
3. Maturity Stage – A slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition. During this stage the aim of the manufacturer is now to maintain the market share they have built up; by consider any product modifications or improvements to the production process which might give them a competitive advantage. During the maturity stage, the product is established and the aim for the manufacturer is now to maintain the market share they have built up. This is probably the most competitive time for most products and businesses need to invest wisely in any marketing they undertake. They also need to consider any product modifications or improvements to the production process which might give them a competitive advantage.
4. Decline Stage – Sales show a downward drift and profits erode. While this decline may be inevitable, the downward drift and profit erosion maybe due to the market becoming saturated (i.e. all the customers who will buy the product have already purchased it) or because the consumers are switching to a different type of product.
The idea of the product life cycle has been around for some time, and it is an important principle manufacturers need to understand in order to make a profit and stay in business. However, the key to successful manufacturing is not just to understand the product life cycle, but to proactively managing products throughout their lifetime, applying the appropriate resources and sales and marketing strategies, depending on what stage products are at in the cycle. Let us now look at the possible challenges and strategies for each stages of the product life-cycle.
Marketing Strategies: Introduction Stage
The first of the four product life cycle stages is the Introduction Stage, which a new product is first distributed and made available for purchase. Any business that is launching a new product must decide when to enter the market and needs to appreciate that this initial stage could require significant investment, increasing awareness of the product through effective marketing and promoting, and also low pricing strategies maybe employed to attract customers and give the new product the best chance of achieving product’s success. For example, a cell phone manufacturer with new technology may introduce a cell phone with basic features at reduced prices in hopes of gaining lots of new customers.
Challenges of the Introduction Stage
Small or no market: When a new product is launched, there is typically no market for it, or if a market does exist it is likely to be very small. Naturally this means that sales are going to be low to start off with. There will be occasions where a great new product or fantastic marketing campaign will create such a buzz that sales take off straight away, but these are generally special cases, and it often takes time and effort before most products achieve this kind of momentum.
High costs: Very few products are created without some research and development, and once they are created, many manufacturers will need to invest in marketing and promotion in order to achieve the kind of demand that will make their new product a success. Both of these can cost a lot of money, and in the case of some markets these costs could run into many millions of dollars. Losses, Not Profits: With all the costs of getting a new product to market, most companies will see negative profits for part of the Initial Stage of the product life cycle, although the amount and duration of these negative profits does differ from one market to another. Some manufacturers could start showing a profit quite quickly, while for companies in other sectors it could take years.