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In today's uncertain market, companies must implement strategies to maintain their product position. According to Bittel (1980), constant introduction of new products is essential due to the product life cycle. Operations managers need clear understanding of this concept when creating strategies for both new and existing products. Griffin and Ebert (2002) define the product life cycle as the stages a product goes through during its profitable lifespan, which can range from months to decades based on customer demand. Every product experiences four phases in the market: introductory, growth, maturity, and decline.
The image displays the various phases of a product's life cycle, with detailed explanations for each stage to come at a later time.
It is important to consider the product's position in the product life cycle when determining distribution strategies. In the beginning, extensive distribution may be necessary for a successful launch. As the product matures, focus may shift towards after-sales service, resulting in more selective distribution. Only dealers who can offer required after-sales service should be allowed to sell the product.
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Ultimately, specific strategies are crucial for each phase of a product's life cycle to stay competitive in a constantly changing market.
The stages of the product life cycle and their definitions, along with helpful strategies, are outlined below.
At the beginning of a process:
Stevenson (1999) states that the introduction stage commences when a product enters the marketplace, sparking curiosity among buyers. Initially, demand is low due to unfamiliarity, often resulting in price decreases. Over time, with enhancements in production and design, products become more reliable and cost-effective, leading to increased buyer awareness and demand.
Griffin and Ebert (2002) also note that during this stage, marketers aim to raise awareness among their target markets about the products' benefits.
During this stage, the product is typically defined by characteristics such as innovation (diffusion of innovative curve), product development (Ansoff Growth Matrix), and problem children (Boston Consulting Group). In a study by Smith et al. (1997), some common characteristics include:
- introducing new products;
- low sales;
- having a low market share;
Target audience interested in purchasing recently launched items.
Compared to other phases, profits are low or negative in this stage due to low sales and high distribution and promotional costs. The company invests heavily in promotions to inform customers about the product and encourage them to try it. At this early stage, the company targets customers who are most willing to make a purchase since the market may not be ready for new products.
In order for a company to become a market leader in their product category, they must align their strategy with their intended product positioning. This involves consistently developing new pricing, promotion, and marketing strategies over the long-term life of the product.
Growth Stage:
During the second stage of the product life cycle process, known as the growth phase, Heizer and Render (2001) explain that the product design has started to stabilize. It is crucial to accurately forecast capacity requirements during this stage. This may involve adding or enhancing capacity to meet the growing product demand. Additionally, customer loyalty may develop as some customers who have tried the product earlier continue to support it. As the market expands, new competitors will likely enter, introducing new features to attract customers. These factors could lead to a stable or slightly decreased product price.
To remain competitive in the market, a company must continue promoting its product, leading to increased profits. The company employs various strategies to sustain its presence in the rapidly growing market, including enhancing product quality, expanding distribution channels, changing advertising focus from product promotion to market reminders and awareness, and lowering prices to attract more buyers.
Smith et al - 1997, states that during this stage, companies that have effectively completed the introduction phase of their product have a notable market share and are very profitable.
- increasing sales and profitability;
Increased usage is now more common.
- market growth;
- dominating market share;
There is a rise in competition.
Maturity Stage:
According to Pride et al, (1988), the third stage a product goes through is maturity. Sales continue to increase but at a slower rate during this stage, until they eventually peak and start to decline. Maturity stages for many products last longer than previous stages, leading to a decline in industry profits. As sales growth slows down, firms and their competitors reduce prices, increase advertising and sales promotions, and may force weaker competitors out of the market. Only the strongest competitors are able to survive the intense competition.
When a company's product reaches maturity, it should consider a different strategy, either by redesigning the market or the product itself. Modifying the market involves increasing consumption of the current product, while the matured product can also be redesigned in terms of packaging or style. This is an effective way for a firm to strengthen its market share, encouraging consumers to use the product more frequently or in new ways. Pricing strategies can be adjusted during this stage, with options like markdowns or price incentives. Marketers may provide incentives and services to distinguish their matured products, particularly in comparison to competitors. Sales promotions and aggressive personal selling can be effective during this period, especially when facing high competition that requires significant promotional investments.
As stated by Smith et al (1997), this phase is generally characterized by:
market maturity and a decrease in sales growth
Conversion of late majority of customers
Striving to enhance market penetration and share.
During the decline stage:
In the final stage of the product life cycle, sales decrease and profit margins become even thinner as customers lose interest in the product and look forward to newer options. Dealers may lower their inventory in preparation for decreased demand, resulting in reduced sales and profits. Technological advancements, shifting consumer preferences, and fierce competition all play a role in this decline, causing some companies to leave the market while others must adapt their strategies by increasing prices to offset costs, altering prices to retain market share, or decreasing prices to clear out inventory.
The firm can choose to decrease advertising and promotional spending in order to lower prices. They can also focus on smaller market segments and trade channels, limiting distribution to the most profitable existing markets. While some advertising and promotions may be used to slow down the decline, they will not be heavily promoted. Ultimately, the company may decide to completely stop production of the product.
Similar to the previous three stages, this phase is also characterized by:
Declining sales and profits;
- Rationalism in the marketplace is achieved through mergers, acquisitions, and takeovers;
Some products will be exploited for economic gain through profiteering.
- harvest may be necessary for products from time to time;
Some product extensions may be developed in certain situations.
Identifying when a product is reaching maturity and starting to decline is crucial for businesses to remain competitive in the market.
"The need in strategy development is to detect changes in the trend of industry sales, to detect when the product life cycle will enter a new phase", (Asker, 1984). In other word, it is very essential for a firm to view and analyze all market factors involved when its product's growth phase of the product life cycle changes to a flat maturity phase and when the maturity phase changes into a decline phase. Below are some factors that supply as market indicators that serve as an aid for a firm in detecting its product maturity and decline...
- The lack of product differentiation and oversupply are contributing factors to price pressures.
As the product matures, buyers are less willing to pay the highest price for brand security because they are already familiar with the related product.
- The advancement of technology and the launch of new products can result in a decrease in demand for a particular product. This shift is demonstrated by the switch from black and white TVs to color televisions, which has significantly and unexpectedly impacted the sales of black and white sets.
A decrease in the number of potential first-time buyers for a specific product can result in lower market demand, decreased company sales, and reduced profits.
- The current market is oversaturated with no room for expansion from existing or new customers.
- Customers who have been using the product for a while may start losing interest and potentially be considering switching to a different brand.
Although the concept of a product life cycle is simple and powerful, its application is not straightforward. The stages mentioned are challenging to predict, determine, and analyze. Additionally, determining the product definition can be difficult. Even if the life cycle stages are identified, the strategy implications may not be clear.
In conclusion, it is crucial for a company to understand the life cycle stages of each product it manages and to anticipate the duration of each stage. This knowledge is essential for devising strategic plans, for example, by introducing a replacement product during a prolonged maturity stage or launching a new product earlier if the maturity stage is projected to be brief.
Strategies for Product Life Cycle Success. (2016, Jul 07). Retrieved from https://studymoose.com/product-life-cycle-and-its-stages-essay
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