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Product Life Cycle
A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycleand is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.
The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:
Product Life Cycle Diagram
Introduction Stage
In the introduction stage, the firm seeks to build product awareness and develop a market for the product. The impact on the marketing mix is as follows:
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Product branding and quality level is established, and intellectual property protection such as patents and trademarks are obtained.
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Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.
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Distribution is selective until consumers show acceptance of the product.
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Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.
Growth Stage
In the growth stage, the firm seeks to build brand preference and increase market share.
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Product quality is maintained and additional features and support services may be added.
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Pricing is maintained as the firm enjoys increasing demand with little competition.
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Distribution channels are added as demand increases and customers accept the product.
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Promotion is aimed at a broader audience.
Maturity Stage
At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The primary objective at this point is to defend market share while maximizing profit.
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Product features may be enhanced to differentiate the product from that of competitors.
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Pricing may be lower because of the new competition.
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Distribution becomes more intensive and incentives may be offered to encourage preference over competing products.
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Promotion emphasizes product differentiation.
Decline Stage
As sales decline, the firm has several options:
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Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
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Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
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Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to continue the product.
The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.
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FAQs on Product Life Cycle - Principles of Marketing - Principles of Marketing - B Com
| 1. What is the product life cycle? |  |
Ans. The product life cycle refers to the stages that a product goes through from its introduction to its decline in the market. These stages include introduction, growth, maturity, and decline. During the introduction stage, the product is launched and gains initial market acceptance. In the growth stage, sales and profits increase as the product gains popularity. The maturity stage is characterized by stable sales, and the decline stage occurs when the product loses relevance or is replaced by newer alternatives.
| 2. What are the key principles of marketing related to the product life cycle? | |
Ans. The key principles of marketing related to the product life cycle include:
1. Product Development: Companies should continuously invest in research and development to innovate and introduce new products to the market.
2. Market Segmentation: Understanding the target market and dividing it into segments allows companies to tailor their marketing efforts and reach the right customers at each stage of the product life cycle.
3. Marketing Mix: The marketing mix consists of product, price, promotion, and place. Companies must adapt these elements throughout the different stages of the product life cycle to meet customer needs and maintain competitiveness.
4. Product Differentiation: As a product matures, competition intensifies. Companies must differentiate their product from competitors by focusing on unique features, quality, branding, or customer service.
5. Product Portfolio Management: Companies should manage their product portfolio strategically, considering the life cycle stage of each product. This involves allocating resources, investing in product improvement, and deciding when to discontinue or replace products.
| 3. How can companies effectively manage the decline stage of the product life cycle? | |
Ans. Managing the decline stage of the product life cycle can be challenging, but companies can take several steps to minimize losses and maximize profits:
1. Cost Reduction: Companies can reduce production and marketing costs to maintain profitability during the decline stage. This may involve streamlining operations, renegotiating supplier contracts, or reducing promotional activities.
2. Harvesting: Instead of immediately discontinuing the product, companies can choose to "harvest" it by gradually reducing marketing support and focusing on maximizing short-term cash flow.
3. Product Diversification: Companies can explore options for repurposing or repositioning the declining product to target new markets or customer segments. This could involve modifying the product, packaging, or marketing approach.
4. Product Retirement: Eventually, companies may need to retire the product and remove it from the market. This should be done strategically, considering the impact on the brand and existing customer base. Proper communication and support for customers during the transition are crucial.
5. Learning and Innovation: Even in the decline stage, companies can learn from their product's performance and use that knowledge to improve future product development and marketing strategies.
| 4. How does the product life cycle concept impact pricing decisions? | |
Ans. The product life cycle concept has a significant impact on pricing decisions. Here's how:
1. Introduction Stage: During the introduction stage, when the product is new to the market, companies often set higher prices to cover initial development and launch costs. This strategy helps generate revenue and recover investments.
2. Growth Stage: As the product gains popularity and competition increases, companies may adjust prices to capture more market share. Price reductions or special offers can attract new customers and maintain sales growth.
3. Maturity Stage: In the maturity stage, competition intensifies, and price becomes a crucial factor. Companies may lower prices to defend market share or differentiate their product based on other factors, such as quality or features.
4. Decline Stage: During the decline stage, companies may further reduce prices to clear inventory or generate final revenue before discontinuing the product. However, they should carefully balance price reductions with profitability considerations.
5. Pricing Strategies: Throughout the product life cycle, companies can adopt various pricing strategies, such as skimming (setting high initial prices and gradually reducing them) or penetration (setting low prices to gain market share quickly). These strategies depend on factors like competition, customer demand, and the company's overall marketing objectives.
| 5. How can companies use the product life cycle to inform their marketing strategies? | |
Ans. The product life cycle provides valuable insights for companies to develop effective marketing strategies. Here's how it can be used:
1. Introduction Stage: Companies should focus on creating awareness and generating interest in the new product. Marketing efforts should highlight the product's unique features and benefits to attract early adopters and build a customer base.
2. Growth Stage: During this stage, companies should aim to increase market share and expand distribution channels. Marketing strategies can include expanding promotional activities, building brand loyalty, and targeting new customer segments.
3. Maturity Stage: In the maturity stage, the market becomes saturated, and competition intensifies. Companies need to differentiate their product through branding, advertising, or product enhancements. They may also consider diversifying the product line or targeting niche markets.
4. Decline Stage: Marketing strategies during the decline stage may involve focusing on loyal customers, offering incentives to buy remaining inventory, or promoting alternative products. Companies should communicate clearly about the product's discontinuation and provide support to customers during the transition.
5. Continuous Monitoring: Throughout the product life cycle, companies should continuously monitor market trends, customer preferences, and competitive activities. This information can help them adapt marketing strategies, identify potential opportunities or threats, and make informed decisions about product improvements or retirement.
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