Products are like human beings: they are born, they grow, they reach maturity and they enter their old age, the declining stage and they die. The product life cycle describes the life of a product in the market with respect to business/commercial costs and sales measures. Here are the four phases of a product's life cycle:
1. Market development (Introductory phase)
Generally, bring a new product to the market is filled with unknown risks because demand has to be created. How long it take to pick up or for a customer adoption depends on the product's complexity, but most of all depends on how well it solve potential customers' needs better than substitute products or even it satisfy a new need or not.
This stage is characterized by a low growth rate of sales as the product is newly launched and consumers may not know much about it. Traditionally, a company usually incurs losses rather than profits during this phase. And because the product is new on the market, users may not be aware of its true potential, it is necessary to widespread information and advertising campaigns through various media. Your objective is to create awareness of the product to capture as much market share as feasible before competitors come in.
However, this stage also offers its share of opportunities. For example, there may be less competition. In some instances, a monopoly may be created if the product proves very effective and is in great demand.
High costs due to initial marketing, advertising, distribution and so on; sales volumes are low, increasing slowly. Those lead to little or no profit made in this phase.
There may be little to no competition.
Demand must be created through promotion and awareness campaigns
Customers must be prompted to try the product.
In this phase, sales grow rapidly. Promotion is increased beyond the initially high levels, and word-of-mouth advertising leads to more and more potential customers hearing about the product, trying it out, and–if the company is lucky–choosing to use the product regularly. Repeat orders from initial buyers are also obtained. Also, distribution has grown and thus the product is more easily accessible to the customer. In this phase, other companies have realized the potential benefits of your growth market, and they launch competitor products. Why have they waited to launch? Because almost all of the risk of a failure was assumed by the first entrant. Your objective as a marketer is to Growth by insuring that your product is differentiated from the rest through branding and achieving loyalty. The growth stage is seen as the best time to introduce product innovations, as it creates a positive image of the product and diminishes the presence of competitors who will be attempting to copy or improve the product, and present their own products as a substitute.
If a monopoly was initially created, then it still exists in this stage. Because of this, the manufacturing company can look at ways to introduce new features, alterations, or other types of innovation to the product according to feedback from consumers and from the market in general. This should be done in order to maintain growth in sales and ensure that interest in the product continues to grow, thus maintain the growth stage.
Costs reduced due to economies of scale: as production and distribution are ramped up, economies of scale kick in and reduce the per unit costs.
Sales volume increases significantly: as the product increases in popularity, sales volumes increase.
Profitability begins to rise: revenues begin to exceed costs, creating profit for the company
Public awareness increases: through increased promotion, visibility and word of mouth, public awareness grows.
Competition begins to increase with a few new players in establishing market.
Increased competition leads to price decreases: price wars may erupt, technology may get cheaper, or other factors can ultimately lead to falling prices.
This is the stage that lasts the longest in the product life cycle.
During the maturity stage, sales will peak as the product reaches market saturation, and competition will grow increasingly fierce. Your objective is to try to keep high market share in the segment(s).
Sales continue to grow in the early part of the maturity phase and starts to slow down, as the product has already reached widespread acceptance in the market, in relative terms. And growth only comes from substitution or new customers coming in to your target customer group. These sales will peak and ultimately decline.
Demand for the product ultimately decreases due to competition and market saturation, as well as new technologies and changes in consumer tastes. Actions the company takes may include:
Improving specific features in order to resell the product (for instance, in the case of a car, the manufacturer may include new colors, sport or hybrid versions, or other changes in order to keep sales going)
Lowering prices in order to fight off competition
Intensifying distribution and promotional efforts
Differentiation efforts, in the hope that new customers will start to buy the product
Finding a new targeted market.
Costs are lowered as a result of production volumes increasing and experience curve effects
Sales volume peaks and market saturation is reached
Increase in numbers of competitors entering the market
Prices tend to drop due to the proliferation of competing products
Brand differentiation and feature diversification is emphasized to maintain or increase market share
Industrial profits go down
Profitability will fall, eventually to the point where it is no longer profitable to produce, and production will stop.
A decline in sales volume as competition becomes severe, and popularity of the product falls;
A fall in prices and profitability (the latter ultimately moving in the negative zone);
Profit increasingly becomes a challenge of production/distribution efficiency rather than increased sales.
By: VSHR Digital Media
Source: 1. https://courses.lumenlearning.com