Product Life Cycle Strategy
The product life cycle is the concept that attempts to describe a product’s sales, profits, customers, competitors and marketing emphasis from its inception until its removal from the market.
Product Life Cycle Strategy
During a product’s life the company will need to reformulate the marketing strategy several times in response to changing market conditions. In fact, there are three dynamic tensions that can stimulate strategic change.
1. The company’s competitive position in its market – whether it is leader, challenger, follower or nicher
2. The economic climate and outlook – whether the industry is in a state of shortages, inflation, recession, upturn, etc.
3. The product’s stages in its life cycle – introduction, growth, maturity or decline.
The analysis of a Product Life Cycle Strategy involves six stages.
Stage 1 : Product development – This is when there are only outgoings since money is invested in design costs and production of prototypes. After this comes the product launch.
Stage 2 : Market Introduction – There is not yet a proven demand for it, sales are low and develop slowly. The cash flow is still negative as a rule.
Stage 3: Market growth – Demand begins to accelerate and the total market begins to expand quickly. This could be called ”takeoff stage”. Until production costs fall ( due to increased volume of output) and so the product begins to generate profits.
Stage 4 : Market maturity – Demand levels off and increase usually only at replacement rate and new family-formation rate. Profits are still satisfactory, yet at the end of this stage further growth is inhibited by competitive products.
Stage 5: Saturation – More products are availabe than the market can absorb. Competition is intensified and prices fall.
Satge 6 : Decline – Here few companies can cope with the decline and chronic overcapacity occurs widely. This may be when mergers are proposed. Production of the product is being concentrated into fewer and fewer hands. Prices and profit margins are depressed.
Being aware of the fact that a product has a life-cycle can become the foundation for policies and practices aimed at building the market through an appropriate product life cycle strategy.