Products at this stage have to be carefully monitored to ensure that they start to grow. Otherwise, the best option may be to withdraw or end the product. The introduction phase of a product includes the product launch with its requirements to getting it launched in such a way so that it will have maximum impact at the moment of sale. This period can be described as a money sinkhole compared to the maturity phase of a product. Large expenditure on promotion and advertising is common, and quick but costly service requirements are introduced.
A company must be prepared to spend a lot of money and get only a small proportion of that back. In this phase distribution arrangements are introduced. Having the product in every counter is very important and is regarded as an impossible challenge (Day, 1981). Some companies avoid this stress by hiring external contractors or outsourcing the entire distribution arrangement. Pricing is something else for a company to consider during this phase. Product pricing usually follows one or two well structured strategies. Early customers will pay a lot for something new and this will help a bit to minimize losses.
Later the pricing policy should be more aggressive so that the product can become competitive (Product Life Cycle, 2011). Another strategy is that of a pre-set price believed to be the right one to maximize sales. This however demands a very good knowledge of the market and of what a customer is willing to pay for a newly introduced product. A successful product introduction phase may also result from actions taken by the company prior to the introduction of the product to the market. This is accomplished during product development by the use of market research.
Customer requirements on design, pricing, servicing and packaging are invaluable to the formation of a product design. A customer can tell a company what features of the product are appealing and what are the characteristics that should not appear on the product. They may also describe the ways of how the product will become handy and useful. So this way a company will know before its product is introduced to a market what to expect from the customers and competitors (Examples of Product Life Cycle Phases, 2011). The Growth Stage is characterized by rapid growth in sales and profits.
Profits arise due to an increase in output and possibly better prices. At this stage, it is cheaper for businesses to invest in increasing their market share as well as enjoying the overall growth of the market. Accordingly, significant promotional resources are traditionally invested in products that are firmly in the Growth Stage (Anderson & Zeithaml, 1984). The growth phase offers the satisfaction of seeing the product take-off in the marketplace. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market then it is in a position to gain market share relatively easily.
A new growing market alerts the competition’s attention. The company must show all the products offerings and try to differentiate them from the competitors. A frequent modification process of the product is an effective policy to discourage competitors from gaining market share by copying or offering similar products. Other barriers are licenses and copyrights, product complexity and low availability of product components (Product Life Cycle, 2011). Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness.
This period is the time to develop efficiencies and improve product availability and service. Cost efficiency, time-to-market, pricing and discount policy are major factors in gaining customer confidence (Day, 1981). Good coverage in all marketplaces is a worthwhile goal throughout the growth phase. Managing the growth stage is essential. The Maturity Stage is probably the most common stage for all markets. It is in this stage that competition is most intense as companies fight to maintain their market share. Here, both marketing and finance become key activities.
Marketing spent has to be monitored carefully, since any significant moves are likely to be copied by competitors. The Maturity Stage is the time when most profit is earned by the market as a whole (Anderson & Zeithaml, 1984). Any expenditure on research and development is likely to be restricted to product modification and improvement and perhaps to improve production efficiency and quality. When the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product, the maturity phase arrives.
In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period carries the highest returns from the product. A company that has achieved its market share goal enjoys the most profitable period, while a company that falls behind its market share goal, must reconsider its marketing positioning into the marketplace (Product Life Cycle, 2011). During this period new brands are introduced even when they compete with the company’s existing product and model changes are more frequent. This is the time to extend the product’s life.
Pricing and discount policies are often changed in relation to the competition policies, for example, pricing moves up and down accordingly with the competitors and sales and coupons are introduced in the case of consumer products. Promotion and advertising relocates from the scope of getting new customers, to the scope of product differentiation in terms of quality and reliability. The battle of distribution continues using multiple distribution channels. A successful product maturity phase is extended beyond anyone’s timely expectations (Day, 1981).
In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can be shared amongst the remaining competitors. At this stage, great care has to be taken to manage the product carefully. It may be possible to take out some production cost, to transfer production to a cheaper facility or sell the product into other cheaper markets. Care should be taken to control the amount of stocks of the product (Product Life Cycle, 2011). Ultimately, depending on whether the product remains profitable, a company may decide to end the product.
The decision for withdrawing a product seems to be a complex task and there are a lot of issues to be resolved before deciding to move it out of the market. Dilemmas such as maintenance, spare part availability and service competitions reaction in filling the market gap are some issues that increase the complexity of the decision process to withdraw a product from the market. Often companies retain a high price policy for the declining products that increase the profit margin and gradually discourage the few loyal remaining customers from buying it (Anderson & Zeithaml, 1984). Such an example is telegraph submission over facsimile or email.
Usually a product decline is accompanied with a decline of market sales. Its recognition is sometimes hard to be realized, since marketing departments are usually too optimistic due to big product success coming from the maturity phase. This is the time to start withdrawing variations of the product from the market that are weak in their market position. This must be done carefully since it is not often apparent which product variation brings in the revenues. The prices must be kept competitive and promotion should be pulled back at a level that will make the product presence visible and at the same time retain the loyal customers Day, 1981). As the decline continues, distribution is narrowed. Below are some examples of products that are currently at different stages of the product life-cycle: INTRODUCTIONGROWTHMATURITY DECLINE E-conferencingTabletsPersonal ComputersTypewriters Electric CarsBlue RaysTelevisions Handwritten letters 4G Cell PhonesE-BooksExercise EquipmentCheck books While the product life cycle theory is widely accepted, it does have critics who say that the theory has so many exceptions and so few rules that it is meaningless.
Among the holes in the theory that these critics highlight: •There is no set amount of time that a product must stay in any stage; each product is different and moves through the stages at different times. Also, the four stages are not the same time period in length, which is often overlooked. •There is no real proof that all products must die. Some products have been seen to go from maturity back to a period of rapid growth thanks to some improvement or re-design. Some argue that by saying in advance that a product must reach the end of life stage, it becomes a self-fulfilling prophecy that companies subscribe to.
Critics say that some businesses interpret the first downturn in sales to mean that a product has reached decline and should be killed, thus terminating some still-viable products prematurely. •The theory can lead to an over-emphasis on new product releases at the expense of mature products, when in fact the greater profits could possibly be derived from the mature product if a little work was done on revamping the product. •The theory emphasizes individual products instead of taking larger brands into account. •The theory does not adequately account for product redesign and/or reinvention (Rink, Roden & Fox, 1999).
Despite which stage a product is in, there is still a certain amount of care involved in how that product should be maintained. At one point or another, all products will run through each of the stages mentioned above and companies need to know how to react to their varying degrees if they want to be successful with future products. References Anderson, Carl R. and Zeithaml, Carl P. (1984) Stage of the Product Life Cycle, Business Strategy, and Business Performance. The Academy of Management Journal Vol. 27, No. 1, pp. 5-24 Day, George S. (1981) The Product Life Cycle: Analysis and Applications Issues.
The Journal of Marketing Vol. 45, No. 4, pp. 60-67 Encyclopedia of Business 2nd Edition: Product Life Cycle (2011) Retrieved July 31, 2011 from http://www. referenceforbusiness. com/small/Op-Qu/Product-Life-Cycle. html Houston Chronicle: Examples of Product Life Cycle Phases (2011) Retrieved July 30, 2011 from http://smallbusiness. chron. com/examples-product-life-cycle-phases-13722. html Rink, David R. , Roden, Dianne M. and Fox, Harold W. (1999). “Financial Management and Planning with the Product Life Cycle Concept. ” Business Horizons. Vol. September