Product Life Cycle: The period of time over which an item is developed, brought to market and eventually removed from the market. First, the idea for a product undergoes research and development. If the idea is determined to be feasible and potentially profitable, the product will be produced, marketed and rolled out. Assuming the product becomes successful, its production will grow until the product becomes widely available. Eventually, demand for the product will decline and it will become obsolete.
Product life cycle is a business analysis that attempts to identify a set of common
stages in the life of commercial products, for example, introduction,
promotion, growth, maturity and decline. The stages of a product's lifecycle
can be classified as follows:
Introduction: The
introduction stage is characterized by low growth rate of sales as the product
is newly launched in the market. Monopoly can be created, depending upon the
efficiency and need of the product to the customers. A firm usually incurs
losses rather than profit. If the product is in the new product class, the
users may not be aware of its true potential. In order to achieve that place in
the market, extra information about the product should be transferred to consumers
through various media. The stage has the following characteristics: 1. Low
competition 2. Firm mostly incurs losses and not profit.
Characteristics of Introductory stages of Product life cycle
1. Higher investment, lesser profits
2. Minimal Competition
3. Company tries to Induce acceptance and gain initial distribution
4. Company needs Promotions targeted towards customers to increase awareness and demand for product
5. Company needs Promotions targeted towards channel to increase confidence in the product
Growth: Growth
comes with the acceptance of the innovation in the market and profit starts to
flow. If the monopoly exists, companies can experiment with new ideas and
innovation in order to maintain the sales growth. This stage is the best time
to introduce new effective products in the market thus creating an image in the
product class in the presence of its competitors who try to copy or improve the
product and present it as a substitute.
Characteristics of Growth stage of Product life
cycle
1. Product
is successfully launched
2. Demand
increases
3. Distribution
increases
4. Competition
intensifies
5. Company
might introduce secondary products or support services.
6. Better
revenue generation and ROI
Maturity: In the
maturity stage, the end of stage of the growth rate and sales slowdown as the
product has already achieved acceptance in the market. New firms start
experimenting in order to compete by innovating new models of the product. With
many companies in the market, competition for customers becomes fierce, despite
the increase in growth rate of sales at the initial part of this stage.
Aggressive competition in the market results in profits decreasing at the end
of the growth stage thus beginning the maturity stage. In addition to this, the
maturity stage of the development process is the most vital.
Characteristics of Maturity stages of Product
life cycle
1. Competition
is high
2. Product
is established and promotion expenditures are less
3. Little
growth potential for the product
4. Penetration
pricing, and lower profit margins
5. The
major focus is towards extending the life cycle and maintaining market share
6. Converting
customers product to your own is a major challenge in maturity stage
Decline: The
decline stage is where most of the product class usually dies due to low growth
rate in sales. A number of companies share the same market, making it difficult
for all entrants to maintain sustainable sales levels. Not only is the
efficiency of the company an important factor in the decline, but also the
product category itself becomes a factor, as the market may perceive the
product as "old" and may not be in demand. It is not always necessary
that a product should go through these stages. It depends on the type of
product, its competitors, scope of the product, etc.
Characteristics of Decline stages of Product life
cycle
1. Market
is saturated
2. Sales
and profits decline
3. Company
becomes cost conscious
4. A
lot of resources are blocked in rejuvenating the dead product.
5. There are only three options left with the company
6.
o Maintain
the product as it is and reduce costs to get maximum profits till the product
can produce profits
o Take
the product off the market.