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Sunday, December 22, 2013

UGC - NET: Commerce (08)

Product Life Cycle
A product is like a human being. It is born, grows up fast, matures and then finally passes away. Product life cycle is the stages through which a product or its category bypass. From its introduction to the marketing, growth, maturity to its decline or reduce in demand in the market.  Not all products reach this final stage, some continue to grow and some rise and fall. Inshort, The PLC discusses the stages which a product has to go through since the day of its birth to the day it is taken away from the market.

The Product life cycle deals with four stages of a products life. Stages of Product life cycle:
A) Introduction: The stage 1 is where the product is launched. A product launch is always risky. If the product has no or few competitors, a skimming price strategy is employed. Characteristics of Introductory stages of Product life cycle:
·         Higher investment, lesser profits
·         Minimal Competition
·         Company tries to Induce acceptance and gain initial distribution
·         Company needs Promotions targeted towards customers to increase awareness and demand for product

B) Growth: Once the introductory phases are over, the product starts showing better returns on investment.  This is a stage where competition may step in to squash the product before it has completely launched. Penetration Price Strategy is the most effective strategy in growth stage. Characteristics of Growth stage of Product life cycle
·         Product is successfully launched
·         Demand increases
·         Distribution increases
·         Competition intensifies
·         Company might introduce secondary products or support services.
·         Better revenue generation and ROI

C) Maturity stage: One of the problems associated with maturity stages in a technologically advanced environment is the problem of duplication. Not only is the product available in duplicate markets, but also there are several competing products which arise with the same features and capabilities. As a result, the USP’s of the product become less attrative. Competitors sell products with the same features at lesser prices thereby trying to penetrate in the market. The growth of sales may be lesser at this stage, but the sales revenue of the organization is maximum during the maturity stage of product life cycle.
·         Characteristics of Maturity stages of Product life cycle
·         Competition is high
·         Product is established and promotion expenditures are less
·         Little growth potential for the product
·         Penetration pricing, and lower profit margins
·         The major focus is towards extending the life cycle and maintaining market share
·         Converting customers product to your own is a major challenge in maturity stage

D) Decline: 1 product, 10 competitors, minimum profits, huge amount of manpower and resources in use – A typical scenario which a product might face in its last stage. Characteristics of Decline stages of Product life cycle:
·         Market is saturated
·         Sales and profits decline
·         Company becomes cost conscious
·         A lot of resources are blocked in rejuvenating the dead product.