Product Life Cycle Flashcards
What is introduction
researching, developing and then launching the product
What is growth
when sales are increasing at their fastest rate
What is maturity
sales are near their highest, but the rate of growth is slowing down, e.g. new competitors in market or saturation
What is decline
final stage of the cycle, when sales begin to fall
7 points of introduction
- Marketing costs are extremely high as consumer product awareness needs to be created
- Sales are slow
- There are few to no competitors in the market
- Demand for the product has to be created
- Customers have to be encouraged to try the product
- There is very little profit at this stage
- Skimming and Penetration pricing may be used during this stage
Example, first VCR cost £1000 but was later reduced due to the growth and economies of scale
7 points of growth (VHS)
- Costs are reduced due to economies of scale (The average cost of a product decreases as output and sales rise.) Larger quantities of the product are produced.
- Product sales increases significantly
- Marketing costs will be lower than in the introduction phase as awareness to the product has been created.
- Product begins to make more profit
- Consumer awareness of the product increases
- Competition increases with new companies entering the market
- New competition leads to potential price decreases. Competitive pricing is used.
7 points of maturity
- Production volumes increase and in effect costs are lowered
- Product sales peak and market saturation is reached
- More competitors enter the market
- Prices drop due to a boost in competitors products in the market
- Persuasive advertising takes place differentiation of brand and diversification of features are emphasise to increase or maintain market share.
- Marketing costs are lower than previous 2 stages. Sales promotion techniques are used e.g.: BOGOF
- Industrial profits decrease
6 points of decline
- Costs become counter-optimal
- No marketing activity would take place during this phase as product is in decline.
- Sales start to decrease
- Profit margin diminishes
- Any profits are made through distribution and production efficiencies rather than increased sales
- Remaining stock sold off
How to lengthen a products life cycle
Advertising – try to gain a new audience or remind the current audience
Price reduction – more attractive to customers
Adding value – add new features to the current product, e.g. video messaging on mobile phones Explore new markets – try selling abroad
New packaging – brightening up old packaging, or subtle changes such as putting crisps in foil packets or Seventies music compilations
What is planned obsolescence
Some companies deliberately plan to keep the lives of their products short. They aim to produce new products before the previous one reaches its maturity. Eg apple iphone
Why do companies design to fail
Such companies advertise their products to consumers so that they believe that they must have the latest version of the design. This is mainly found within the field of electronics. Companies product churn because?
• To maintain a steady volume of sales
• To maintain a market advantage over their competitors
• As a result of technological advancement, e.g. developments in
microelectronics
What is obsolescence for safety (with example)
these are usually for health and safety reasons, for example, the hypodermic syringe or disposable razor.
Other products do have the ability to last longer but may be restricted by cost e.g. if the correct material were to be used to make it last longer by not corroding then it would be too expensive for the target market.
Ink cartridges, light bulbs thomas Edison’s bulbs still glow unlike todays, fashion (in and out of style)
