Product Lifecycle Stages and Strategies

Question 1

What are the Product Life Cycle Stages?

Answer 1

4

• Introduction (don’t make that much money)
• Growth (growing in demand)
• Maturity (all revenues and profits are at their highest possible)
• Decline (demand starting to erode and we cannot make any more money from this product)

Question 2

Introduction Stage: Riskiest

Answer 2

When we introduce the new product

• Lots of costs incurred
• Communication (promotion) is needed to generate awareness about the product
• Low to No Profits because costs are not covered by sales yet

Question 3

Introduction Stage Strategy

Answer 3

Is the product in an existing category or creating a new category?

Existing: penetration pricing
New: skimming pricing

Price Skimming - setting a high initial price for a product to quickly recoup the investment related to its development and marketing

Price Penetration - setting a low initial price to encourage many customers to try it

Question 4

Growth Stage

Answer 4

Customers are starting to get to know your product and getting familiar with it

• Increased sales, competition, and higher profits
• Increased promotional spending
• New offerings with the same successful brand name can give the company a competitive advantage
• Profits beginning
• Increased number of distribution outlets
• Price remains at the same level

Question 5

Maturity Stage (Golden)

Answer 5

Demand for your product is at its highest and any consumer you wanted to attract has been reached

• Highest revenues

Question 6

Maturity Stage: Risks and Strategies

Answer 6

Risks: Intense competition to capture existing customers in the marketplace and profits are falling until the strongest player remains

Strategies
- Promotional Strategy: emphasize competitive advantage
- Price Strategy: reducing prices to counter competitors
- Place Strategy: increase trust and cooperation with partners

GOAL
- Stay in the maturity stage as long as possible

Question 7

Decline Stage

Answer 7

Sales and demand decrease and continue to drop

• important to sell what inventory you have left, not advertising and reducing prices to get rid of inventory

Question 8

Decline Stage: Risks and Strategies

Answer 8

RISKS: Profits shrink until each sale costs more than revenue earned (introduction of better, newer, and more innovative products)

Strategies
- Promotional Strategy: reduces promotion to save money
- Price Strategy: Reduce prices to capture dwindling interest
- Place Strategy: Match reducing demand by reducing outlets in which product is sold