Product Life Cycle

Product Life Cycle

The stages through which individual products develop over time. (tutor2u)

Different Stages

Introduction

This is when the product is first introduced to the market. Companies tend to lose more money than they might make in this stage, having spent on research and development prior to the release of the product, then more money invested in promoting and setting up distribution channels while ensuring that the product is demonstrating satisfactory growth in order to avoid having to withdraw it from the market.

Growth Stage

In this stage, the product experiences a rapid growth in sales and profits. An increase in output and possibly better prices result in an increase in profits, and businesses will often find it cheaper to invest in increasing their market share and promoting their successfully growing products, while enjoying the overall growth of the market.

Maturity Stage

The Maturity Stage is, perhaps, 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 spend 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. Any expenditure on research and development is likely to be restricted to product modification and improvement and perhaps to improve production efficiency and quality.

Decline Stage

In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can be shared amongst the remaining competitors, thus, the product has to be managed carefully and the amount of stocks of the product have to be well-controlled. Companies can, for example, take out some production cost, transfer production to a cheaper facility, sell the product into other, cheaper markets. Ultimately, depending on whether the product remains profitable, a company may decide to end the product.

Sources

“Product Life Cycle.” Tutor2u. N.p., n.d. Web. 23 Feb. 2012.
<http://tutor2u.net/business/marketing/products_lifecycle.asp>.

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