35. The product lifecycle:
A product life cycle describes the stages a new product goes through in the marketplace: introduction, growth, maturity,and decline.
Intro - prod introduced to its intended target mkt. sales grow slowly, and profit is minimal. lack of profit is often the result of a large investment costs in prod dev. ie. Gillette and its Fusion razor shaving system. Gillette spent millions advertising to grow awareness, result, 60% of male shavers became aware of the new razor within 6 months and 26% tried the prod. Companies often spend heavily on advertising
and other promotion tools to build awareness and stimulate product trial among consumers in the intro stage. Gaining distribution can be a challenge.
Growth - characterized by rapid increases in sales. It is in this stage that competitors appear. ie. Fax machine growth in 1986-1998. Number of companies competing rose from 4 to 7 then 25 later. Prod sales at an increasing rate because new people trying or using the prod and a growing proportion of Repeat Purchasers - ppl who tried, liked and bought again. ie. Gillette, men who tried adopted the prod permanently. In growth stage, it is important to broaden distribution
for the prod. In stores, competing comp fight for display and shelf space.
Maturity - slowing of total industry sales or prod class revenue. marginal competitors begin to leave the market. most consumers who would buy the prod are either repeat purchasers of the item or have tried and abandoned it. sales increase at a decreasing rate as fewer new buyers enter the market. profit declines due to fierce price competition among many sellers, and the cost of gaining new buyers at this stage rises (less money to be made but prod costs same). Mktg attention directed toward holding market share
thru further prod differentiation and find new buyers. Fax machine mfg dev internet-enabled multi-func models with features like scanning, copying, and color reproduction. Major strat
is to control overall marketing cost by improving promotional and distribution efficiency.
Decline - occurs when sales drop. ie. Fax machines for business use moved to this stage in early 2005. by then avg price for a fax machine had sunk below $100 (previously $12k). frequently, a prod enters this stage not because of wrong strat on company end but because of environmental changes. ie. mp3 players pushed CDs players into decline in recorded music industry.