PART 1: PRODUCT LIFE CYCLE MODEL DESCRIPTION
The product’s life cycle - period usually consists of five major steps or phases:Product development, Product introduction, Product growth, Product maturity andfinally Product decline. These phases exist and are applicable to all products or services from a certain make of automobile to a multimillion-dollar lithography tool to a one-cent capacitor. These phases can be split up into smaller ones depending on the product and must be considered when a new product is to be introduced into a market since they dictate the product’s sales performance.
Product Life Cycle Graph ( Reference : William D. & McCarthy J. E. Product Life Cycle: “Essentials of Marketing”, Richard
D Irwin Company, 1997.)
1. PRODUCT DEVELOPMENT PHASE
Product development phase begins when a company finds and develops a new produc tidea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot of money and time during development, before it is exposed to target customers via test markets. Those products that survive the test market are then introduced into a real marketplace and the introduction phase of the product begins. During the product development phase, sales are zero and revenues are negative. It is the time of spending with absolute no return.
For example: - Research and development for New medicines and alternative medicines for Hypertension and Diabetes ( New Drug molecule development)
2. INTRODUCTION PHASE
The introduction phase of a product includes the product launch with its requirements
to getting it launch in such a way so that it will have maximum impact at the moment
of sale. A good example of such a launch is the launch of “Windows XP” by
This period can be described as a money sinkhole compared to the maturity phase of a
product. Large expenditure on promotion and advertising is common, and quick but
costly service requirements are introduced. A company must be prepared to spent a lot
of money and get only a small proportion of that back. In this phase distribution
arrangements are introduced. Having the product in every counter is very important
and is regarded as an impossible challenge. Some companies avoid this stress by
hiring external contractors or outsourcing the entire distribution arrangement. This has
the benefit of testing an important marketing tool such as outsourcing.
Pricing is something else for a company to consider during this phase. Product pricing
usually follows one or two well structured strategies. Early customers will pay a lot
for something new and this will help a bit to minimize that sinkhole that was
mentioned earlier. Later the pricing policy should be more aggressive so that the
product can become competitive. Another strategy is that of a pre-set price believed to
be the right one to maximize sales. This however demands a very good knowledge of
the market and of what a customer is willing to pay for a newly introduced product.
A successful product introduction phase may also result from actions taken by the
company prior to the introduction of the product to the market. These actions are
included in the formulation of the marketing strategy. This is accomplished during
product development by the use of market research. Customer requirements on
design, pricing, servicing and packaging are invaluable to the formation of a product
design. A customer can tell a company what features of the product are appealing and
what are the characteristics that should not appear on the product. He will describe the
ways of how the product will become handy and useful. So in this way a company
will know before its product is introduced to...