Transcript Product Life Cycle

Product Life Cycle
Sales fall. Low
demand.
Product sales level
off or slow down.
May be more
competition now or
target owns product
already.
Product introduced
into the market.
Decline
Introduction
Maturity
Growth
Product is enjoying
success. Much of
the target market
knows about and
buys product.
Introduction Stage
• Company’s focus is on promotion and
production
• Major goal – draw attention to the new
product
• Special promotions may get customers’
attention
• Costs are high, especially advertising
• Least profitable stage
• Going rate pricing is common
Skimming Pricing
• Sets a high price
• Used when demand is greater than supply
• Company knows they will have to lower
price when market changes to priceconscious customers
• While product is hot, high profit margin
• Can lower price without insulting target
market
Penetration Pricing
• Pricing an introductory product very low
• Goal – to encourage as many people as
possible to buy your product
• Effective if demand is elastic
• Product must take hold in a short period of
time
• If product is not in high demand, lower
price will cause bigger loss
Growth Stage
•
•
•
•
Product enjoys success
Sales and profits increase
Target knows about and buys product
Advertising focus is now on consumer
satisfaction
• Competition is aware and is entering
market
• Company may have to introduce new
models
Pricing during Growth
• Depends on whether it was introduced
with skimming or penetration pricing
• With skimming
– Price will be lowered to appeal to priceconscious market
• With penetration
– Very little change
– Decreased demand and high competition
– Look for new market segments to hold prices
Maturity Stage
• Sales level off or slow down
• More competition or most of target owns
product
• Company spends marketing dollars on
fighting off the competition
Pricing during maturity
• Goal is to stretch the life of the product
• Some companies reduce prices
• Others add new features or new target
markets
• Sell to international markets
Decline Stage
• Sales fall
• Profits may be smaller than costs
• Must decide how long to continue to support
product
• Can also
–
–
–
–
–
Sell or license product
Recommit to product line
Discount the product
Regionalize the product
Modernize the product
Prices during decline
• Sales and profit margins decrease
• Companies are forced to reduce price to
generate sales
• To maintain profit margin, reduce costs or
cut back on advertising