The product life cycle is a metric used to describe…
The product life cycle is a metric used to describe the stages of a product’s life in the market. There are four major steps in the product life cycle – introduction, growth, maturity, and decline.
It is important to study the product life cycle to see how a product transitions through each of these phases. This article will explain product life cycle and how it relates to product pricing and marketing.
The Four Stages of Product Life Cycle
From the name, you pretty much have the idea that there will be multiple stages in the life cycle of a product. This section explains each of these stages and their importance to the overall marketability of the product. Let’s explain product life cycle and the stages.
1. Introduction Stage
The introduction stage is the first stage where excitement about a new product or service begins. Unless the producer is popular, growth is often slow at the beginning. The product may be first-rate and address many consumer needs, but the public is not familiar with it. Therefore, demand won’t be high. Producers often budget huge sums to promote the product to shake off this lethargy.
2. Growth Stage
When a product reaches the second stage, the producer’s marketing efforts begin to pay off, and the product becomes increasingly popular.
3. Maturity Stage
In the third stage, the product has matured. The sales patterns have become more stable. At the maturity stage, there’s also the potential to expand into new markets.
4. Decline Stage
Nothing good lasts forever, they say. Therefore, the decline stage is a natural part of the consumer’s life cycle. At this stage, the product has peaked.
To remain competitive, the price either remains the same or slightly declines. Usually, manufacturers try to make changes to the product and do some sort of rebranding.
These changes could be minor or significant. The alternative is to withdraw the product and move on to another product.
Pricing Strategies and Product Life Cycles
This section will explain product life cycle and pricing strategies that manufacturers use at each stage of the cycle. Manufacturers usually study the product’s stage in the product life cycle to determine the right pricing strategy. We will show you the most appropriate pricing strategy based on the greatest demand for the product.
At the initial stage, a manufacturer may choose to price the new product higher to signal an increase in value. Except they’re trying to market the product as a cheaper alternative to an existing product, manufacturers must avoid pricing the product lower.
At the growth stage, the manufacturer monitors the market to observe market trends and competitor actions. This stage is crucial as it helps to forecast future sales.
At the maturity stage of the product life cycle, the product has realized its full potential. The company may offer incentives like discounts or other offers to retain customers loyal to the brand.
The company needs to determine whether the decline is temporary or permanent. Once determined, they may decide to reduce the price and clear off old stock and move on. Alternatively, they may add new features or include the old product in a new product offering.
Frequently asked questions
How does product life cycle affect marketing strategy?
As it grows, it gains more and more customers, and eventually, the market stabilizes and the product matures. After a period of time, the product is overtaken by development and introduce superior competitors, goes into decline, and is eventually withdrawn. Marketing strategies vary by stage.
What are the 5 stages of product life cycle?
Product life cycles consist of five distinct stages, where a product develops, introduces, grows, matures, and declines. Theore Levitt, the German economist, developed the Product Life Cycle concept in 1965. This model still exists today.
What are the five stages of product life cycle?
Product life cycles describe the progression of a product through five stages-development, introduction, growth, maturity, and decline. Theodore Levitt developed the concept, who published his Product Life Cycle model in Harvard Business Review in 1965. The model remains in use today.
What pricing method is used in the introduction stage of the product life cycle?
In order to gain market share, product pricing has to start at the beginning. Most companies use skimming price tactics when pricing their products. A company usually charges a very high price to their customers who would purchase a product as a result of this pricing strategy.
What is product life cycle and its importance?
Life cycles of a product usually break down into four stages: introduction, growth, maturity, and decline. Marketing and management professionals use product life cycles to evaluate advertising schedules, price points, new market expansion, packaging redesigns, and more.
What is product life cycle in pricing strategy?
Life cycle is the cycle of a product from when it was created to when it is discontinued. The cycle is divided into four stages: development, growth, maturity, and decline. Business owners are able to manage their sales, determine prices, predict profitability, and compete with other businesses through the product life cycle.
Which strategies are used in a product life cycle?
- Rapid skimming – launch the product at a high price and high promotion.
- Product launch at a high price and low promotional level leads to slow skimming.
- Rapid penetration – making the product affordable with significant promotion.
How product life cycle affects pricing?
The life cycle stage price elasticity varies at each stage. It becomes the most challenging part of the competition to make a brand the top priority among consumers. As the product progresses, the competition increases and consumers become more price sensitive.
Why is product life cycle important?
Marketing is important for its product life cycle because it helps define and determine strategies related to a particular product. It is “a forecasting tool, planning tool, control tool, and estimated for profit,” says subjectquery.com.
How many pricing strategies are there?
Categories. Additional variations are possible in addition to the four basic pricing strategies — premium, skimming, economy, value, and penetration — these are commonplace. The product is the item offered for sale.