A number of variations of the Industry Life Cycle model are used to direct the focus of the marketing activities during each phase of the model. Most of the models are similar in respect of the direction provided in respect of the marketing effort and focus, despite the fact that they differ as to the number and names of the stages.
Despite the criticism of the product life cycle model during the mid 70's, by a number of authors, the model continues to be a valuable tool for marketers. This criticism came about as a result of some product life cycles that started shrinking and others that were increasing without any apparent reason and other products that did not reflect the usual shape of the product life cycle graph.
Companies that persisted with the use of the product life cycle concept continued to have a competitive advantage over those who did not. It is clear that the use of the model has a significant impact on the success of the business strategy and the associated corporate performance.
The goals in respect of strategy, competition, product, price, promotion and distribution will be different for the different stages of the product life cycle. This article is focusing on a number of the primary product life cycle management techniques that can be used to optimize a product's revenues in respect to its effective positioning in a market during the introduction stage of the product life cycle.
The Introduction Stage
When a new product is introduced to the market, sales volumes are normally not very high. The volume will normally only increase once a number of potential customers become aware of the product and the benefits it has for them.
During the introduction stage the strategic goal normally includes to acquire a strong market position.
The goal in respect of the competition dimension is to prevent the early entry of aggressive competitors into the market segment.
During the introduction stage of the life cycle, most companies will endeavor to build product awareness and establish a market for the product. The impact on the marketing mix is as follows:
The product strategy will normally be to have a limited number of variations of the product in order not to confuse the early adopters. During this stage establishing the product brand and quality level in the market is imperative. The establishment of intellectual property protection such as patents and trademark registration is important aspects to remember.
An aggressive pricing policy to maximize market penetration is very common during this phase of the life cycle. If market share is built rapidly the development cost can be removed later. In cases where development cost was high and the life cycle is expected to be short high skim pricing to recover development costs is normally a suitable strategy during this phase.
The promotion strategy is normally aimed at innovators and early adopters. Marketing communications will focus on establishing a definite product identity to ensure that the market awareness is maximized. Potential buyers are made aware of the new product, its features, uses, benefits and advantage in order to entice them to buy it.
During the introduction phase an exclusive and selective distribution strategy that is aimed at focused distribution channels is a common strategy in order to ensure that the product is available at the correct place for the early adopters. The creation of high profit margins for middle men is also an important component of the distribution strategy for this stage.
In cases where the barrier to entry is low it may be more appropriate to have a more extensive and comprehensive distribution strategy to cover as wide a market as possible early on in the life cycle of the product.
Conclusion
During the introduction stage, the most important objective is to establish a market and establish a firm initial demand for the product. The marketing communication cost is by and large quit high during this stage of the product life cycle. This is as a result of the need to increase customer awareness of the product rapidly and to ensure that the early adopters are targeted.
During the introductory stage a company is normally also expected to incur extra costs associated with the establishment of the initial distribution channels of the product due to the initial inefficiencies that normally exists.
The high level of the extra costs to establish a new market at the same time as the low sales volume that is usual for a new product being introduced normally results in the introduction stage to be a time where losses is accumulated. This should not bother the company as these losses are normally more than recovered in the next phase provided that the correct marketing strategies are followed during this introduction stage.
This article is part of a series of articles by the same author about marketing strategies that are aligned with the various stages of the product life cycle phases to maximize the benefits that can thus be achieved.
Examples
Set out below are some suggested examples of products that are currently at different stages of the product life-cycle:
INTRODUCTION
GROWTH
MATURITY
DECLINE
Third generation mobile phones
Portable DVD Players
Personal Computers
Typewriters
E-conferencing
Faxes
Handwritten letters
All-in-one racing skin-suits
Breathable synthetic fabrics
Cotton t-shirts
Shell Suits
iris-based personal identity cards
Smart cards
Credit cards
Cheque books
The term "life cycle" implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Consequently, the life cycle concept is not well-suited for the forecasting of product sales. Furthermore, critics have argued that the product life cycle may become self-fulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline.
Nonetheless, the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle.