All product and services have certain life cycles. The life cycle refers to the period from the product’s first launch into the market until its final withdrawal and it is split up in phases. During this period significant changes are made: in the way that the product is behaving into the market i.e. its reflection in respect of sales to the company that introduced it into the market. Since on increase in profits is the major goal of a company that introduces a product into a market, the product’s life cycle management is very important. Some companies use strategic planning and others follow the basic rule of the different life cycle phase that analyzed later.
The understanding of a product life cycle can help a company to understand and realize when it is time to introduce and withdraw a product form a market, its positron in the market compared to competitors, and the products success or failure.
PRODUCT DEVELOPMENT STAGE
Product development stage begins when a company finds and develops a new product idea. This involves translating various pieces of information and incorporating them into a new product. A product is usually undergoing several changes involving a lot money and time during development, before it is exposed to target customers.
Those products that survive the test market are then introduced into a real market place 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.
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 as the moment of sale. A good example of such a launch is the launch of “WINDOWS XP” by Microsoft corporation.
This period can be described as a money sinkhole compared to the maturity phase of product large expenditure on promotion and adversity 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 on impossible challenge. Some companies avoid this stress by hiring external contractors or outsourcing the entire distribution arrangement. This has the benefit of testing on important marketing tool such as out sourcing.
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 right one to maximize sales. This how ever 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 his way a company will know before its product is introduced to a market what to expect from the customers and competitors. A marketing mix may also help in terms of defining the targeted audience during promotion and advertising of the product in the introduction phase.
The growth phase offers the satisfaction of seeing the product take-off in the market place. This is the appropriate timing to focus on increasing the market share. If the product has been introduced first into the market, (introduction into a “Vigm” market or into on-existing market) then it is in a position to gain market share relatively easily. A new growing market alerts the competition attention.
The company must show all the product offerings and try to differentiate them form the competitors ones. A frequent modification process of the product is an effective policy to discourage competitors form gaining market share by copying or offering similar products. Other barriers are licenses and copyrights, product complexity and low availability of product components.
Promotion and advertising continues, but not in the extent that was in the introductory phase and it is oriented to the task of market leadership and not in raising product awareness. A good practice is the use of external promotional contractors.
The period is the time to develop efficiencies and improve product availability and service. Cost efficiency and time-to-market and pricing and discount policy are major factors in gaining customers confidence. Good coverage in all market places is worth while goal throughout the growth phase. Managing the growth stage is essential. Compares sometimes are consuming much more effort into the production process, overestimating their market position. Accurate estimations in forecasting customer needs will provide essential input into production planning process. It is pointless to increase customer expectations and product demand without having arranged for relative production capacity. A company must not make the mistake of over committing. This will result into losing customers not finding the product “on the self”.
When the market becomes saturated with variations of the basic product, and all competitors are represented in terms of an alternative product. The maturity phase arrives. In this phase market share growth is at the expense of someone else’s business, rather than the growth of the market itself. This period is the period of the highest returns form the product. A company that has achieved its markets share goal enjoys the most profitable period. Period. While a company that falls behind its market share goal, must reconsider its marketing positioning into the market place.
During this period new brands are introduced even when they compete with the company’s existing product and model changes are more frequent (product, brand, model). This is the time to extend the product’s life.
Pricing and discount policies are often changes in relation to the competition policies i.e pricing moves up and down accordingly with the competitors one and sales and coupons are introduced in the case of consumer product. Promotion and advertising relocates form the scope of getting new customers, to the scope of product differentiation in terms of quality and reliability.
The battle of distribution continues using multi distribution channels of successful product maturity phase is extended beyond anyone’s timely expectations. A good example of this is “ride” washing power, which has grown old, end it is still growing.
In the decline stage the market is shrinking, reducing the overall amount of profit that can be shared amongst the remaining competitors. At this stage, great care has to be taken to manage the product carefully. It may be possible to take out some production cost, to transfer production to a cheaper facility, sell the product into other cheaper markets, care should be taken to control the amount of stocks of the product ultimately, depending on whether the product remains profitable, a company may decide to end the product.
For a company to fully understand the above and successfully manage a product’s life cycle, the need to develop strategies and methodologies. Which is the first phases which has already mentioned, the product development, product introduction, product growth, product maturity and finally product decline: These phases exist and are applicable to all producers or services form a certain make of automobile to a multimillion –dollar lithography tool to a one-cent capacitor-thee phases can be spoilt 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.
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FACULTY: MANAGEMENT SCIENCES
COURSE CODE: MKT 363
COURSE TITLE: DISTRIBUTION MANAGEMENT