Product Lifecycle shows the path of a typical new product which takes from its inception to its discontinuation. Product life cycle refers to the period from the product first launch into the market until its final withdrawal. The understanding of a product life cycle of a product can help a company to understand and to make decisions like, what is the right time to introduce the product, how to plan marketing activities and what price has to be fixed.

We see advertisements regularly, telling about various new features of existing products: a branded shampoo with new flavour, chips with new flavour and snacks with new delicious fruit flavour.

But if you go to retail shop you can see thousands of products which are not advertised on regular basis. Some product needs marketing plan and promotional methods. But why do some products apparently sell themselves? Answer is that the marketers are continuously acting according to where the item is in its lifecycle.

Progressive organisations try to remain aware of what is happening throughout the life of the product in terms of the sales and the resultant profits.

A new product progress through different stages:

1. Introduction: This is the initial stage, where there is huge amount of investment by companies, with little or no profits and we normally see a slow growth in sales. Price may be too high or expensive at this stage. Introduction stage requires advertisement. Advertisement helps in increasing sales and to build brand name.

2. Growth: In case the product launch is successful, the sales must start picking up or rise more rapidly. Sometimes price may reduce a little as new competitors enter the market. Sales would climb up fast and profit picture will also improve considerably. For example, iPods were introduced in 2001. Currently iPod finds itself in growth stage of its product life cycle. It shows steady growth rate. Most of the electronic items are in this stage.

3. Maturity: In this stage, competition gets started and competitor drops the price accordingly to attract the market. A competitive price strategy is useful in this stage. This is the longest phase for most of the products. Sales grow at a decreasing rate and then stabilize. Sometimes manufacturers leave the market for low growth and fewer profit margins.

4. Decline: The distribution cost and promotion is now spread over a larger volume of sales. As the volume of production is increased the manufacturing cost per unit tends to decline. Profits, as expected, continue to erode during this stage with little hope of recovery. Typewriters are in the decline stage of the product life cycle. OUTDATED/NEWER PRODUCTS TAKING MARKET SHARE.

Product life cycle helps in better decisions making process on revenue and cost, within a particular stage. It helps marketing managers to make better decisions on pricing aspects.

Seetarama Hegde
Retail Consultant
http://www.CustoLogix.com

CustoLogix with its wide experience in statistical analysis helps retailer to improve retail profitability through Analytics. To know more about markdown management please visit CustoLogix at http://www.custologix.com/services

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