Successful production and marketing of goods depends on many factors, ranging from the cost of raw materials to the quality of advertising. In order to promote a product on the market and get maximum profit from it, you need to know what the product life cycle is and how to manage it.
To begin with, I would like to determine what a product is. Economists characterize it as absolutely any thing involved in a kind of exchange for other things, including cash.
The life cycle of a product is a period of time during which a product goes through a certain number of stages, from development, appearance on the market, to complete departure from it. It is worth noting that in some cases, having hit the market, the product is not sold, and it is no longer produced. In such a situation, the product life cycle is zero.
There are certain criteria by which they determine at what stage the product is currently located:
- profit;
- commodity circulation;
- price;
- costs;
- inventory.
Based on the availability and magnitude of each indicator, 4 stages of the product life cycle are distinguished. In different sources, they may have different names, but, in fact, are no different.
- Implementation. Buyers evaluate the quality of a new product, price, etc. As a rule, sales are small and grow quite slowly. This period is characterized by some unprofitability, since costs exceed profits.
- Height. Consumers are actively buying goods. Profit begins to grow markedly.
- Maturity. The most stable period. The pace of company sales is slowing. The product has won its place in the market and regular customers. Profit is usually stably high. During this period, the appearance of competitive products is especially dangerous.
- Recession. Profit and sales are decreasing. Without any urgent measures (advertising, packaging changes, discounts, etc.), the goods will soon have to be withdrawn from circulation.
The concept of the product life cycle was formed in 1965 by the famous economist from America Theodore Leviticus. He was the first to clearly describe the reasons why any product has to leave the market:
- Thanks to the development of science, new fashion trends, the product loses its relevance and is replaced by a newer, improved one.
- The product life cycle is divided into several periods, each of which solves certain problems, problems.
- Each stage is also characterized by a certain level of profit.
- There are specific strategies in the field of production, finance, marketing, personnel management, specific for each specific stage of the product life cycle.
Often, sales volume depends not only on the quality of the product, but on competent and well-thought-out marketing strategies. With their help, you can increase the life cycle of the product and get the desired profit.
At the first stage (implementation), the main task for any company is market penetration. Considering the price level and promotion activity, the following strategies can be used:
- Slow penetration - low price, promotion inactive.
- Fast penetration - low price, active promotion.
- Quick skimming - the price is high, the promotion is very active.
- Slow skimming - high price, inactive promotion.
At the second stage (growth), the company seeks to strengthen the position of the product and, if possible, to conquer new territories. The following strategies will be effective:
- New advertisement.
- Improving the quality of goods, modernization.
- Release of related products, expansion of the range, development of new models.
The third stage (maturity) involves obtaining maximum profit. This period is characterized by the following:
- Fighting competitors.
- Getting the maximum profit.
- The increase in production.
- Increase in margins.
The fourth stage (recession) is the final one. A product can be left if it is necessary to promote something new. The following strategies are possible:
- Reduction of investments or refusal to produce unprofitable goods.
- Increased investment to strengthen its position in the existing market.
- Refusal to produce old goods, sale of fixed assets and profit.