Product Life Cycle

1
Product Life Cycle
Product introduced into the market.
Sales fall. Low demand.
Product sales level off or slow down. May be more
competition now or target owns product already.
Product is enjoying success. Much of the target
market knows about and buys product.
2
Introduction Stage

• Companys focus is on promotion and production
• Major goal draw attention to the new product
• Special promotions may get customers attention
• Costs are high, especially advertising
• Least profitable stage
• Going rate pricing is common

3
Skimming Pricing

• Sets a high price
• Used when demand is greater than supply
• Company knows they will have to lower price when
  market changes to price-conscious customers
• While product is hot, high profit margin
• Can lower price without insulting target market

4
Penetration Pricing

• Pricing an introductory product very low
• Goal to encourage as many people as possible to
  buy your product
• Effective if demand is elastic
• Product must take hold in a short period of time
• If product is not in high demand, lower price
  will cause bigger loss

5
Growth Stage

• Product enjoys success
• Sales and profits increase
• Target knows about and buys product
• Advertising focus is now on consumer satisfaction
• Competition is aware and is entering market
• Company may have to introduce new models

6
Pricing during Growth

• Depends on whether it was introduced with
  skimming or penetration pricing
• With skimming
• Price will be lowered to appeal to
  price-conscious market
• With penetration
• Very little change
• Decreased demand and high competition
• Look for new market segments to hold prices

7
Maturity Stage

• Sales level off or slow down
• More competition or most of target owns product
• Company spends marketing dollars on fighting off
  the competition

8
Pricing during maturity

• Goal is to stretch the life of the product
• Some companies reduce prices
• Others add new features or new target markets
• Sell to international markets

9
Decline Stage

• Sales fall
• Profits may be smaller than costs
• Must decide how long to continue to support
  product
• Can also
• Sell or license product
• Recommit to product line
• Discount the product
• Regionalize the product
• Modernize the product

10
Prices during decline

• Sales and profit margins decrease
• Companies are forced to reduce price to generate
  sales
• To maintain profit margin, reduce costs or cut
  back on advertising