Product life cycle

Successful production and marketing of goods depends on many factors, starting with the cost of raw materials and ending with the quality of advertising. In order to promote the product on the market and get the maximum profit from this, it is necessary 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, some kind of, exchange for other things, including money.

The life cycle of a product is a period of time for which the product passes a certain number of stages, from development, appearance on the market, to complete withdrawal from it. It is worth noting that in some cases, having entered the market, the goods are not sold, and they cease to be produced. In this situation, the life cycle of the goods is zero.

There are certain criteria by which they determine at what stage the product is at the moment:

• profit;
• Turnover;
• price;
• costs;
• Commodity stocks.

Based on the availability and magnitude of each indicator, four stages of the product life cycle are identified. In different sources they can have different names, but, in fact, they are no different.

1. Implementation. Buyers evaluate the quality of the new product, price, etc. As a rule, sales volumes are small and grow quite slowly. This period is characterized by some unprofitableness, as costs exceed profit.
2. Growth. Consumers actively buy goods. The profit starts to increase noticeably.
3. Maturity. The most stable period. The pace of the company's sales volume is slowing down. The product has won its place in the market and regular customers. The profit is, as a rule, stably high. During this period, the appearance of competitive goods is especially dangerous.
4. Recession. The profit and sales volumes decrease. Without any emergency measures (advertising, packaging changes, discounts, etc.), the goods will soon have to be removed from circulation.

The concept of the product life cycle was formed in 1965 by the famous economist from America, Theodore Levitte. For the first time they clearly described the reasons why any product has to leave the market:

1. Thanks to the development of science, new trends of fashion, the product is losing its relevance and a newer, improved one comes to replace it.
2. The product life cycle is divided into several periods, each of which solves certain problems and problems.
3. Each stage is also characterized by a certain level of profit.
4. There are specific strategies in the field of production, finance, marketing, personnel management, characteristic for each particular stage of the product life cycle.

Often, the volume of sales depends not so much on the quality of the product as on the literate and thoughtful marketing strategies. With their help, you can increase the product life cycle and get the desired profit.

At the first stage (implementation), the main task for any firm is to penetrate the market. Given the price level and promotion activity, you can use the following strategies:

1. Slow penetration - low price, promotion inactive.
2. Rapid penetration - low price, active promotion.
3. Quick removal of cream - the price is high, the promotion is very active.
4. Slow cream removal - the price is high, the promotion is inactive.

At the second stage (growth), the firm strives to strengthen the position of the goods and, if possible, to conquer new territories. The following strategies will be effective:

1. New advertising.
2. Improving the quality of goods, modernization.
3. Release of related products, expansion of assortment, development of new models.

The third stage (maturity) involves obtaining maximum profit. This period is characterized by the following:

1. Fighting against competitors.
2. Getting the maximum profit.
3. Increase in production volumes.
4. Increase in mark-ups.

The fourth stage (recession) is final. The product can be left if it is necessary to promote something new. The following strategies are possible:

1. Reducing investment or refusing to produce a loss-making product.
2. Increase investments to strengthen their positions in the existing market.
3. Refusal to produce the old goods, selling fixed assets and making a profit.