product life cycle

The Successful production and distribution of goods depends on many factors, from cost of raw materials and ending with quality advertising. In order to promote the product on the market and get maximum profit, you need to know what is the life cycle of the product and how to manage it.

For a start I would like to define what the product is. Economists characterize as absolutely any thing that is involved in a kind of exchange for other things, including cash.

Product Life cycle – is the length of time over which the product passes a certain number of stages, from development, market introduction, to the complete exit. It should be noted that in some cases hitting the market, the goods are not sold, and no longer produce. In such a situation the product life cycle is equal to zero.

There are certain criteria that define at what stage is currently the product:

• Profit;
• Trade;
• Price;
• Costs;
• Inventories.

Based on the availability and magnitude of each indicator, providing 4 stages of the product life cycle. In different sources they may have different names, but essentially no different.

1. Introduction. Buyers evaluate the quality of a new product, price, etc. generally, sales volumes are small and grow rather slowly. This period is characterized by some loss, since costs exceed revenue.
2. Growth. Consumers are actively buying the product. The profit starts to increase significantly.
3. Maturity. The most stable period. The pace of company sales are slowing. The product has won its place in the market and loyal customers. Profit usually consistently high. During this period especially dangerous is the emergence of competitive goods.
4. Decline. Reduced profits and sales. Without any emergency measures (advertising, change in packaging, discounts, etc.) product will have to be withdrawn from circulation.

The Concept of the product life cycle formed in 1965, the famous economist from America by Theodore Levitt. They were first clearly described the reasons why any product has to leave the market:

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1. Thanks to the development of science, new fashion trends product becomes irrelevant and replaced by newer, improved.
2. Product Life cycle is divided into several periods, each of which solves certain problems, problems.
3. Each stage is also characterized by a certain level of profit.
4. There are specific policies in the field of production, Finance, marketing, personnel management, characteristic for each specific stage of the product life cycle.

Often, the sales volume depends not only on the quality of goods, how many literate and thoughtful marketing strategies. They can be used to increase the life cycle of the product and get the desired profit.

In the first stage (introduction) the main task for any business – market penetration. Given the level of prices and the activity of promotion you can use the following strategies:

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

In the second phase (growth), the firm seeks to strengthen the position of the product and the opportunity to conquer new territories. Effective are the following strategies:

1. New commercials.
2. Increasing product quality, modernization.
3. Release related products, expanding the range, development of new models.

The Third stage (maturity) implies profit maximization. This period is characterized by the following:

1. The competition.
2. Maximize profits.
3. Increase in production volume.
4. Increase margins.

The Fourth stage (decline) is final. The goods can be left if necessary to advance something new. Possible the following strategies:

1. Reduction of investments, or the abandonment of production of unprofitable goods.
2. Increased investment to strengthen its position in the existing market.
3. The abandonment of production of the old product, the sale of fixed assets and profit.