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Unlock This CourseEvery product has a journey - from when it first appears in shops to when it eventually disappears. This journey is called the Product Life Cycle. Think about products you know: the iPhone started as something completely new, became hugely popular and continues to evolve. Understanding this cycle helps businesses make smart decisions about pricing, promotion and when to develop new products.
The Product Life Cycle shows how a product's sales and profits change over time. It's like watching a product grow up - from a baby product that nobody knows about, to a teenager that everyone wants, to an adult that's established and eventually to an elderly product that might retire.
Key Definitions:
Businesses use the Product Life Cycle to plan their marketing strategies. If they know their product is in the Growth stage, they might increase production and advertising. If it's in Introduction, they might focus on educating customers about what the product does. It's like having a roadmap for business decisions.
The Introduction stage is when a product first hits the market. It's an exciting but risky time for businesses. Sales are usually low because customers don't know the product exists yet and those who do might be unsure about trying something new. Think about when electric cars first appeared - most people had never seen one and weren't sure if they could trust them.
During Introduction, businesses face several challenges. Sales grow slowly because customers need time to learn about and trust new products. Profits are often negative because companies spend heavily on research, development and marketing whilst selling relatively few units. Competition is usually limited - the business might be the only one selling this type of product.
Sales start at zero and grow slowly. Customers are cautious about trying new things, so it takes time to build momentum.
Usually negative profits due to high development costs and low sales volume. Money is going out faster than it's coming in.
Few or no competitors. The business might have the market to themselves, but the market is still very small.
When Tesla launched the Model S in 2012, electric cars were virtually unknown to most consumers. Tesla faced the classic Introduction stage challenges: educating customers about electric vehicles, building charging infrastructure and overcoming concerns about battery life. Initial sales were slow, with only 2,650 cars sold in the first year. Tesla invested heavily in marketing and education, hosting test drives and building showrooms in premium locations to attract early adopters.
Businesses use specific strategies during Introduction to overcome the challenges of launching something new. The main goal is to create awareness and educate potential customers about the product's benefits.
Heavy investment in advertising and promotion to build awareness. Businesses often use informational advertising to explain what the product does and why customers need it. Free samples, demonstrations and celebrity endorsements are common tactics.
Pricing Strategies in Introduction:
The Growth stage is when things get exciting! Sales start increasing rapidly as more customers discover the product and word spreads. This is often the most profitable time for businesses, as sales volume increases whilst development costs have already been paid. Competition usually starts appearing as other businesses notice the success and want a piece of the action.
Growth brings new opportunities and challenges. Sales increase rapidly as the product gains acceptance. Profits typically become positive and grow quickly because fixed costs are spread over more units. However, competition increases as other businesses enter the market with similar products.
Sales increase quickly as more customers adopt the product. Word-of-mouth recommendations help accelerate growth.
Profits turn positive and grow rapidly. High sales volume helps spread fixed costs over more units.
Competitors enter the market with similar products, increasing choice for customers but reducing market share for the original business.
After the iPhone's introduction in 2007, it entered rapid growth from 2008-2012. Sales exploded from 1.4 million units in 2007 to over 125 million in 2012. Apple's profits soared as economies of scale reduced production costs per unit. However, competition intensified with Android phones from Samsung, HTC and others. Apple responded by improving features, expanding to more countries and developing the App Store ecosystem to differentiate from competitors.
During Growth, marketing strategies shift focus. Instead of just creating awareness, businesses need to differentiate their product from new competitors and capture as much market share as possible whilst the market is expanding.
Key Growth Stage Strategies:
As competitors enter the market, businesses must work harder to maintain their position. This might involve price adjustments, improved customer service, or developing unique features that competitors can't easily copy. The goal is to build customer loyalty before the market becomes too crowded.
The Growth stage presents both exciting opportunities and significant challenges. Businesses must scale up production to meet increasing demand whilst maintaining quality. They need to invest in distribution networks to get products to more customers. Cash flow can be challenging despite growing sales, as businesses often need to invest heavily in inventory, equipment and marketing to support rapid growth.
Successful businesses use Growth stage profits to invest in research and development for their next products. They know that current success won't last forever, so they prepare for the future whilst maximising current opportunities.
Netflix's streaming service entered Growth stage around 2010-2015. Subscriber numbers grew from 20 million to over 75 million globally. Netflix invested heavily in original content like "House of Cards" to differentiate from competitors like Amazon Prime and Hulu. They expanded internationally and improved their recommendation algorithms. This growth strategy helped them maintain market leadership even as competition intensified.
Understanding the differences between Introduction and Growth helps businesses adapt their strategies appropriately. Each stage requires different approaches to pricing, promotion and product development.
Introduction focuses on education and awareness, whilst Growth emphasises differentiation and market capture. Introduction accepts losses for future gains, whilst Growth maximises profits from current success. Introduction has few competitors, whilst Growth sees increasing competition.
Both stages are crucial for long-term business success. A strong Introduction stage creates the foundation for Growth, whilst effective Growth stage management sets up the business for continued success in later stages. Businesses that understand these dynamics can make better decisions about resource allocation, timing and strategic priorities.