Question

Explain the first two stages of product life cycle.

Answer 1

1. Introduction Stage: During this stage, the product is created. This could be a whole new product or an updated version of an existing one. The company tells the market about their product and its features. There is little competition, a small market, exorbitant prices, and inadequate knowledge about product innovation. Consumers' lack of information and limited distribution contribute to low sales volume growth. Due to limited production capacity and hefty advertising costs, prices are typically high. The introduction stage is associated with high costs, poor sales volume, limited distribution, and high prices. This stage is quite dangerous, as many new products fail during this time.
   The following strategies may be employed to introduce the product successfully :
   1. Proper advertisement and publicity of the product, e.g., a money-back guarantee, may be offered to persuade people to try the product.
   2. Attractive gifts to customers as an ‘introductory offer’.
   3. Selective distribution and attractive discount to dealers.
   4. Removing technical and other deficiencies in the product.
   5. Skimming the cream pricing policy, i.e., higher price to recover heavy promotional costs during the initial period.
2. Growth Stage: In this stage, demand and sales increase rapidly, distribution expands, competition increases, and prices fall. The promotional focus switches from “buy my product” to “buy my brand”. The company grows sales by expanding market share in existing areas and entering new markets. Promotional expenses remain high but decrease as a percentage of sales turnover. As a result, profits increase. In some circumstances, significant product improvements may occur.
   The following strategies may be adopted during the growth stage:
   1. Heavy advertising to create brand image and to stimulate sales.
   2. Expanding distribution channels to make the product available wherever it is demanded.
   3. Introducing new versions of the product to cater to the needs of different types of customers.
   4. Keeping the price at competitive levels.
   5. Greater emphasis on customer service.