Product Life Cycle - Literature review Example

Product Life Cycle The product life cycle is a method used by business to attempt to gauge the life expectancy of a product and as a calculated attempt to forecast the product with the changes in market demand in order to remain competitive. The four stages that consist of the product life cycle is introduction stage, growth stage, maturity stage and decline stage. As the product flows through the four stages, marketing mixes and strategies are implemented to foothold staying power and remain competitive against newcomers and transitioning old rivals. The introduction stage is the first stage of the product life cycle and can be considered the developmental stage. Theodore Levitt (81) article "Exploit the Product Life Cycle" suggests this stage is the initial launch even before there is a proven demand for the product (81). A good example of this phase is the Plug-in hybrid electrical vehicles (phev). This relatively new concept had a direct adverse impact on Toyotas cost recovery performance. Toyota was seeking a new market segment which had no previous track record to use as a compass, therefore there initial entry was filled with uncertainties and unknowing risks. The introduction stage is also the most risky for the pioneer as the trailblazer absorbs cost while they calculate the penetration price considering overhead expenses and potential profit spreads. It is not unusual for a corporation to be the only manufacturer developing the concept at this time as competitors attempt to save initial investment capital by allowing another company to pay for the test pilot. It is also during this phase that the manufacturer begins reducing operational costs, corporate risk and attempt to improve the product to seek improvements in profit. The pioneer of the product anticipate slow sales with relatively minimal chances of cost recovery, however they also anticipate a gradual growth in sales which sets them in place for the next phase of the product life cycle which is growth. During the growth phase, which is the second phase of the product life cycle, there is a gradual rise in consumer demand and sales begin to take off. The trailblazer may have a a slight edge over competitors because they may have planted their feet and have the first-movers advantage. Fernando Suarez and Gianvito Lanzolla (121) article "The Half-Truth of First -Mover Advantage" believe that if the company have a strong brand name, solid financial backing and excellent marketing skills, the pioneer may sustain staying power. The article makes reference to the brand name of Sony suggesting that its brand name paired with its exceptional level of product quality allowed them to take a firm hold on the walk-man industry. The growth stage may not be the phase where cost recovery is optimal. The initial corporation may have launched the product, however if the concept proves to be lucrative, then fierce competition will enter changing the market from blue waters, where there was relatively no competition, to red waters where competition is fierce. The pioneer edge may be the fact that their name was the first attached to the product, however the competitors may now be able to duplicate the product at cheaper cost and correct glitches, therefore launching the same product, with possible better quality, but the competition generally take advantage of the pricing to maximize rate on return. Youngme Moon (88) article "Break Free From the Product Life Cycle," suggests that the traditional tunnel vision method of the product life cycle may need broadening if competition becomes to fierce or if anticipated sales are not satisfactory. The article goes on to say that as companies go through the product life cycle that marketeers can intuitively defy the rules of the life cycle and restrategize their marketing positioning in order to regain or capture a larger part of market share. During this stage the trailblazer anticipates a cost recovery for the product, however the initial launcher of the product must begin to fight for product and brand differentiation. If the originator doesnt have a sustainable brand name then customer loyalty may sway. Also, even though the first movers advantage may be an asset, late entry competitor tactics such as advancement in technology, and the need to lower profit margins to establish its market share may have a direct impact on the originator cost recovery performance. However, there are marketing tactics that the originator can take to fight for market share. Author Youngme Moon (88) suggests that the pioneer could use marketing positions or repositions, where the product is marketed in unexpected ways allowing the company to change how the customer mentally categorize the product in an attempt to fight for its share of the market. During this growth stage, the demand for the product is still growing and therefore promoting the product to reach a broader audience is another tactic to grab more market share. The third stage of the product life cycle is the maturity stage. During the maturity stage competition is dueling and the waters have turned from blue waters to red waters. The maturity stage also plateaus the prices which are slashed as competition begin to fight vigorously for market share. During this stage corporations begin to offer incentives, promotions and exceptional level of quality of service to differentiate themselves from competitors to sustain and gain market share. This is also the stage where there is a decline in a businesss cost recovery performance as the direct cut in price along with all the incentives have a direct impact on the profit margin. During the maturity stage, the product may turn from being market driven to market driving. Nirmalya Kumar, Liswa Scheer, Philip Kotler (1) authors of the article "From Market Driven to Market Driving" suggests that countless pioneering companies who have chartered blue waters revolutionized existing industries through innovation and creativity are market driving instead of being market driven. The maturity stage of the product life cycle is one of market driven. During this cycle, the originator fights to hold its position and makes direct contact with the customer to begin to differentiate itself from competitors and try to remain in the market. This point in the product life cycle is also when the product features may be enhanced and the customer may be given more bang for their buck. A prime example of this stage is the recent competitive bout for the new car purchaser. The auto makers were experiencing a sharp decline in new car sales, therefore General Motors, DaimlerChrysler and Ford, which are deemed the big 3, offered huge incentives to lure customers in to purchase pre-manufactured automobiles. Incentives such as rebates, amenities, low interest rates and other bait and hook tactics were offered. This segment of the product life cycle for this particular example reveals an adverse affect on a business cost recovery performance. The final stage of the product life cycle is the decline stage. During this phase, saturation becomes endemic and sales begin to decline while survival tactics begin to surface. Competitors may begin to merge, buy others out or the weaker ones may withdrawal. During this stage cost recovery performance is highly declining and product refocusing must be made. It is during this stage that a marketing mix decision can be utilized to salvage the product and plateau expenses. The decline stage allows for the reposition for growth via breakaway positioning or reverse positioning. Youngme Moon (92), author of "Break Free From the Product Life Cycle" explains that with breakaway positioning a mature product can be repositioned for growth by combining features of distinctly different categories. The author also goes on to say that reverse positioning can be utilized by adding some new components and stripping away old attributes which can shift a product backward from maturity into the growth phase. The recommendations can stave off severe cost recovery performance and allow a corporation to turn back to a lucrative stage. The product life cycle consist of four stages and is generally used by corporations as a gauge to keep track of their products performance. The first stage is your introduction stage where the product is introduced into the market. The second stage called the growth stage is where the corporation is most likely to retrieve their cost recovery performance. The third stage deemed the maturity stage is where competition becomes fierce and sales begin to decline. The final stage of decline is when the market becomes to saturated and profitability margin spread is too thin and weaker opponents must restructure in order to remain in the loop. Works Cited Kotler, P, Kumar, N & Scheer, L. 2005. From Market Driven to Market Driving. Harvard Business Review 1-12 Lanzolla, G. Suarex, Fernando. 2005. The Half-Truth of First-Mover Advantage. Best Practice 121-127 Levitt, T. 2005. Exploit the Product Life Cycle. Harvard Business Review 81-93 Levittt, T. 2006. What Business Are You In? Harvard Business Review 127-148 Moon, Y. 2005. Break Free From the Product Life Cycle. Harvard Business Review 87-92 Roberts, J. 2005. Defensive Marketing How a Strong Incumbent Can Protect Its Position. Harvard Business Review. 150-170 Read More