Class 9 - March 17, 2011

This week we discussed Chapter 10, Developing and Managing Products.

The thing I thought was most interesting in this chapter was learning the product life cycles.  The product life cycle is a biological metaphor that traces the stages of a product's acceptance, from its introduction (birth) to its decline (death).  The amount of time a product spend in each life cycle can vary dramatically. 

First is the introductory stage.  This stage represents the full-scale launch of a new product into the marketplace.  A high failure rate, little competition, frequent product modification, and limited distribution typify the introductory stage of the product life cycle.  During this stage, sales normally increase slowly, and profits are usually negative due to R & D costs, factory tooling, and high introduction costs.  The promotional strategy focuses on developing product awareness and informing customers about the product's potential benefits.

The second stage is the growth stage.  If a products survives the introductory stage, it advances into the growth stage.  In this stage, sales typically grow at an increasing rate, many competitors enter the market, and large companies may start to acquire small pioneering firms.  Profits rise rapidly, reach their peak, and begin declining as competition intensifies.  The promotional strategy switches to aggressive brand advertising and communication of the differences between brands.  Distribution becomes a major key to success during the growth stage.

The third stage is the maturity stage.  This is the period which sales begin to increase at a decreasing rate.  Normally, this is the longest stage of the product life cycle.  It is during this stage that appliances begin to release a yearly model.  Product lines are lengthened to appeal to additional market segments.  Marginal competitors begin dropping out of the market.  Promotion increases with dealers and consumers to maintain loyalty and market share.

The final stage is the decline stage.  This stage is signified by a long-run drop in sales.  During this stage, companies must learn to develop strategies specific for this stage; to eliminate all nonessential marketing expenses and let sales decline as more and more customers discontinue buying their products. 


While my business is more of a service business rather than a products business, I still think it is important to understand how this works - just in case I am ever involved in a product based company.