Course: SLF 125 Business Planning and Startup

Reading

Stages 1 and 2
Stages 1 and 2
Credits
Adapted from Marketing, Boundless Marketing Open Textbook, Chapter 9 Products
www.boundless.com/marketing
Creative Commons Attribution-ShareAlike 3.0 Unported License

Stage 1: Introduction

The product life cycle begins with the introduction stage. Just because a product successfully completes the launch stage and starts its life cycle, the company cannot take its success for granted.

A company must succeed at both developing new products and managing them in the face of changing tastes, technologies and competition. A good manager should find new products to replace those that are in the declining stage of their life cycles, learning how to manage products optimally as they move from one stage to the next. Even small businesses have to be prepared to offer NEW AND IMPROVED VERSIONS to customers. Competition will be doing just that same thing!

The introduction stage is characterized by a low growth rate of sales as the product is newly launched and consumers may not know much about it. Traditionally, a company usually incurs losses rather than profits during this phase. Especially if the product is new on the market, users may not be aware of its true potential, necessitating widespread information and advertising campaigns through various media.

However, this stage also offers its share of opportunities. For example, there may be less competition. In some instances, a monopoly may be created if the product proves very effective and is in great demand.

Stage 2: Growth

The growth stage is the period during which the product eventually and increasingly gains acceptance among consumers, the industry, and the wider general public. During this stage, the product or the innovation becomes accepted in the market, and as a result sales and revenues start to increase. Profits begin to be generated, though the breakeven point is likely to NOT be reached for a significant time -- maybe even until the next stage -- depending on the cost and revenue structures.

Initial distribution is expanded further as demand starts to rise. Promotion is increased beyond the initially high levels, and word-of-mouth advertising leads to more and more potential customers hearing about the product, trying it out, and--if the company is lucky--choosing to use the product regularly. Repeat orders from initial buyers are also obtained.

Challenges include:

- Competition begins to increase with a few new players in the establishing market
- Increased competition leads to price decreases: price wars may erupt, technology may get cheaper, or other factors can ultimately lead to falling sales