Product life cycle
Product life cycle - a concept that characterizes the development of their sales and profits from the sale of goods, offers activities for strategy and marketing tactics from receipt of goods on the market until its removal from the market. First published by the American economist T. Leavitt in 1965 the concept of the product life cycle - is certainly only a theoretical model of good life during his stay on the market.
However, this model is widely used in marketing practice as being well with practical experience, allows us to describe, analyze market life not only goods, but also political parties, public figures, ideas, services and so on. P.
The classic model of the product life cycle can build in a graph that illustrates the dynamics of sales and profits from the sale of the entire stay of the goods on the market (Fig. 22).
Fig. 22. The concept of product life cycle
I - research and development of products;
II - introducing product to the market;
III - market expansion;
IV - the benefits;
V - product maturity;
VI - market saturation;
VII - extrusion product from the market.
Throughout this period can be divided into several stages. First stage consider the period when the product on the market as such is almost gone. Being only his development, market research, product testing ideas. Neither sales nor earnings at this stage nobody expects. Instead, the company mainly invests heavily in product development, hoping in the future to cover their income from it.
In the second stage the product is introduced to the market starts its implementation. At this stage, measures are taken with test marketing, and takes the production and commercial sale of goods.
Sales rise, losses are reduced. According to the concept of life cycle of the second phase should begin with a relatively low turnover, as yet not known commodity in the market, and its sales at the stage of organization. 'That is why at this stage there are high costs of advertising and marketing, as well as relatively high - production. The main goal on the second stage - to attract the attention of consumers, to stand first "test", so to speak, purchase goods, make contacts with trade, dispel its doubts about the success of new products.
In the third stage the market and expand sales by increasing the production of goods, accelerating the processes of proliferation, increased promotional activities. This requires the strengthening of relations with the trade, expansion of distribution channels, the formation of sufficient advertising budget. It is at this stage of the life cycle of goods can pass the break-even point, and therefore have the appropriate returns. As the volume of sales and profits at this stage with a steady upward trend. and
In the fourth stage, the company fully experiencing the advantages secured by successful product idea, the right choice of the target market, the optimal marketing programs and more. Here sales and profits take a certain inertia due to measures implemented in previous phases. Goods became known in the market, all attracted new groups of consumers. However, the level of profit at that stage approaching the maximum though sales volumes continue to grow. This discrepancy is explained by the fact that there begins to be felt the impact of competition. Attracted by the success of the goods, they begin to copy it to produce goods-analogues. In response, the company is forced to tighten its advertising impact, modify product prices decrease more. All this leads to higher costs and a corresponding decrease in profit.
The next stage is the maturity of the product. At this stage, its sales volume reached the highest value, but become more noticeable tendency to brake. Volumes decreased profits, but they are so significant that the attractiveness of the product for the enterprise remains.
State saturation - the next stage of the product life cycle. Its feature is descending levels of sales and profits. The reasons for this are, on the one hand, the saturation of the market, and with another - increased competition due to the large number of competitors.
The last stage of the product life cycle is its extrusion from the market. At this stage, sales vanishes. Low demand, increased competition and price fighting threatened loss. The main task on this stage - in time, in the shortest terms to withdraw the product from production, minimizing possible damage.
The main idea of the concept of product life cycle is to confirm the temporary nature of the market life of the product. Even products with the rapid growth in sales and profits ever go through stages of maturity, saturation and displacement from the market. In this regard, every company should promptly take care of replacing their new products.
According to the changes in sales volume and profits modified and marketing program (tab. 10). The main purpose of this modification - extension of the lifetime of the product on the market, increase return on it for the company.