Product Life Cycle Strategies
Product, which is "anything that is capable of satisfying customers needs". Every product have a "life cycle" which similar as living organism, product will growth, become mature and decline. The stages of product's development, called "Product Life Cycle".
Product Life Cycle included five stages: Product Development, Introduction, Growth, Maturity and Decline.
Real market situation
1. Introduction Stage
As the name meaning, the product in this stage is new and just begin to enter the market. For example, in the year 2004, Orange introduces a new product, which is the 3G (Third Generation) mobile phones into the market. The company had spent huge amount of development and research cost for the product in the development stage. At the introduction stage, Orange's main objective is to build up the market awareness. Therefore, the marketing and distribution cost of Orange is very huge which aiming to establish branding and quality of product in this stage.
It's unlikely to have profit at this stage, it's only a stage to testing the market.
Companies may choose market skimming as the pricing strategy of the product in order to recover the huge development cost. Or they may choose market penetration in order to build up market share. At the very beginning stage of introduction of 3G mobiles, Orange wanted to recover the huge cost in development and chose market skimming. However, successful market skimming depends on inelastic market demand. There were so many substitutes of 3G mobiles in the market so that make market demand more elastic. So, Orange suffered great loss in marketing skimming.
2. Growth Stage
The product in this stage has increasing sales volume and profits. Company spend much on advertising and willing capture market share which has been more stabilized than pervious stage. For example, in the earlier...