A new product progresses through a sequence of stages from introduction to growth, maturity and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation. The product life cycle has a major impact on marketing strategy and marketing mix.
A. Introduction Stage:
This is the first stage of product life cycle when the new product is launched or introduced in the market for the first time for sale. During this stage, the sales increase at very slow rate. There are several reasons for the slow growth of new products such as delay in the expansion of production capacity, technical problems, delays in obtaining adequate distribution through retail outlets and customers’ reluctance to change existing buying habits.
Profits are negative or low in the introduction stage because of low sales and heavy distribution and promotional expenses. The investment on advertising and the other promotional activities is high because consumers are not aware of the new product and it is important for the company to make aware. The main reasons for high level of promotional efforts are
- To inform potential consumers of the new product
- To induce them to try the product
- To attract distributors or retail outlets to sell their product
- Sales: During introduction stage, sales of the company are very low because of the following reasons
- Technical Problem: Due to small-scale production, output is low and cost of production is high. Due to high cost of production, the firm has to sell at higher price therefore sales are low
- Lack of awareness: As many consumers are not aware of the product and its features, they cannot buy the product. The consumers who buy the product are innovators and they are limited in number therefore sales are low
- Cost: During introduction stage, cost per consumer is very high because of low production and heavy promotional expenses.
- Profit: Due to heavy promotional costs and low sales, it is not possible for the company to recover all its costs therefore profits are either zero or negative
- Customers: In introduction stage, few customers are aware of the product and very limited customers are ready to buy the new product because of the success of product is not known.
- Competitors: In the introduction stage, there is no competition when the product is new to the company as well as the market and there are also limited competitors when the product is new to the company and the market.
Strategies during Introduction Stage:
During the introduction stage, the company can choose any strategy related with price, promotion, distribution and product quality.
|HIGH||Rapid Skimming Strategy||Slow Skimming Strategy|
|LOW||Rapid Penetration Strategy||Slow Penetration Strategy|
(i) Rapid Skimming Strategy: any skimming strategy is always interested in more profits. Therefore, the price is always high. So, in rapid skimming strategy, the management launches a new product with a high price and a high promotional level.
This strategy will be effective / make senses under the following assumptions
- A large part of potential market is unaware of the product
- Those who are aware of the product are ready to buy it and are capable of paying any price
- The firm faces potential competition and wants to build up brand preference
(ii) Slow Skimming Strategy: In slow-skimming strategy, the management launches the new product with a high price and low promotion. This strategy can be effective or make sense only when
- The market is relatively limited in size
- Most of the people are aware of the product
- People are ready to pay high price and
- There is less threat of potential competition
(iii) Rapid Penetration Strategy: In rapid penetration strategy, the management launches the new product with a low price and high promotion. The effectiveness of this strategy depends upon the following assumptions
- The size of the market is large
- The market is relatively unaware of the product
- Most of the buyers are price sensitive
- There is a strong potential competition
- When company’s cost of production decreases with increase in production
(iv) Slow Penetration Strategy: In slow penetration strategy, the management launches the new product with a low price and low promotion. The firm keeps low price so that people accept the product rapidly and also keeps its promotion cost low in order to get more net profits. This strategy depends upon the following assumptions The market is large The market is highly aware of his product The market is price sensitive There is some potential competition