Product life Cycle Concept
Product life cycle concept shows a framework to spot the occurrence of opportunities and threats in a product market and the industry. This can help firms to reassess their objectives, strategies, and different elements of a marketing program.
A new product launch requires an investment of considerable resource, and most companies have to contend with substantial short-term losses. During the growth stage, sales rise rapidly and competition increases and large investments are required. The company that captures the largest share of the market should have lowest per unit cost because of economies of scale and experience. If the market-share leader reduces the price, it discourages aspiring new entrants and low-share firms. Such low-share firms, as well as new entrants, have not only to invest to take advantage of market growth but also to increase market share. The “first starter” company is likely to lose some market share during this stage but its sales keep on increasing.
During the maturity phase, companies with larger market share enjoy the rewards of their earlier investments. Product price is sufficient to keep even high-cost companies in business because they do not need investments, as was the case during the growth stage. Most competitors are content with the present position and do not try to increase their market share. The market leader keeps investing to improve a product and attain more efficiency in production, marketing, and physical distribution.