Page 561 - Business Principles and Management

Unit 6

the introduction stage include Web-ready cellular
FIGURE 20-3 Sales and profits follow a predictable telephones, high-definition television (HDTV), and
pattern as products progress through each stage
of the product life cycle. portable audio players that can download digital
music files from the Internet.
When a company introduces a product, it is con-
$
cerned about successfully producing and distribut-
ing it. The company needs to inform prospective
customers about the brand-new product and its
Sales
uses, because people will be unfamiliar with it.
There is no competition from the same type of
product, but customers are probably using other,
older products. The company must show customers
how the new product is better than the products
they are currently using. Initially, only a few cus-
tomers will buy the product, but their experience
0
Profits will often determine whether other people will want
Introduction Growth Maturity Decline
to buy it as well.
The costs of producing and marketing a new
product are usually very high, resulting in a loss or
very low profits for the firm initially. The company is counting on future sales
to make a profit. If a product is successfully introduced, an increasing number
of consumers will accept it, sales will rise rapidly, and profits will grow.

GROWTH
When competitors see the success of the new product, they will want to get into
that market as well. When several brands of the new product are available, the
market moves into the growth stage of the life cycle. If customers like the new
product, they will begin buying it regularly and telling others about it, so more
and more customers become regular purchasers.
How might a fast-food com- In the growth stage, each company tries to attract customers to its own brand.
pany respond to the maturity Companies attempt to improve their brands by adding features that they hope will
stage of the product life cycle?
satisfy customers. They also add to their distribution to make the product more
readily available to the growing market. Most companies make
a profit in this stage. Profits are likely to increase as companies
sell enough of the product to cover the research and develop-
ment costs. Examples of products that have been in the growth
stage recently are digital video cameras, personal digital assis-
tants (PDAs), and wireless computers.

MATURITY

A product in the maturity stage has been purchased by large
numbers of customers and has become quite profitable. In the
maturity stage, the product is competing with many other
PHOTO: © GETTY IMAGES/PHOTODISC. developed a loyalty to one or a very few brands.
brands with very similar features. Customers have a hard
time identifying differences among the brands but may have

In this stage, companies emphasize the promotion of their
brand name, packaging, a specific image, and often the price of
the product. Because there are so many customers, each busi-
ness has to distribute the product widely, adding to their costs.
Competition becomes intense. Companies must spend a lot on

548 promotion and reduce prices, because customers have many