Characteristics of Product Growth Stage

Characteristics of Product Growth Stage

Product growth stage is second stage of product life cycle. Characteristics of this stage are being elaborated below

1.    Sales is Increasing

In these stage sales is increasing day by day. Customer is increasing with a great pace. In this stage customer preference and choices is being closely observed by the marketing department to increase demand.

2.    Price is Still High

Prices will remain high, if the demand is high or more than expectation, otherwise, there will be a slight decline in the price. Product prices in this stage are totally depends on demand of product. Prices may be lowered to boost demand.

3.    Marketing Cost is High

Marketing cost has come down from the introduction stage, but still a huge budget is required to remind the customer.

4.    Distribution is expending

Product is being introduced to new segment of market after being getting positive response from the initial launch. Retail demand is also high for the product in this stage.

5.    Competition is expected

Competition is expected, especially if the product is performing well in the market, because your competitor can not leave the market open for you.

6.    Cost are reducing

Due to high demand and high production level, the unit cost of the product is falling; moreover, there is also tendency of lower advertising cost.

7.    Profit has started

It is expected that product is earning some profits, and profit is growing with great speed with each day passing. This is due to high volume of sales and lower unit cost of product.

Characteristics of Product introduction Stage

 Characteristics of Product introduction Stage

Introduction stage is very critical for the product and therefore a proper management is required at introduction stage. Some important characteristics of introduction stage have been explained below;

1.    Market Demand

Create market Demand for the product is one of the main objectives of introduction stage. This is done by heavy advertisement of the product.

2.    No Competition

In introduction stage, there is no competition in the market, therefore organization is market leader. This concept is valid (where new product or new feature is being introduced)

3.    Losses are expected

There are so many costs involved at introduction stage, and market demand is limited. Therefore company may suffer losses at this stage.

4.    High Advertising Cost

Advertising cost is expected to be high in the introduction stage. More customers are engaged by media. High advertising cost is must for creating initial Demand and future growth of product.

5.    Price is High

Price kept at high side to get the maximum benefit from the willing customer. This high price compensates the high advertisement budget in the initial stage.

6.    Distribution

Distribution will be targeted and scattered. It is kind of a test of the product, because there are fair chances that product may not be able to attract customer. Therefore selected area/customer are preferred at this stage.

7.    Promotion is extensive

Promotions activities are extensive, initial user are given trial usage. It is believed that satisfied customer will bring new customer, so many promotional activities are started for the customers.

Advantages of product life Cycle

Advantages of product life Cycle

1.    Understanding profitability

Product life cycle costing helps in understanding & predicting the profitability of the product during the different stages and as whole (during the life cycle).

2.    Cost analyses

Product life cycles break down the cost at different stages. This provides a better understanding of cost to be incurred at different  stages. These costs understand helps management to adopt appropriate strategy for controlling those costs.

3.    Pricing

Product life cycle costing is very helpful to adopt appropriate pricing strategy for different phases. It explains that each stage require price reconsideration.

4.    Future planning

Product life cycle costing is a kind of future planning for the product. Therefore product life cycle costing may be used as planning tool for the future. Product life cycle costing itself provides grounds for product planning. b

Stage of Product Life Cycle

Stages of Product Life Cycle

1.    Research & Development Stage

During this stage product is developed, most of the cost in this stage is capital in nature.

2.    Introduction Stage

Next stage is launching of product in the market. At this stage a lot of advertising activity is required. At this stage product is being produced at low quantity, therefore unit cost will be high, while profitability will be on lower side.

3.    Growth Phase

At this stage the large production will be made to meet the customer demand. Large production will lower the unit cost and therefore profitability would be at higher side.

4.    Maturity Phase

At this stage organization will try to maintain its market share. The product will be still making good profits at this stage.

5.    Decline phase

In this stage demand for the product start to fall and therefore profit will be shrinking. The firm will start preparation for exist and existing inventory will be sold. Firm continue to produce the product till the point selling price is more than variable costs.

6.    Withdrawal Phase

In this stage organization stops producing the product and incur necessary cost for the withdrawal.

Types of product life Cost

Types of product life Cost

1.    Acquisition or Development Cost

Cost which incurred for the development to product is regarded as development costs. These include all costs which incurred till the product is ready for sales.

2.    Operational costs

These are cost incurred during the life of product i.e. (number of year it remained in market).

3.    End of life cost

These costs include the withdrawal cost of product.