Product Cycle: An Introduction To The Product Life Cycle

Introduction to the Product Life Cycle

As consumers, we consume billions of products every year. These products are manufactured, marketed and distributed by various organisations.

It is very important to these organisations ,especially those who are involved with 2 or more products( such as Procter and Gamble, Unilever, Nestlé and Reckitt Benckiser) to effectively manage the products in order to fulfil their primary objective, increase their profits, market share and maximise shareholder wealth.

An Image showing a large number of consumer products being controlled by 10 Corporate Organisations.

In order to achieve this, various methods and models are used. One of the most commonly used ones is the Product life-cycle method.

The product life

In the growth stage, a few similar products might have entered the market, so there may be some competition present. Profits will improve in the growth stage as the sales revenues will rise also leading to inherent economies of scale.

The company would still experience high advertising costs in order to attract a larger pool of customers, and in order to promote the superiority of their product over potential competitors (if any).

Due to increasing sales volume, production volume will also be raised to keep up with the demand. When this happens, economies of scales will arise. Economies of scale are a drop in the price of a single unit, due to the fixed costs being shared by more units.

The organisation will gain production and marketing experience, thus leading to the organisation developing these two functions.

In the growth stage, as a result of a larger number of customers, the company would expand the distribution network resulting in the company being able to reach a larger pool of customers.

The economies of scale would enable to company to reduce the selling price among stiff completion. Companies also seek to differentiate the product and the brand during this stage.

Summary of Opportunities and Challenges & Problems

Opportunities Challenges &