How does a firm's pricing policy relate to the product's life cycle

A detailed Summary of How does a firm's pricing policy relate to the product's life cycle


How does a firm's pricing policy relate to the product's life cycle?

When a company launches a new product, it knows the product won't last forever. However, the company does expect to earn a satisfactory profit to cover all the effort and risk that went into launching it. A firm can never accurately predict the lifetime of a product, but the lifetime involves four distinct stages. These four stages are collectively known as the Product Life Cycle (PLC).

The first stage is the introduction stage, when the product is first launched. Sales growth tend to be low as consumers are 'introduced' to the existence of the product. At this stage therefore, profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their inventories. Promotion spending is especially high to inform customers of the new product and get them to try it.

One of the biggest launches in recent history is that of the DVD player. Not only is this a new product, it's a whole new market. Industry executives have named DVD-Video the "Medium of the Millennium" and boast that DVD-Video is the fastest growing new packaged media format launch in history with clos


e to 5.4 million DVD-Video players shipped to retail since the format launched nationally in the U.S. in autumn 1997 (Consumer Electronics Association).

The company could try modifying the product- by changing characteristics such as quality, features or style to attract new users and to instigate more usage. The firm might also improve the product's quality and performance i.e. its durability, reliability, speed, taste. Additional features concerning the product's usefulness, safety or convenience can be applied, as Sony keep doing to its Walkman and Discman ranges, and Volvo have developed a reputation for safety.

There are now nearly 70 DVD Video player models marketed under 30 different consumer electronics brands.

http://www.dvdinformation.com/news/index.html

Profits increase during the growth stage, as the promotion costs are spread over a large volume and as unit-manufacturing costs fall. There are several strategic ways a firm uses to sustain rapid market growth as long as possible. It improves product quality and adds new product features and models. It enters new market segments and new distribution channels, and prices are reduced to attract more buyers.

It is during the maturity stage that a firm should consider modifying three elements: the market, product and marketing mix.



Some common words found in the essay are:
Intelect ASW, Unlike DVD, Walkman Discman, DVD Entertainment, Cycle PLC, Johnson Johnson, , Medium Millennium, DVD Video, Cadbury's Timeout, sales growth, dvd player, market segments, consumer electronics, stage decline, product features, dvd-video player, current profit, growth stage, dvd-video players,

Approximate Word count = 1099
Approximate Pages = 4 (250 words per page double spaced)

Category: Miscellaneous

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