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Pricing - Erukhimovich IL

6.1. Product life cycle. The concept, stages

Life product on the market called the product life cycle

(ZHTST). Different products have different life cycle: from a few days to decades.

This cycle consists of stages, each of which requires an entity (company) of the respective strategy and tactics of market behavior.

Market behavior strategy consists of directions and measures to implement the objectives of producers for each individual market

for a certain period of time (market segment) and each product (average duration, long-term and forward-looking). Marketing strategy is developed on the basis of market research, the study of the goods, buyers, competitors and others.

Here are some examples of the most common strategies of market behavior producers: to enter the market with the development of a commodity; the introduction of the goods on the market of novelty already mastered the market; increase in sales on a particular market segment; the deployment of the international cooperation of production engineering with partners from other countries for intensive output in these countries' markets.

Marketing strategies can be targeted for maximum effect, regardless of the degree of risk, the minimum risk without expectation of great effect and a combination of the previous two directions.

Tactics market behavior suggests measures to implement the objectives of producers in each market and for each product in a specific period of time (short-term), based on the chosen strategy and assessment of the current market situation. At the same time the company objectives are constantly adjusted as tactical changes and other factors (which include price index, increased competition, the seasonal decline in demand, reduction of customer interest in the product and so on. D.).

Here are some examples of tactical setting marketing objectives: to expand the range of goods on the basis of the specified data on the customer needs; undertake enhanced promotional activities in connection with some fall in demand; reduce the price of goods for the purpose of sales promotion; expand the range of services provided by service organizations, to attract new customers; increase market share due to the decline in sales of a competitor; constructively to improve the product in accordance with the requirements of a specific market; to take measures to stimulate the personnel responsible for the efficiency of business transactions in the enterprise, and others.

In general, the tactics of market behavior should provide a sustainable level of commercial services in the market, rapid response to changing market conditions, response to the actions of competitors, correction of scientific and technical and production activities in accordance with the changing requirements of the buyers.

As already mentioned, ZHTST consists of several stages (stages):

• research and development;

• Introduction;

• increase in sales;

• maturity;

• decline.

Depending on the phase change ZHTST expenses of the enterprise on its production and profits, the price and the degree of competition, customer behavior and differentiation of the produced goods.

Typical ZHTST chart shown in Fig. 9. This is the classical curve.

The first phase of ZHTST - research and product development. Product Life begins long before he was born as a commodity - in ideas, designs, experiments. And it is at least 50% determines the continued success or failure of the producers on the market. For the enterprise, this phase of the product - it is only possible future costs and revenues.

The second phase - implementation (market excretion). This product begins to be sold. The procedure for removing the goods to market takes time; in this period, sales increased slowly, which can be explained by these factors:

• delays in the expansion of production capacities;

• technical problems;

• delays in bringing the goods to the consumer, particularly in establishing appropriate distribution through various retail outlets;

• the reluctance of customers to abandon the habits of behavior.

In the cases of expensive new products and increase sales is constrained by other factors, such as small number of customers are able to accept the goods and afford to buy it.

For the enterprise, this stage is the highest cost of creating the product. At this stage the company incur losses or profits are very small because of the small sales and high costs for the organization of the distribution of goods and stimulate its sales. The costs of incentives to achieve the highest level of this time in connection with the need to concentrate the efforts to promote new items in order to inform potential customers about new, still unknown product to them; encourage them to testing of the product; ensuring this product distribution through retailers.

New technology needs to be improved. Producers at this point a little bit, and they produce only the basic options of the goods, since the market is not yet ready to accept modifications. Companies are focusing their efforts on sales to consumers, the most prepared to make a purchase (as a rule, representatives of the group of high-income). The first to buy the most active consumers of goods. However, they are usually not too much, and the volume of sales of goods is not large; often it grows very slowly.

The company at this stage will receive a small amount of profit due to high production costs.

The third stage - the increase in sales volume. If the new product satisfies the market interests, selling begins to significantly expand. For active customers, re-buy a new product joins a large number of others. Advertising helped to disseminate information about what the market has a new good product. In the process of working out of its high-quality technology has become robust. There are modifications of the goods within the firm, helped by the emergence of competing products.

On the market there are new competitors, attracted by the opportunities. They will offer the goods with new features that will expand the market. Increased competition will lead to a sharp increase in sales from the factories to satisfy product distribution channels.

Expenses on sales promotion firms retained at the same level or increase somewhat to counter competitors and continue to inform customers about the product.

Prices either remain high or rise. Demand in the market is growing. The company begins to receive a significant profit, which increases and reaches a maximum at the end of the stage in question. Arrived at this stage increases as the cost of sales promotion is already accounted for more sales while reducing production costs. Making a profit and marks the beginning of phase increase.

The fourth stage - maturity. This product is available in large quantities on the proven technology with high quality. Slower than the previous stage, but has been steadily increasing the sales volume to the maximum. This stage is usually longer than the previous, and poses challenges in the field of marketing management. Most of the products available on the market is just at the stage of maturity. Growing competition on price, similar products, there are the original competition design. To keep competitive position needs to be improved versions of the goods, which in most cases diverts significant resources.

The slowdown in the expansion of sales means that many manufacturers accumulated stocks of unsold goods. This leads to increased competition; competitors are increasingly resorting to the sale at reduced prices and the prices below the list. Expands advertising, an increasing number of preferential trade deals with the scope and consumers. Growing allocations for R & D in order to create improved variants of the goods. All this means lower profits. The weakest competitors begin to drop out of the fight. In the end, the industry there are only firmly entrenched rivals.

The demand for goods became popular, people buy it again and repeatedly.

The fifth stage - decline. Eventually selling certain varieties or brands of goods still starts to fall. This demonstrates the "venerable" age of the goods when it comes to the final stage of existence - the recession, characterized by its withdrawal from the market. Falling sales may be slow or rapid. Sales may fall to zero and can fall to a low level and remain there for many years.

Sales Fall for several reasons:. developments in technology, changes in consumer tastes, increased competition from domestic and foreign competitors, etc. As a result, profit is sharply reduced, the goods can be sold even at a loss. Typically, low price, but at the end of this phase, they can even be improved. As sales and falling profits, some companies leave the market. The rest can reduce the range of product offering, to abandon small segments of the market and the least effective sales channels to cut allocations for incentives and lower prices.