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Writer's pictureFahad H

Profit Potential of the Product Life Cycle

Every product has a life cycle and the varied phases of this could produce totally different revenue margins and as such it’s best to concentrate on the product life cycle when your promoting margins going ahead, first lets outline the Product Life Cycle:

The timescale inside which a product is launched resulting in a development in gross sales, earlier than gross sales mature and start to say no, probably even ending within the product being withdrawn.

So as may be seen there are 4 clear sections which I’ll talk about additional utilizing the pending launch of the Sony PlayStation Three as a working instance, everyone knows the PlayStation Three is coming, developer releases and video games conferences have seen examples and demos which has meant that the press have latched on and the hype is beginning to develop. So a lot in order that to say it will be a scorching product is an understatement. As such this offers an excellent working instance as an example the product life cycle in your product choice decisions.

Stage 1 – Introduction Phase

With all consoles at launch the demand properly outstrips the provision which ensures that the market worth of the product will probably be artificially excessive, the reason is that there will probably be comparatively few suppliers with inventory and principally individuals can pay something for the product. From your perspective you don’t have any competitors within the market and you’re assured to promote them at a big mark up. This is likely one of the finest occasions to promote and your margin will probably be by the roof.

Stage 2 – Growth

The provide is beginning to meet up with demand, which in flip signifies that there are going to be extra individuals with the product and therefore the value will begin to fall. Increased promoting by Sony and elevated press protection will make sure that the demand rises and as such you may make a continued revenue (albeit at a decrease fee). Early development stage is the important thing are as you strategy the latter finish the market begins to get saturated with sellers. a part of the cycle to be promoting in as the quantity gross sales counter the decreased margins and supply an excellent promoting base.

Stage 3 – Maturity

This might be the toughest stage of the cycle to function in and sadly the purpose the place most sellers begin to promote, product provide is regular and many sellers which have seen the earlier income made leap on the band wagon to get a slice of the motion. Sales begin to stabalise after which Sony will begin to introduce differentiated product into {the marketplace} to take care of gross sales reminiscent of a restricted version designed PlayStation 3.

The impact of all these sellers coming into {the marketplace} signifies that worth wars and intense competitors happen, the market is principally changing into saturated and that is the place you see the larger gamers leaving {the marketplace} because the margin produced by the product sale is not ‘well worth the effort’. These massive gamers leaving the market additionally compounds the issue as a result of the product they had been shopping for now grow to be extra obtainable to Joe Bloggs and so they be a part of the sale battle and so forth.

Profit sensible this can be a unhealthy time to promote, the margin per unit will probably be low in comparison with the hassle that it takes to market the product. It is finest to drop your worth to value and clear your shares and look to the following product.

Stage 4 – Decline

We all know there will probably be a PlayStation 4 (most likely named otherwise) and the market begins to say no as a result of individuals are ready for the brand new mannequin to come back out, perhaps even a competitor brings out a console that may ‘take up the slack’ throughout the interim interval. This generate intense worth slicing within the market and the value can drop considerably from everyday.

Try to not carry inventory into this part because the chances are high that you can be promoting at a loss. If you’re carrying inventory then think about the loss chief precept.

The hardest a part of promoting any product inside the worthwhile sections of the product life cycle is judging the time of every stage, each merchandise life cycle is totally different with some having longer phases than others and even some lacking phases fully and going from introduction straight to say no.

The secret is to grow to be an early adopter and goal to get the product early and maximise the market potential of the product, utilizing the PlayStation Three instance this will probably be extraordinarily tough for almost all of sellers nevertheless each product has a life cycle and each product has the potential to make revenue so limiting your self to a selected product is like throwing cash down the drain.

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