Guarantee Your Sales Growth
Introduction
You may already be thinking that the title sounds a little ambitious, but the article will make the point that sales growth is not about luck: it is about making the most out of your product or service at the right time to reach your maximum sales targets.
When businesses introduce new products and services, it is important that they identify the different stages of their ‘life cycle’. All products and services go through this period and are known as the ‘Product Life Cycle’ (PLC). There are different stages in the PLC in which specific marketing has to be taken to gain the highest benefit from each stage. This will vary from promotions, pricing strategies, advertising, and so on.
By failing to recognize when your product/service has moved into a new stage of the PLC, it can result in marketing actions being made too soon or too late. Consequently, this can cause business failure for those small businesses where their future depends on the success of the current product/service.
This article will identify the different stages of the PLC with an added view to the profit levels that you can expect to receive at each stage
The Product Life Cycle The PLC is a model that illustrates the different stages (six in total) that a product or service will pass through. Each stage has its own attributes and will vary in length (time) with different products and services. The time that it takes for your product/service to move through the PLC will largely be determined by how effective your marketing plan is. It should therefore be stressed that the PLC is a marketing tool to ass ist you when compiling a marketing plan. Below is a diagram of the Product Life Cycle:
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| Stage 1: Development As soon as you put pen to paper, this is where the PLC of the product/service begins. This is the time where you will design and develop your product/service with all the direct costs that may be incurred such as wages, materials for prototypes, research, etc. During development, a product/service may never move onto the next stage because you may decide that the risk is too high to launch the product/service. It is important that you recognize any risk during this time as small businesses will be affected if the product/service does not prove to be successful once introduced: the costs of development and introduction may never be recovered where larger companies can usually compensate for unsuccessful products. Within this stage, the product has not yet been introduced to the market and consequently there are no sales. The expenditure of development has also created a loss. Stage 2: Introduction It is arguable that this stage can influence the length of the PLC and so the product/service should be introduced in the market as effectively as possible. This is the time when the product/service is new in the market and a high degree of marketing will be needed such as promotions and advertising to increase commercial awareness. Sales will be slow during the introduction stage and so you should not become impatient and spend more money than necessary to try to increase the speed of sales: it will take time for people to use and trust your product/service. As you begin to make sales, the money used for developing and introducing the product/service may not be fully recovered (i.e. break-even) until late in the introduction stage. Once you begin to make profit, you may decide to re-invest the money back into promoting the product/service in an attempt to stimulate future sales (and profit). Stage 3: Growth Once your product/service has become established in the market, you can expect the number of sales to increase rapidly and marketing expenditure may now be used for brand building. This is the stage where you will benefit from high profits but this is also the stage where your profits will peak. Services over products will generally have far longer periods of growth (usually years) where products, particularly those that are new, will soon attract the attention of competitors. Once competitors join the bandwagon, the sales will gradually slow down and force you into marketing new prices: consequently resulting in fewer profits. If you have released your own version of an existing product (making you the competitor), then the growth stage may be short depending on how long the existing product has been available in the market. Stage 4: Maturity The stage of maturity begins when the product/service sales peak and become stable mainly due to the introduction of competitors during the end of the growth stage (influencing the move into the maturity stage). As pricing becomes more competitive (resulting in even less profits), many businesses, commonly the smaller businesses, cannot compete and consequently withdraw their product/service from the market. Maturity does not only result from increased competition, but also by new alternative products/services in the market becoming more popular. Quite often, services in particular are withdrawn because they are no longer needed, unfavourable or out of fashion. Stage 5: Saturation The saturation stage is sometimes overlooked in many PLC models but is seen as the first sign of product/service decline. At this point, the product/service has no future for profits because there are too many competitors or the product/service is no longer popular. Stage 6: Decline The product/service moves into the decline stage when sales start to drop continuously and will be a result of the issues that moved the product through maturity and saturation (competition, low demand, unfashionable, etc). The time taken to reach this stage of the PLC will differ with different products/services: for an extreme example, Kellogg’s still have a range of cereals that are as popular today as when they were first released in the early 1900s. Also note; Kellogg’s may have the number one cereal, but they have to spend a lot of money advertising that fact: there being nothing new or exciting about plain old cornflakes makes this a great example of brand marketing. In the small business world, when your products/services move into decline, it is a good idea to either improve your product or remove it completely to avoid damaging your image. Extending the PLC: Extension Strategies The most profitable period of the PLC is during the later stages of growth (stage 3) and maturity (stage 4). This is the reason why many businesses try to delay the product/service from reaching the decline stages for as long as possible. This is done by introducing PLC extension strategies during the maturity stage. Although you may have your own ideas, the more common strategies include:
The Problems of PLC Models Not all products/services go through every stage of the PLC and it is common to go straight from the introduction stage to decline: this may be seen as a result of poor marketing. It is often hard to tell which stage the product/service is in and consequently marketing actions could be taken, as said before, too early or too late. It is then fair to say that the model can only be used to help identify the symptoms of each stage. Every product/service will spend different lengths of time in each stage and there is no physical way of showing this on the PLC model. However, the better your financial control, the more you will be able to track individual products/services. Summary The PLC model is only part of the marketing mix and is used to determine the different stages that a product or service can be expected to go through. By using the model as guidance, effective and timely marketing will take the product/service through each stage and can be planned in advance (the marketing plan. The PLC model illustrates that profits are highest during the stages of growth and maturity and so it is good business to integrate extension strategies during this time to maintain high profit levels.
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