What are the Characteristics of Product Life Cycle:

When looking at how a particular product and how it is born or introduced, grows, attains
maturity and the point of saturation into the market. Ultimately sooner or later it is bound to
enter in its declining stage and finally reaches the stage of obsolescence, the stage when the
product loses distinctiveness and dies out in terms of both sales and profit margin. The
characteristics can be defined as the Product Life Cycle:

1) Stages of Product Life Cycle:

Every product has the life cycle just as every human being has. The life cycle of every product
starts from an introduction of the product in the market and it is ceased after passing through
the market growth and market maturity stages. The product lifecycle denotes that the product
passes through different stages at a different speed in its course of completing the whole cycle.

2) Different for Different Products:

No two products have an identical life cycle. This cycle may last from a few months (e.g. fashion
garments) for several years (e.g. cycle, bread, biscuits, electrical appliance). The duration of
each stage of different for different products. The duration depends upon the factors such as
nature of products, the rate of technological changes, completion pressure, etc.

3) Different Strategies are Adopted:

The product life cycle concept provides a useful framework for developing effective marketing
strategies in different stages of the product lifecycle. Companies can adopt different strategies
according to the stage where the product is. Different promotion strategies can be adopted in
different stages of the life of the product.

4) No Demarcation between Stages:

One cannot have a defined line of demarcation between one and the subsequent stage. The
succession is one of merging and not of finite Calculation. The product goes from one stage to
another, there is no specific duration, and depends on the nature of the products and various
market conditions.
5 ) Different Products Face Different Stages of Life Cycle:

It is not necessary that all products go through all stages, some fail at the initial stage (i.e.
introductory stage), others may reach maturity stage after a long time.

6) Products Face Different Stages of Life Cycle in Different Markets:

As a given point of time, the same product might reach different stages in different market
segments. In segment one, it might have touched the peak-height of maturity, in segment two
it may be in the growth stage, in segment three it may be heading towards the decline.

7) Study of Product Life Cycle:

The profit of a business firm grows rapidly in this stage of growth and starts declining due to
competitive conditions at the stage of maturity. However, the sales volume goes on increasing.
The clear-cut understanding about the implication of product lifecycle concept increases its
usefulness for the marketers.

Types of Product Life Cycle:

The Product Lifecycle concept is used to analyze a product category (fabric washing product)
product form (washing detergent) a product (liquid detergent) or a brand (Godrej E-zee). Not all
products exhibit a bell-shaped Product Lifecycle. Three common alternate patterns are shown
below.

1. Growth-Slump Maturity Pattern:

This pattern is often characteristic of some kitchen appliances such as handheld mixers and
bread makers. Sales grow rapidly when the product is first introduced and then fall to a
“petrified” level that is sustained by late adopters buying the product for the first time and
early adopters replacing the product.

2. Cycle-Recycle Pattern:

This pattern often describes the sales of new drugs, Pharmaceutical Company aggressively
promotes its new drug, and this produces the first cycle. Later, sales start declining, and the
company gives another promotion a push, which produces a second cycle (usually of smaller
magnitude and duration)

3. Scalloped Pattern:

Another common pattern is scalloped. Product Life Cycle. Here sale pass through a succession
of Lifecycles based on the discovery of new-product characteristics uses or users. The sales of
nylon, for example, shows a scalloped pattern because of the many new uses-parachutes,
hosiery, shirts, carpeting, boat sails, automobile tyres -that continue to be discovered over
time.
 What are the Factors to consider when Setting the Price

A business always needs to into account the price hat it charges and be consistent with the
objectives of the business. Businesses are free to set their prices and discount their goods and
services as they see fit. However, they must set their prices independently of their competitors.
Price setting process starts with an understanding of the company marketing objectives. A firm
determines the price for its product after evaluating various factors.

There are several factors a business needs to consider in setting the price

1)Objectives:

What are the marketing objectives of the firm?

2) Competitors:

This is important Competitor strength influences whether a business can set prices
independently, or whether it simply must follow the normal market price.

3)Costs:

A business cannot ignore the cost of production or be buying a product when it comes to
setting a selling price. In the long-term, a business will fail if it sells for less than cost, or if its
gross profit margin is too low to cover the fixed cost of the business.

4)The state of the Market for the Product:

If there is a high demand for the product, but a shortage of supply, then the business can put
prices up.

5)The State of the Economy:

Some products are more sensitive to changes in unemployment and workers’ wages than
others. Makers of luxury products will need to drop prices especially when the economy is in a
downturn.

6)The Bargaining Power of Customer in the Target Market:

Who are the buyers of the product? Do they have any bargaining power over the price set? An
individual consumer has little bargaining power over a supermarket though they can take their
custom elsewhere) However, an industrial customer that buys substantial quantities of a
product from a business may be able to negotiate lower or special prices.

7)Legislation in the Market:

Some business operates in markets where prices are regulated by government legislation-e.g.
the rail industry.

8)Other Elements of the Marketing Mix:

It is important to understand that prices cannot be set without reference to other parts of the
marketing mix. The distribution channels used will affect price-different prices might be
changed for the same product sold directly to the consumer or via intermediaries. The price of
a product in the decline stage of its product lifecycle will need to be lower than when it was
first launched.

Steps in Price Setting:

Step 1: Selecting the Pricing Objective

 The company first decides where it wants to position its market offering. The clearer a
firm’s objectives, the easier it is to set price. Five major objectives are:
 Survival
 Maximum current profit
 Maximum market share
 Maximum market skimming
 Product-quality leadership

Step 2: Determining Demand

Each price will lead to a different level of demand and have a different impact on a company’s
marketing objectives. The normally inverse relationship between price and demand is captured
in a demand curve. The higher the price, the lower the demand.

Different methods:

 Surveys
 Price experiments
  Statistical analysis

Step 3: Estimating Costs

For determination, the price of product company should estimate the cost of a product.

 Variable and Fixed Cost:

 Price must cover variable & fixed costs and as production increases, costs may decrease.
 Differential Cost in Differential Market:

Firms must also analyze activity-based cost accounting (ABC) instead of standard cost
accounting. ABC considers the costs of serving different retailers as the needs differ from
retailer to retailer.

 Target Costing:

Also, the firm may attempt Target Costing (TG). TG is when a firm estimates a new product’s
desired functions & determines the price that it could be sold at. From this price the desired
profit margin is calculated. Now the firm knows how much it can spend on production whether
it be engineering, design, or sales but the costs now have a target range. The goal is to get the
costs into the target range.

Step 4: Analyzing Competitors’ Costs, Prices, and Offers

 The firm should benchmark its price against competitors, learn about the quality of
competitors offering, & learn about competitor’s costs.

Step 5: Selecting a Pricing Method

 Various pricing methods are available to give various alternatives for pricing.
 Markup Pricing: a 20% markup
 Target Return Pricing: this is based on ROI
 Perceived-Value Pricing: buyers perception of the product is key, not cost so what is the
product worth to consumer sets the price.
 Value Pricing: more for less philosophy
 Going Rate Pricing: charge what everyone else is
 Auction-Type Pricing: companies bid prices to get a job

Step 6: Selecting the Final Price

Pricing methods narrow the range from which the company must select its final price. In
selecting that price, the company must consider additional factors.

 Impact of other marketing activities

 Company pricing policies
 Gain-and-risk-sharing pricing
 Impact of price on other parties
 Advertisements
 Reference:

Title of Book

Author

Publication

Unit:

Pages: 1.21,1.22,1.23,2.12.2.13

Source: Website: BBA School

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