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oh and welcome back to the micro Learning Institute in this short tutorial we look at the model the product life cycle the product life cycle model describes the stages a product goes true from when it was thought of until it is finally removed from the marketplace the main stages identified by the product lifecycle model are the introduction stage the growth stage the maturity stage the decline stage the product life cycle model visually is shown as follows and here we can see on a timeline so you can see the x-axis is time we can see each of the phases of the product life cycle and an indication of the possible sales profile in each phase so following the introduction of the product we can see that sales revenue begins to increase if the product gains market traction then it enters the growth phase and we see rapid increase of the sales revenue then after a period of time the market matures and we see a decline in the sales revenue our reduction in the growth rate of the sales revenue and finally once the product has saturated the market the sales revenue begins to decline and head back towards zero some companies adopt product excel extension strategies to look at ways of trying to extend the maturity phase of the product life cycle and defer the introduction of the decline phase now let's look at each of these phases of the cycle and what strategies companies typically adopt during each of these stages during the introduction phase the new product is launched - under marketplace we can expect at this stage a low level of sales because the product is yet not gained market acceptance and of course as a supplier of the product to the market the company will possibly have low utilization it's equipment capacity or it's resource capacity quite likely the company has far more capacity to deliver the product than the market demand at that early stage as a result of this low capacity utilization the unit cost of the products will be high plus a lot of costs were being called in teething problems maybe trying to fix the product and get it to match perfectly with the customer marketplace usually at this introductory phase we have negative cash flow because we're still investing heavily in the product and not generating the revenues required of the profits required to give us a return a positive return on this investment also another challenge here is that distributors may be reluctant to take an unproven product and consequently that might compromise our revenue recognition or revenue earning potential so we need to expend heavily on promotion to make customers aware of the product again strategies that companies are adopted at the introduction stage could include encouraging customer adoption maybe giving away free samples or dramatic reductions high promotional spending with advertising on TV and websites to create awareness and to inform people and again considering either market skimming or penetration prices skimming is charging as higher price as possible for the product because it is unique to the market our penetration pricing is maybe looking at charging very low prices initially for the product so that the product gains a high volume of users and subsequently those the pricing to those users can be increased as the product reaches in the growth and maturity stages and finally at the at the introduction stage another relevant strategy is maybe to focus unlimited focused distribution just looking at one segment of the market and focusing our efforts on that segment a demand initially from early adopters is what occurs at the introductory stage following completion of the introduction stage if the product gains market accept then we entered the growth stage of the product life cycle here the market expands but also competitors began to enter the marketplace our sales are fast growing and again we see an increase in the capacity utilization the utilization of our human resources and our equipment resources as the product gains market acceptance during this stage cash flows may become positive no not necessarily but it's more likely that cash flows will become positive here as the product gains market acceptance and also unit costs will fall with economies of scale as we're getting higher capacity utilization the cost of producing each unit will fall so the market grows profits rise but again we attract at the end the entry of new competitors who may see an attractive segment of the market that we've uncovered again relevant strategies at the growth stage might include further advertising to promote brand awareness and brand development increasing the number of distribution outlets and again distributors when they see the product gaining market acceptance might be more interested in engaging with us to distribute our product through their channels again we could go for market penetration and also looked at the very price competitive in the marketplace who ensure that we sustain our growth trajectory again we could target the early majority of potential buyers and again we can continue with high promotional spending also during the growth phase we can look to improve the product by adding new features improving the style of our maybe providing more options for the customer to ensure that we sustain the growth of the product following the growth phase we began to enter the maturity phase of the product life cycle in the maturity phase we have slower sales growth as rivals began to enter the market and take market share this leads to an intense competition in the market place and a fight for market share to sustain our position during this phase we have very high levels of capacity utilization and again we have done ha our highest profits for those with highest market share during this phase cash flow must be strongly positive because again we produced the unit costs dramatically because of increased utilization and hopefully at this stage we are one of the dominant players in the marketplace also at this phase weaker competitors will start to leave the market or potentially be bought up in merger or acquisition deals by other competitors and prices will begin to drop and profits will begin to fall at the maturity phase there's a wide variety of possible options for a product that has reached this stage firstly we could look to increase the differentiation of the product and maybe add further product improvements we can also rationalize our capacity looking at options such as outsourcing of course the manufacturer of the product of the delivery of the product would be a well-established process at this stage and could lend itself to being outsourced to perhaps a lower cost production or lower cost development environment yeah we could also adjust our pricing to be more competitive with respect to our competitors and again we be engaged on significant promotion activities focusing on the differentiation of our product and how our product is better than competing products more persuasive advertising and again intensive distribution or using many different channels there perhaps online channels and many different physical channels to distribute our product we could also consider here entering new segments and potentially new geographic segments or new new sociographic segments of the marketplace to offer our products to segments to whom it has not been offered to previously this should result in the attraction of new users to our product we could also look to reposition our product on the marketplace as a higher quality product or a lower-cost product than some of the competitors and again we could possibly look at extending the uses to which our product can be deployed at the decline stage of them of the product lifecycle common features include falling sales market saturation are lots of competition a decline in profits and weaker and maybe again approaching negative cash flows more competitors leaving the market as they began to redirect the resources to development of further new products for future market activities and again a decline in the utilisation of our capacity and again we might begin to look at switching that capacity to alternative products again potential strategies at the decline stage are harvest as much as we can from the product by spending little on marketing the product because again it should be well established in the market at this stage so excessive spending on market marketing activities might be inappropriate and we could rationalize the product and just offer a few key variations of the product weeding out any elaborate variations of the product we could begin to cut prices of our product by in order to maintain competitiveness and again promotion to retain loyal customers who are established users of our product again our distribution might be narrowed and more focused just on the profitable segments of the of the marketplace we also spoke about the idea of extending the product and to prevent the onset of the decline phase and some strategies and some techniques that can be used for product extension include advertising where we try to gain a new audience are remind of the current audience of the benefit of the products again price reductions again which is makes our product more attractive to customers perhaps adding value where we're adding new features to the current product for example video messaging on mobile phones etc we could look at exploring is exploring new markets who may be overseas markets or different segments of the marketplace or maybe look to make the product more attractive but new packaging and so on brightening up the old packaging or making subtle changes such as putting crisps in foil packets or 70s music compilations are offering portfolios exception thank you very much for watching this short tutorial on the product lifecycle presented by the micro Learning Institute