Product Life Cycle Introduction GrowthMaturity Decline Product introduced into the market. Product is enjoying success. Much of the target market knows about and buys product. Product sales level off or slow down. May be more competition now or target owns product already. Sales fall. Low demand.

Introduction Stage Company’s focus is on promotion and production Major goal – draw attention to the new product Special promotions may get customers’ attention Costs are high, especially advertising Least profitable stage Going rate pricing is common

Skimming Pricing Sets a high price Used when demand is greater than supply Company knows they will have to lower price when market changes to price- conscious customers While product is hot, high profit margin Can lower price without insulting target market

Penetration Pricing Pricing an introductory product very low Goal – to encourage as many people as possible to buy your product Effective if demand is elastic Product must take hold in a short period of time If product is not in high demand, lower price will cause bigger loss

Growth Stage Product enjoys success Sales and profits increase Target knows about and buys product Advertising focus is now on consumer satisfaction Competition is aware and is entering market Company may have to introduce new models

Pricing during Growth Depends on whether it was introduced with skimming or penetration pricing With skimming –Price will be lowered to appeal to price- conscious market With penetration –Very little change –Decreased demand and high competition –Look for new market segments to hold prices

Maturity Stage Sales level off or slow down More competition or most of target owns product Company spends marketing dollars on fighting off the competition

Pricing during maturity Goal is to stretch the life of the product Some companies reduce prices Others add new features or new target markets Sell to international markets

Decline Stage Sales fall Profits may be smaller than costs Must decide how long to continue to support product Can also –Sell or license product –Recommit to product line –Discount the product –Regionalize the product –Modernize the product

Prices during decline Sales and profit margins decrease Companies are forced to reduce price to generate sales To maintain profit margin, reduce costs or cut back on advertising