Product Life Cycle InitialPhase: Definition, Key Qualities
In the world of business, introducing a new product to the market can be a daunting task. This initial stage, known as the Introduction Stage of the Product Life Cycle, is characterised by low sales, high costs, and a focus on building market demand [1][2][3].
During this phase, a company invests heavily in marketing to build awareness and demand for its new product. The goal is to acquire early adopters, typically innovators and early adopters, who are willing to try out new products [1][3]. However, these efforts often come at a price, with high costs associated with advertising, market development, and setting up logistics [1][2].
The sales volume at this stage is usually low due to limited customer awareness [2]. The product may be unique or differentiated, leading to a lack of competition initially [1]. However, consumer acceptance and demand are not yet well known, making this phase risky and potentially leading to losses before profitability is achieved [2].
Network effects can play a significant role in this stage, potentially leading to exponential growth in sales volume [1]. However, most consumers are unaware of the new product and its benefits, making it a struggle for the company to promote it effectively [1].
Two pricing strategies companies may adopt at this stage are price skimming and penetration pricing [1]. Under price skimming, companies charge high prices initially for innovative products to recover development costs and screen out initial buyers [1]. On the other hand, penetration pricing involves setting lower prices to quickly achieve a significant market share [1].
The company's focus during the introduction stage is on creating demand for the new product. They selectively build distribution channels until the product gains customer acceptance [1]. The main objective of promotion is to achieve market acceptance and develop a foundation for future growth [1].
It's important to note that the company may bear losses during this stage due to low revenue and high costs [1]. However, these losses are often necessary to establish the product in the market and set the stage for revenue growth in later phases [1][3].
In conclusion, the Introduction Stage of the Product Life Cycle requires significant resources to promote a new product amid uncertain demand, resulting in high costs and generally low or negative profitability at first. Success depends on effectively building awareness and customer acceptance to move quickly to the growth stage where profits become more attainable [1][2][3].
[1] Product Life Cycle: Understanding the Growth, Mature, and Decline Stages. (n.d.). Retrieved from https://www.investopedia.com/terms/p/productlifecycle.asp [2] The Four Stages of the Product Life Cycle. (n.d.). Retrieved from https://www.businessnewsdaily.com/5887-product-life-cycle.html [3] Understanding the Product Life Cycle: The Introduction Stage. (n.d.). Retrieved from https://www.forbes.com/sites/forbesagencycouncil/2017/04/03/understanding-the-product-life-cycle-the-introduction-stage/?sh=38a5c1447a3d
In this phase of introducing a new product, companies invest heavily in marketing, a key aspect of the finance industry, to build awareness and demand for their product [1]. The high costs associated with advertising, market development, and setting up logistics are characteristic of the business sector during the Introduction Stage of the Product Life Cycle [1][2].
