Life cycle of goods

Before production of a new product by the most important the definition of the correct marketing strategy of its advance for the purpose of receiving the maximum profit is. The theory of life cycle of goods which studies demand for goods depending on a development stage at which it is was developed for simplification of this task.

What requires the concept life cycle of goods?

Knowing stages of life cycle of goods, the company can plan what product and in what time to release whether it is necessary to modernize it or in general to stop production of completely outdated product. Thanks to the analysis of life cycle of goods it is possible to understand what investments are necessary during any given period in order that the goods promoted in the market. It is also simple to count that profit or losses which its realization can bring.

Main stages of life cycle of goods

In economy allocate the following main stages of life cycle of goods, each of which has the features:

1. Stage of introduction (entry into the market). Any life cycle of goods begins with it therefore its further destiny in the market depends on its course. During this period the goods only go on sale, at the same time the technology of its production can continue to be improved. The small volume of its realization, care of buyers in relation to new products and rather high expenses on advertizing campaign belong to features of life cycle of goods at this time.
2. Growth stage. If the goods occupied the niche in the market, from all stages of life cycle of goods this is characterized by sharp increase in profit thanks to significant growth in sales. There are advanced models of goods, the competition between similar products of different producers amplifies, and the prices fall slightly thanks to already tested production technology.
3. This period of life cycle of goods in the market is characterized by decrease in rates of sales (as many already got it), the considerable competition, improvement of quality of goods and improvement of technology of its production.
4. Saturation stage. At this time the producer begins to reduce the price, but sales volume all the same is considerably reduced. The market is completely saturated by goods, and all possible options of marketing are already tested and are widely applied. Thus, market life cycle of goods begins to approach the end.
5. Recession stage. Sharply profit falls, sales volumes because of emergence of more perfect goods or loss of interest of consumers in this product decrease. During this period it is expedient to stop its production completely.

All most significant stages of life cycle of goods can be presented in the form of the following scheme:

What life cycle of goods is?

Life cycle of goods is influenced not only by its look, but also time-to-market and the general economic situation in the country. Therefore there are different types of life cycle of goods which we more detailed also will consider. Its traditional option is stated above. In this case life cycle of goods is characterized by passing of all specified stages proceeding during strictly certain period. However there are also other options:

• the classical cycle assumes that after achievement of peak of popularity the product remains demanded without decrease in rates of sales for a long time;
• hobby is characterized by fast rise of popularity and its same sharp falling;
• long hobby is a same hobby, but its feature is that after decrease in interest in products it nevertheless continues to be on sale still some time, but in rather insignificant volumes;
• seasonal life cycle of goods is an increase in demand for goods during the certain periods carried in time;
• renewal describes sudden increase in sales, apparently, of outdated goods;
• the failure is one of the most adverse types of life cycle of goods and means that these products in general were uninteresting to the consumer after the emergence in the market.