productAt Thomas Kellie & Co. we focus on the Product Life Cycle. We team with our clients to understand where they are in relation to the PLC and use that to identify key areas of improvement opportunity to drive growth while identifying ways to reduce cost and deliver value to our client’s end user. The four stages we focus on are the following:

1. Introduction: The Introduction stage is probably the most important stage in the PLC. In fact, most products that fail do so in the Introduction stage. This is the stage in which the product is initially promoted. Public awareness is very important to the success of a product. If people don’t know about the product they won’t go out and buy it.

There are two different strategies you can use to introduce your product to consumers. You can use either a penetration strategy or a skimming strategy. If a penetration strategy is used then prices are set very high initially and then gradually lowered over time. This is a good strategy to use if there are few competitors for your product. Profits are high with this strategy but there is also a great deal of risk. If people don’t want to pay high prices you may lose out. The second
pricing strategy is a skimming strategy. In this case you set your prices very low at the beginning and then gradually increase them. This is a good strategy to use if there are alot of competitors who control a large portion of the market. Profits are not a concern under this strategy. The most important thing is to get your product known and worry about making money at a later time.

2. Growth: If you are lucky enough to get your product out of the Introduction stage you then enter this stage. The Growth stage is where your product starts to grow. In this stage a very large amount of money is spent on advertising. You want to concentrate on telling the consumer how much better your product is than your competitors’ products.

There are several ways to advertise your product. You can use the internet, TV and radio commercials, magazine and newspaper ads, or you could get lucky and customers who have bought your product will give good word-of-mouth to their friends/family/business contacts.

If you are successful with your advertising strategy then you will see an increase in sales. Once your sales begin to increase your share of the market will stabilize. Once you get to this point you will probably not be able to take any more of the market from your competitors.

3. Maturity: The third stage in the Product Life Cycle is the maturity stage. If your product completes the Introduction and Growth stages then it will then spend a great deal of time in the Maturity stage. During this stage sales grow at a very fast rate and then gradually begin to stabilize. The key to surviving this stage is differentiating your product from the similar
products offered by your competitors. Due to the fact that sales are beginning to stabilize you must make your product stand out among the rest.

4. Decline: This is the stage in which sales of your product begin to fall. Either everyone that wants to has bought your product or new, more innovative products have been created that replace yours. Many companies decide to withdrawal their products from the market due to the downturn. The only way to increase sales during this period is to cut your costs and reduce your spending. Very few products follow the same cycle. Many products don’t even make it through all four stages. Some products even bypass stages. For example, one product may go straight from the Introduction stage to the Maturity stage. This is the problem with the PLC. There is no set way for a product to go. Therefore, every product requires a great deal of research and close supervision throughout its life. Without proper research and supervision your product will probably never get out of the first stage.

At Thomas Kellie & Co. our outsourced CFO services and Budget/ Forecasting services can guide you through this cycle with proper planning and capital needs identification as well determining which product mix will yield the highest growth potential for your organization.