Question

The life cycle phenomenon of products allows Operations Manager to anticipate the production and distribution need and plan for them well in advance. What are some differentiated ways in which OM manager differ their strategies at each stage of product life cycle? Assess them in terms of cost, revenue and profit angle. [Provide your answer with supporting with appropriate theory for about minimum of 200 words]

Answer 1

Usually from the development of a product to it’s decline in value and eventual retirement from the market, the product suffers four stages which is called as product life cycle.  The four stages are introduction, growth, maturity and decline. Various marketing strategies may be implemented in order to prolong the life cycle during each stage.

The product life cycle and product differentiation are intertwined.  Every product requires to be differentiated from its competitors by offering a unique set of valued differences to a consumer.

Introduction Differentiation

During this stage, marketers are required to focus on informing potential consumers about the product. The product is simply differentiated by being new and establishment of a strong brand name. Promotion and pricing are geared to generating product trials, allowing the consumers to buy and try the product.  During this stage, concern about profit are reduced because operating managers are concerned with familiarizing the products to the consumers.

Growth Differentiation

As product sales start to take off, marketers improve the offerings by expanding the sizes or types available. Here lower pricing strategy is most commonly employed.

Profit margins actually increase during this stage despite of  lower prices because of the economies of scale that is achieved through increased sales.

Maturity Differentiation

In mature stage, here operation manager begins to modify their products, promoting them as “new and improved” or “bigger," or “stronger." Changes are made to improve the aesthetic appeal of the product. Additional uses are promoted to attract new target markets and hence the profitability. Strategies that enables the enhanced profitability and revenue are employed during this stage of the product life cycle.

Decline Differentiation

Here the expanded selection of different sizes and types introduced in the growth stage are slowly eliminated in the decline stage. The major focus is on consolidating volume into a few basic options, to achieve economies of scale where possible. Under this differentiation strategy, the price is increased and it is assumed that the profits from the increased prices will more than offset the decline in volume that typically accompanies increased pricing.