Question

Descriebe the four stages of PCL (introduction, growth, maturity and decline) describing the stage and analyzes the implicaitons that stage may have on price strategy, product, competition and profit for VIZIO company?

Please cite referrence used.

Answer 1

The four stages of product life cycle are described as below:

• Introduction: This phase is characterised by large expenses in R&D and marketing. The cash flow from the product is relatively less and the early adopters use the product. At this stage the product is born and introduced to the market.

In this stage the pricing of the product is decided based on whether it is a premium offering or a cost leader. The focus is to gain market share and beat competition. The profitability is relatively low because of low market share and high marketing expenses.

• Growth: This phase is characterised by increasing market share and also increasing cash flows from the product. However marketing expenses still remain high but the product has now gained acceptance and is rapidly being consumed and has become a focus for the seller.

The pricing strategy is now firmed up after initial iterations. The market share has risen and the product is now profitable. It has also gained a competitive edge based on its positioning.

• Maturity: In this stage the product’s market share has saturated and the cash flows from the product has also reached a peak. The marketing expenses are relatively low and the product is a cash cow which delivers high returns to the company and the initial investment in the product is now paying off for the company.

The product pricing is unchanged. Highly profitable due to low expenses and firm market share. It has a competitive edge and hence can hold onto market share and remain profitable.

• Decline: The product is now on the cusp of being retired. Newer and better products could take up its position in the market. Marketing expenses are low, however the cash flows from the product has also started decreasing and market share has also shrunk.

The market share has started declining and hence pricing can be reduced to retain the same. This affects profitability and positioning slightly. The competitive edge is getting eroded and the product would be phased out eventually.

1. Anderson, C. R., & Zeithaml, C. P. (1984). Stage of the product life cycle, business strategy, and business performance. Academy of Management journal, 27(1), 5-24.