Products pass through different stages as they move from the point at which they are introduced to the point at which they are widely accepted and finally to the point where they are completely eliminated or are replaced by another product.
The first stage in this cycle is commonly referred to as the introduction stage and there are some remarkable similarities in the way consumers adopt various products during this stage. These similarities also have several implications for marketing mix decisions that are appropriate for the introduction stage of a product’s life cycle.
An understanding of the introduction stage of a product’s life cycle can provide many benefits to the marketing manager or decision-maker. See below:
- Target Market: The target market in the introduction stage would generally be upscale consumers with higher levels of income and education who are also likely to experiment with new product concepts.
- Product: The product itself provides a distinct product plus when compared with others currently in the marketplace though this would not exclude innovative new uses for existing products (see discussion under Implementation below).
- Promotion: The introductory stage requires a major emphasis on communicating the unique features of the product and an explanation of the significant benefits the product can provide to the consumer.
- Place: In general the introductory stage would require a distribution decision that is consistent with the target market that is sought. In the case of a new, innovative item, promotion in the introduction stage is usually generic, in that it presents the features of the new product and the superiority of the new product over the old one, rather than of the brand over other brands. Advertising that involves comparisons between particular brands follows later.
- Price: One feature of the introduction stage is that the demand for the product can be assumed to be relatively inelastic. This provides an opportunity for the marketer to set prices that not only ensure a comfortable profit margin but also help recover the initial costs of product development and promotion.
In order for the marketing decision-maker to implement the appropriate marketing mix decisions for the introduction stage of a product’s life cycle, a method for clearly defining the introduction stage must first be identified.
Such a method must also take into consideration the distinction between the introduction stage for a product category as a whole and the introduction stage for the individual decision-maker’s brand or model.
Both the product category and the individual brand will have life cycles of a similar form but the life cycles will not correspond to each other on a one-to-one basis.
In general, a determinant of the introduction stage of a product category will be the overall size of the potential market for that product category. On the other hand, for a product form or brand within an overall category, the determinant of the introduction stage will be the potential share of the product category market that the form or brand can realistically be expected to attain.
A marketing decision-maker should therefore begin by developing a measure of the overall potential for the product category or form as the case may be. Next, a measure of the saturation of the market, i.e. ratio of the size of the current market to overall potential, can be determined. The introduction stage would then be at a low level of saturation and the marketing decision-maker can continually monitor this.
The implementation task through the determination of saturation, as described above, could also be aided by a consideration of some of the other signs that typically accompany the introduction stage. These include a slow growth in sales over time and a small number of competing products.
The moment these two indicators are reversed and the sales start growing rapidly and new competition enters the market, the marketing decision-maker will know that the introduction stage is over.
This discussion has identified many of the features unique to the introduction stage. Based on these features, the marketing decision-maker should address a number of questions that will help determine when a particular product is in the introduction stage and what marketing mix decisions will be appropriate for the product during that stage.
Typical questions which the decision-maker will ask are:
- Is this a new product category or a new form within an existing category?
- What are the characteristics of the target market to which this product will have initial appeal?
- Does this product have a unique product plus that will be difficult for others to imitate in a short period of time?
- Given the target market to which this product will be directed, what is the best marketing mix (4Ps) that should be employed?
Answers to these questions will help management to choose the optimal marketing strategy for the introduction stage.
Once management has introduced the product, answering various questions will help determine how long the introduction stage may be expected to last and when changes in strategy will become necessary.
- What is the overall market size for this product category?
- What is the current saturation level for the product category?
- What share of the overall product category market can the particular product form/brand be expected to attain? How much has it already attained?
- What is the rate of growth of sales and has it increased recently?
- How many competitors are currently in the market and has there been an increase in their number?
The introduction stage of a product’s life cycle can be uniquely identified in terms of both the nature of the target market and the particular marketing mix decisions that would be appropriate. In this section key features of the introduction stage have been noted and the distinction between product category and product brand/form considerations has been observed.
A method of quantitatively establishing the introduction stage through a measure of saturation has been provided and specific decisions under each element of the marketing mix (4Ps) which would be appropriate to the introduction stage have been discussed.
Applications to Small Business
As noted earlier, all products go though the introduction stage of the life cycle but small businesses have a particularly crucial need to understand the marketing implications of the introduction stage. This is because the introduction stage requires a clear definition of the target market, i.e. the early adopters, and appropriate promotional programs directed at that target market.
This may entail a considerable financial commitment and the slow growth of sales in this stage can frequently lead to net cash outflows for which the small business has to be prepared. Furthermore, the implications of the negative cash flow for the other operations of the small business have to be considered.
With regard to implementation, the small business, which most probably has its operations confined to a narrow geographical area, needs a sense for the overall potential in the market. It can then develop a measure of saturation against the overall market potential which will help it determine when the introduction stage begins and, more importantly, when it ends.
In many respects this is one of the most difficult tasks for the small business because such measures of potential and saturation are much more difficult to determine for a vaguely defined narrow geographical area than for a large manufacturer looking at the overall national market.
Yet, these are tasks that the small business has to undertake because at the end of the introduction stage comes a period of rapid growth which the small business needs to plan for, if it does not want to find itself strapped for resources and in a situation where it has to turn away customers and lose sales to its competition.