At this stage the sales are usually slow but with good publicity sales will pick up as demand increases. The costs at this stage will be in the advertising and branding. These costs can be equated to an investment in the product because if the ‘buzz’ is not created for the product then there will be a lack of demand slowing the process of cost recovery. This stage is usually followed by a stage of growth which will see the increase of sales and the beginnings of the cost recovery period.
During this period the efforts of the advertising campaign should be seen and thus an increase in sales and revenue. Public interest should have built fuelling the sales, however it is also expected that at this stage competitors begin to enter the field which will cause a decrease in price for the product to remain competitive in the market. After the growth phase comes the maturation stage. This stage is characterized by the saturation of a product in a particular market, while an even greater increase in competition continues.
At this stage there are many avenues open to the producers. There is the option of further price cuts, or additional incentives added with the product. Using the example of Apple again, they have managed to get around the problem of saturation through the staggered release of the product, driving up demand for it. This can be seen in the case of the recently launched Iphone 4. Around the UK, the Iphone was staggered and all traders were given limited supplies but not informed when they would next receive stock.
This forced the traders to advertise as limited stock, increasing the feel of exclusivity and thus increasing the demand for the product. This tactic also handles the problem of saturation in that, it does not allow for anyone trader to have idle stock lying unsold and traders would be re-stocked once their stock had been sold. However with this approach, a company does leave itself exposed to the risk of potential buyers being snared by the competition.
By the end of this stage the products sales will have stabilized or begin to decline, but also by this point the business should have recovered costs of both manufacture and advertising of the product. Most sales at this point should be included in the gross profits and not still to cost recovery. At this time the producers will discontinue with advertising and marketing efforts. Dependant on the product, it may, at this point, be put onto a sales discount of a certain percentage, this being to make as much profit as still possible to take from the product.
In conclusion to this essay, it can be seen that every stage in the product life cycle, has the potential to affect the cost recovery performance of a business. However it can also be seen that with the right investment and decision making at the right stages, you can increase the rate of recovery, speeding up the process. As discussed in this essay, not only are expenses incurred at the manufacturing level, but also in the marketing phases.