Introduction Stage

Introduction Stage

The introduction stage starts when the new product is first launched. introduction stage Introduction takes time, and sales growth is apt to be slow. Well­known products

The product life­cycle such as instant coffee, personal computers and mobile telephones lingered for

stage when the new many years before they entered a stage of rapid growth.

product is first In this stage, as compared to other stages, profits are negative or low because

distributed and matte of the low sales and high distribution and promotion expenses. Much money is

availa blefor purchase. needed to attract distributors and build their inventories. Promotion spending is

relatively high to inform consumers of the new product and get them to try it. Because the market is not generally ready for product refinements at this stage, the company and its few competitors produce basic versions of the product. These firms focxis their selling on those buyers who are the readiest to buy ­ usually the higher­income groups. For radical product technologies, such as the video cassette recorder (VCR), electronic calculators and mobile telecommuni­ cations, business or professional users were the earliest targets.

A company might adopt one of several marketing strategies for introducing a new product. It can set a high or low level for each marketing variable, such as price, promotion, distribution and product quality. Considering only price and promotion, for example, management might skim the market slowly by launching the new product with a high price and low promotion spending. The high price helps recover as much gross profit per unit as possible, while the low promotion spending keeps marketing spending down. Such a strategy makes sense when the market is limited in size, when most consumers in the market know about the product and are willing to pay a high price (these consumers are typically called the 'innovators'), and when there is little immediate potential

competition. If, however, most consumers in the limited market are unaware and know little about the innovation, and require educating and convincing, a high level of promotion spending is required. A high­price, high­promotion strategy also helps the firm to skim rapidly the price­insensitive end of the market in the early stages of the new product's launch.

On the other hand, a company might introduce its new product with a low price and heavy promotion spending (a rapid penetration strategy). This strategy promises to bring the fastest market penetration and the largest market share,

and it makes sense when the market is large, potential buyers are price sensitive and unaware of the product, there is strong potential competition, and the company's unit manufacturing costs fall with the scale of production and accumu­ lated manufacturing experience. A low­price, but low promotion spend {or slow penetration strategy) may be chosen instead if buyers are price conscious, but the firm wants to keep its launch costs down because of resource constraints.

A company, especially the market pioneer, must choose a launch strategy consistent with its intended product positioning. It should realize that the initial strategy is just the first step in a grander marketing plan for the product's entire

life cycle. If the pioneer chooses its launch strategy to make a 'killing', it will be sacrificing long­run revenue for the sake of short­run gain. As the pioneer moves through later stages of the life cycle, it will have continuously to formulate new pricing, promotion and other marketing strategies. It has the best chance of building and retaining market leadership if it plays its cards correctly from the start.

630 • Chapter 14 Product Development and Life­Cycle Strategics