Kotler and Armstrong (2008) stated that the product life cycle (PLC) is the course of a product’s sales and profits over its lifetime, and Komninos (2002) suggest it is the period from the first launch of the new product into the market until its final withdrawal from the market. According to McDonald (1999), (PLC) is very important marketing theory. Armstrong and Kotler (2009) employ this concept to describe a product class, a brand, or a product form. And also could apply to service industry, such as a sales outlet within a hotel, a destination, an individual property and, chain of outlet, even an industry (Bowie and Buttle, 2004, 121).
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In this stage, the new product is a pioneer, company should pay more attention on the price (adjust price), promotion policy (formulate promotion strategy) and advertisement strategy, in order to create and improve awareness of new product in the early buyer group. Manufacturers normally employ cost-plus way to define the price of the product. Next, the advertisement part, producer pay more attention on brand awareness building, in order to introduce this brand to consumer, let consumers recognize this brand. Due to product is newly introducing in this market, small number of production lead to high cost, and rarely product category, just some basic product. And while, high cost and low sales also lead to negative profit in the first stage. The biggest benefit from this period is that competitors are smaller, and there is no or less type of similar product in the market. It is a significant stage for the company, if they play correctly cards from the start, this period is the best chance of building and retaining market leadership (Kotler and Armstrong, 2008, p.270). On the other hand, the producers use some
selective distribution channel to distribute product.
2.2 Growth stage
Growth stage is a period which the product rapidly accepted by the consumer and profit dramatically increase period (Kotler, Bowen and Makens, 2010). After successfully introduction stage, the product easily accept by consumers, in this period, product account stable market share, and the sales keep increase. Follow by the awareness increasing in this stage, a large number of consumer recognize the product and consume product, which directly lead to high market demand. Thus, manufacture start increase the production, the cost of product per unit decreased and the price also follow cost to decrease. Manufactures launch more type of product, and use penetration strategy to decide the price.
In this stage, the manufacture should pay more attention on build brand reputation rather than production introduction, because their product still not popular enough in this market. Therefore, the producer still need pay more attention on advertisement, in order to enhance product and brand awareness, meanwhile, the ads might be attract consumers interesting in brand, and stimulate consumers desire to buy. Different kinds of distribution channel are added in this stage, distribution channel become very intensive (Rumelt, 1979). And the company might employ variety of promotional strategy (like discount, voucher and etc.) to bring benefit for consumer, in order to attract much more consumers. Meanwhile, some competitors enter into this market, because they
want to chase some market share, and profit. Furthermore, competitors noticed this industries have a large market, a larger number of competitors enter into this market to scramble market share and chase profit. In order to protect leader position, the first producer might be descending selling price to ensure sales.