Abstract
Establishing the initial price for a new product is one of the most important decisions a firm will make. Implementing and adjusting this price over the sales cycle of the new product are crucial decisions for both its short- and long-term success. A modification of the product life cycle (PLC) concept is presented to reflect one of the many alternative price-setting strategies available to the company. After justifying and illustrating the modified PLC pricing strategy, applications and limitations are presented and discussed.
Highlights
Since the birth of marketing, academicians have worked diligently to formulate theories they felt would benefit practitioners
Emphasis in this paper will be on the second reason why practitioners have not widely embraced the product life cycle (PLC) notion: lack of specificity of academicians’ recommendations regarding the constitution of the marketing mix across PLC stages
The product life cycle (PLC) represents the unit sales trend for a product, extending from the time it is first placed on the market until it is later removed by the firm (e.g., Buzzell, 1966; Staudt & Taylor, 1970; Kotler, 1972; Kotler & Keller, 2016)
Summary
The introduction stage encompasses the time period a product initially enters the market until its unit sales start to rise at an increasing rate This phase is characterized by losses or low profits, uncertainty of length, product is vulnerable to attack from competing items, relatively few distributors, inexperienced personnel, and product is often manufactured in pilot plants. Different products tend to move through the phases at varying speeds (e.g., Patton, 1959; Kotler, 1972; Rink & Swan, 1979) Variables such as ease of competitive entry, rate of technological change, and speed of market acceptance determine the magnitude and intensity of the product’s sales decline (e.g., Dean, 1950; Staudt & Taylor, 1970). The sales curve for different industries will have numerous shapes as will those for various segments of a market and associated products (e.g., Berenson, 1967; Staudt & Taylor, 1970; Swan & Rink, 1982; Kotler & Keller, 2016)
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