The Product Life-Cycle Concept

Because we live and work in a dynamic market situation, managers must accept as the normal state of affairs that all products have a limited life. This fact is commonly expressed in the form of the product life-cycle curve. Products during their existence go through the phases indicated on the curve, as follows:

1. Starting before, sometimes long before, a product reaches the marketplace, there is a development phase. Market research must be undertaken, the product designed, prototypes built, plants laid down. While costs can be very high, income will initially be nil and will probably grow only slowly. Profits are a long way off yet. Many products are slow to ‘catch on’ and this part of the curve typically does not rise steeply.

2. During the growth phase the product reaches general acceptance, and sales increase steeply. Profits mount as development costs are recovered and unit costs decrease with greater volume of production.

3. As the product reaches maturity, initial demand is beginning to be satisfied, competitors may have arrived on the scene, and there will be greater reliance on replacement sales. Sales increase more slowly, and profits come under pressure and may start to decline.

4. When the market is fully saturated, sales will ‘peak off’ and profits decline still further.

5. Finally, sales will go into definite decline and margins come under very severe pressure as it becomes increasingly costly to maintain sales at a reasonable level.

The curve for any particular product may be steeper or flatter, the time-scale may be longer or shorter. Some products seem to go on for a very long time. For this reason the pattern must be applied with care. In addition, we must be careful what we mean by a product in this context: for example, the market for glass has risen steadily over the past 50 years, but within this period the sale of lamp glasses has declined and that of milk bottles has risen steeply (to decline again in some countries in face of competition from waxed cartons or plastic and the change from doorstep delivery to bulk purchase from the supermarket).

Nonetheless the typical pattern stands as a warning that it is dangerous to rely too heavily for too long on one product, so that, as profit from one declines, profit from its successor rises to fill the gap. Ideally this will give a steadily rising profit for the company as a whole, even though some products have entered the ‘decline’ phase of the product life-cycle.

It must be emphasized that the product life-cycle diagram is not a rigid description of exactly how all products always behave. Rather it is an idealized indication of the pattern most products can be expected to follow.

There is nothing fixed about the length of the cycle or the lengths of its various stages. It has been suggested that the length of the cycle is governed by the rate of technical change, the rate of market acceptance and the ease of competitive entry. So, each year numerous new fashion styles are introduced, many of them to last only a few months. At the other extreme, a new aircraft must have many years of life if it is to be commercially worthwhile.

The main importance of the life-cycle concept is to remind us constantly of the three following facts:

1. Products have a limited life;
2. Profit levels are not constant but change throughout a product’s life in a way that is to some extent predictable;
3. Products require a different marketing programme at each stage of their life-cycle.

Implications of the Product Life-cycle

If we have to accept that no product will go on earning profits indefinitely, then we must plan so as to have a whole succession of new products coming ‘through the pipeline’. Peter Drucker has drawn attention to the need to keep all products under review to ensure that not too high a proportion are at the end of their life-cycle. He describes the following six categories:

1. Tomorrow’s breadwinners – new products or today’s breadwinners modified and improved;
2. Today’s breadwinners – the innovations of yesterday;
3. Products capable of becoming net contributors if something drastic is done;
4. Yesterday’s breadwinners – generally products with high volume, but badly fragmented into ‘specials’, small orders and the like;
5. The ‘also raps’ – generally the high hopes of yesterday that, while they did not work out well, nevertheless did not become outright failures;
6. The failures.

Product Elimination

From the product life-cycle concept and Drucker’s analysis of product categories, it follows that all products must be kept under review to assess their present and likely future contribution to profits. A common mistake of marketing management is to keep in the range products that have little or no prospect of contributing to profits. Products are kept in the range until they fade away, meanwhile consuming valuable resources, which could be more profitably utilised elsewhere. These marginal products lower the company’s profitability, and it is essential to control them.

Source: http://en.articlesgratuits.com/the-product-life-cycle-concept-id1560.php

Choosing a Niche Product to Dropship

Time and time again I recommend that you choose a niche product to dropship from your website or sell on eBay. But how do you choose your niche? The following are brainstorming tips to help you come up with a niche product that can be sold online.

First: Check Your Purchases. Many prospective online entrepreneurs try to think of really out-there products like unicycles or bamboo knitting needles so they can enter a market that isn’t too saturated. This is a good idea in some respects, but one of the most important factors when choosing a product is to choose something that people actually buy online. One way to brainstorm this type of product is to think what you yourself buy online.

In the past month, I’ve bought three second-hand novels written by Mildred Walker, a pair of studded motorcycle boots, a Hebrew-printed t-shirt, tickets to a murder mystery play, a pair of Cubs swim trunks, and a calligraphy set. Not surprisingly, almost all of my purchases represent niche markets. Why is that? Because with the exception of a few broad categories like electronics, most items bought online are niche products. This is because common, general products can easily be purchased at physical locations close to your home. You go online to find unusual items that can’t be bought at the mall.

Second: Check Logistics. Let’s assume that I want to dropship my products, not purchase them wholesale. This means that some of the products I purchased last month are out of the running for my niche inspiration. Used books aren’t generally dropshipped, and neither are theater tickets. Shoes and clothing are usually sold wholesale, but in this case the items that I bought might still be appropriate since they weren’t common apparel and accessories. The studded motorcycle boots might be a good candidate for a dropship niche product for a few reasons: first, they are a product that’s not easily found in local stores. I bought those boots online because after searching the three malls in my area I couldn’t find anything quirky enough to satisfy my Sarah Connor Chronicles obsession.

The studded motorcycle boots are a good pick for another reason: they’re a theme product that I could easily build a whole product line around. With the boots as my central product, I could have a goth/punk/emo website, a motorcycle apparel site, or a studded leather accessories site. Finally, while I might not be able to find this product through a dropship supplier, they are expensive enough that I could possibly use a wholesaler to dropship them. Let’s say my wholesale supplier has a $100 order minimum: if a single pair of studded boots costs $125, I can likely have single pairs shipped directly to my customers even though the supplier is ostensibly a wholesaler.

Stay tune for more tips on choosing a niche to dropship products.

Just Ask These 4 Essential Questions To Find The Best Affiliate Product For You

If you’re just starting out in the internet marketing world, then it’s likely that you’ll turn to affiliate marketing for some quick income. Affiliate marketing is easy to do, once you’ve chosen your product. But from all the offers available, how do you find the best affiliate product for you?

Well, that’s easy too, you just need to answer these four essential questions, to make sure that your affiliate career gets off to a great start!

No.1. Are You Interested In The Product You’re Marketing?

This definitely comes first. Just as when choosing a product to create yourself, you need to pick an affiliate product that you’re interested in or already know about. For example something connected with one of your hobbies or leisure activities, or previous employment.

Having this kind of connection to the affiliate product, will help to bring your personal experience into your promotion and will maintain your own interest when you’re doing your marketing.

You’ll find this of most help if you’re using the regular blogging and article marketing, which is recommended for the best affiliate product promotion. It’s always so much easier to write about something with which you’re familiar, rather than trying to make up a post for something that you don’t know about and have no real interest in. If you do go down that route, you’re likely to find your initial enthusiasm waning quite quickly and your promotional output slipping as well.

No.2. What Is The Commission Rate?

When you’re looking for the best affiliate product, you’re intending to make a profit. That means earning more from sales than you pay out in expenses. So, obviously, the commission rate that’s paid, coupled with the products selling price, is of prime importance.

The way to approach this step to finding the best affiliate product, is to take the subjects that interest you and compare the different affiliate offers in those markets, until you find the higher value products and their commission rates.

Obviously, at any given commission rate, the more expensive the product, the more profit you make. So, generally, the higher value products will be the best bet. However, you’ll also need to assess the product’s saleability as well (No.3.), in order to decide the overall profitability of the product.

This is something to be learnt from experience and a good step right now would be to have a look at the range of offers on ClickBank.com and familiarize yourself with the sales statistics they give for each offer.

No.3. Will The Product Be Saleable?

Here you need to consider the saleability of the product. By that I mean, is it likely to be popular. Is it something that people will want and is it something that your target market will find both affordable and value for money.

These are the key elements that will achieve the product sales, once the prospects have arrived at your site. Another aspect that will make sales easier, is if the product is seen as unique or is easily recognizable to customers, for example by having a brand name or trademark.

Picking a product that has this sort of individuality, will make it easier for you to carry out your search engine optimization and will bring more focused traffic to your site, than will a general product description.

No.4. Is The Product Merchant Well Established?

If you are right at the beginning of your own internet business, the best affiliate product to choose will be one from an established seller. Here you’ll get the benefit of knowing that all the production and commission systems are set up and bug free, and all you need to do is concentrate on making the sales.

Well established merchants will often have good quality sales aids, like ads and banners and sometimes offer affiliate help lines. They’re also more likely to have the benefit of some brand recognition, which will help your own sales and marketing.

So, if you’re ready to start, two of the best known places to take a look at are ClickBank.com and Commission Junction. Take some time and look around these sites to see how they work, what’s on offer and how the commissions are paid.

Then, wherever you choose your product remember to answer these four questions to find the best affiliate offer for you.