Once the product crosses the introduction phase, it enters the growth phase. The introduction phase of the New Products is indeed the most crucial one. For more than 95% of products fail at this phase only. However, 5% of the products which enter the growth phase meet with a more strengthened and increased competition. This competition now offers a greater choice to the customer in different product types, packaging and prices. The market base expands as more customers come in to buy the product. More trade channels are now willing to keep the product and one generally observes softening of prices.
Organizationally, the pioneer firm now operates at economical levels. There are lesser production bottlenecks and hence costs are lower now. To remain competitive over a period of time, the pioneer firm initiates the product improvement or modification programs .The sales and profit grow exponentially .But profits taper off at the end of this phase.
The marketing task is that of cultivating selective demand. This involves in some cases, niche marketing and in others, focused marketing strategies. Whatever be the ultimate choice of the strategist, one thing emerges, that, growth phase also marks an end to standardization or mass marketing approach. The growth phase involves strategy of product modification, enlarging distribution and service network and maintaining a competitive price level. The strategy also involves one of extending product to different use situations and considering newer packaging alternatives to attract more and more new customers.
Most products that survive the heat of competition and customerâ€™s passion to acquire them now enter the maturity phase. This phase is characterized by slowing of growth rates of sales and profit. In fact, the decline in profits seem to appear now. This phase is also marked by cut throat competition which often tends to narrow down to price and promotion war. It is an irony that when the firm has established its product and generated customer preferences for its brand, competition gets intensified and the firm has no other alternative but to invest resources in service augmentation and also simultaneously undertake the task of cost reduction and hence price reduction. Maturity phase also sees a boom in the market demand as more and more customers are now willing to accept the product.
Internally, the firm derives benefits of economies of scale in production and distribution. Product modification programs are at a much higher level and the firm also introduces a modified product during this phase. Profits and Margins are low now, in fact on the decline, as the firm continues to invest resources to maintain its competitive position in the market place.
The marketing task is one of adopting a segmental approach. In fact, carving a niche even within a specific market segment, service augmentation, image marketing and creating a new value image are critical tools to retain competitive edge. Strengthening the brand through repositioning or making changes in the channels of distribution(e.g. moving from indirect to direct or shortening the length of the channel) now become imperative for while the firm has to fight competition and take its product nearer to the customer ,it has to also make adequate profits to remain on the business.
This is the phase when sales decline because customer preferences have changed in favor of more efficient and better products. The number of competing firms is reduced and generally the industry now has limited product versions available to the customers. Customerâ€™s value perception of the product also undergoes a change. However, the firm may get an inkling that its profit curve is largely coming from the people who will be willing to a pay higher price to possess it either for its antique value or because they resist any change. The marketing task is one of the diverting and gradual withdrawals of the product. To cater, to small niche, a firm may consider generating primary demand for the product rather than the brand demand .Nonetheless, products having entered a decline phase need to be pruned.