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How does a firms pricing policy relate to the products life cycle When a company launches a new product it knows the product wont last forever However the company does expect to earn a satisfactory profit to cover all the effort and risk that went into launching it A firm can never accurately predict the lifetime of a product but the lifetime involves four distinct stages These four stages are collectively known as the Product Life Cycle PLC The first stage is the introduction stage when the product is first launched Sales growth tend to be low as consumers are introduced to the existence of the product At this stage therefore profits are negative or low because of the low sales and high distribution and promotion expenses Much money is needed to attract distributors and build their inventories Promotion spending is especially high to inform customers of the new product and get them to try it One of the biggest launches in recent history is that of the DVD player Not only is this a new product its a whole new market Industry executives have named DVD-Video the Medium of the Millennium and boast that DVD-Video is the fastest growing new packaged media format launch in history with close to 54 million DVD-Video players shipped to retail since the format launched nationally in the US in autumn 1997 Consumer Electronics Association The outlook for next year is equally promising The DVD Entertainment Group estimates that hardware shipments will double to eight million DVD-Video players in 2000 And based on the success of the format exceeding all previous forecasts that number could be even higher The group also estimates that the installed base will more than exceed 10 percent of US households a benchmark of success for a consumer electronics product The surge in hardware sales is a positive boost for retailers In 1999 DVD-Video hardware represented more than 1
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