Exam 12: Product and Distribution Strategies

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The product life cycle refers to the four stages a product goes through from the time it first enters the market until it is no longer a viable product. These stages are introduction, growth, maturity, and decline. In the introduction stage, the firm tries to promote demand for its new offering; inform the market about it; give free samples to entice consumers to make a trial purchase; and explain its features, uses, and benefits. During the growth stage, sales climb quickly as new customers join early users who now are repurchasing the item. Word-of-mouth referrals and continued advertising and other special promotions by the firm induce others to make trial purchases. In the maturity stage, industry sales at first increase, but they eventually reach a saturation level at which further expansion is difficult. Competition also intensifies, increasing the availability of the product. Sales continue to fall in the decline stage, the fourth phase of the product life cycle. Profits decline and may become losses as further price-cutting occurs in the reduced overall market for the item.

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The supply chain is the complete sequence of suppliers that contribute to creating and delivering a good or service to business users and final consumers. The supply chain begins when raw materials used in production are delivered to the manufacturer and continues with the actual production activities that create finished goods. Finally, the finished goods move through the producer's distribution channels to end users.