Business / Why Volumes, Prices, And Margins Vary Over The Product Life Cycle?
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Autor: anton 16 May 2011
Words: 440 | Pages: 2
Why do volumes, prices, and margins vary over the product life cycle? Can you provide an example?
The same factors that are the key to reaching maximum market potential Awareness, Availability, Ability to Use, Benefit Deficiency, and Affordability. Take the release of both Applesâ€™ iPod and iPhone, both of these products had great pre-release awareness, during the pre-release a lot of people learned from reading press releases and other media how to use them. When they were finally released it was a very wide release making them readily available, for a day or two anyway. The only problem with this products was affordability, the price of the product itself was not out of reach for most working adults, the problem came with the opportunity cost for the individual, what they would have to give up to get one.
In the case of the iPhone the volumes have dictated, to an extent, the price of the product or price decline, and in return the price has effected the volume. Apple announced a reduction in price a week before the prices actually declined the week following the announcement saw a 40% decline in units sold, according to CNBC.com. The week after the price reduction saw unit sales return to near the amount of week one sales, also according to CNBC.com.
How does the rate of product adoption affect the product life cycle?
The rate of product adoption can be a direct indication of growth. The faster a product grows the faster it reaches its full market potential. The sooner it reaches its potential the sooner the firm must produce a replacement or upgrade for the product.
Thinking back to an undergraduate marketing class, what happens when a new product meets with rapid consumer acceptance?
The only thing I can see that might happen is that companies will not be able to produce enough products to keep up with market demand. Someone used the example of the PS3 and ebay. There were several people selling the PS3 for upward of $800 on Ebay, A friend of mine being one of them, according to him less than 5% of what he had actually sold for those amounts.
The supply and demand model would indicate that prices be raised, but in all actuality who pays more for something they do not really need, I will pay 500 for a PS3 or XBOX 360, not 700. When it comes to things like gas, oil, milk, water, or housing I have little choice I must forgo that PS3 or weekly drink at the local pub.
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