Explain the first two stages of product life cycle.

The first two stages of product life cycle are:

1. Introduction Stage — During this stage, the product is born.

Characteristics:

• Competition is virtually absent.
• Market is limited and prices are relatively high.
• Sales grow at a low rate due to lack of consumer awareness.
• Heavy promotional expenditure leads to high costs and negative profits.
• This stage is very risky because a high percentage of new products fail during this period.

Strategies adopted:

• Proper advertisement and publicity (e.g., money-back guarantee).
• Attractive gifts as 'introductory offer'.
• Selective distribution and attractive discount to dealers.
• Skimming pricing policy to recover heavy promotional costs.

2. Growth Stage — In this stage, demand and sales grow rapidly, distribution is widened, competition increases and prices fall. Promotional focus shifts from "buy my product" to "buy my brand".

Characteristics:

• Sales and profits grow rapidly.
• Distribution channels expand.
• Promotional expenses remain high but fall as a percentage of sales.
• Major improvements may take place in the product.

Strategies adopted:

• Heavy advertising to create brand image.
• Expanding distribution channels.
• Introducing new versions to cater to different customer types.
• Keeping prices at competitive levels.
• Greater emphasis on customer service.