Explain the second and third stage of product life cycle.

Second Stage — Growth Stage:

In this stage, demand and sales grow rapidly, distribution is widened, competition increases and prices fall. The promotional focus shifts from "buy my product" to "buy my brand".

Characteristics:

• The firm expands sales by increasing market share in existing markets and by entering new markets.
• Promotional expenses remain high but fall as a percentage of sales turnover, leading to rising profits.
• Major improvements may take place in the product.

Strategies adopted:

• Heavy advertising to create a brand image and stimulate sales.
• Expanding distribution channels.
• Introducing new versions of the product.
• Keeping the price at competitive levels.
• Greater emphasis on customer service.

Third Stage — Maturity Stage:

During this stage, sales continue to grow but at a decreasing rate. Competition increases further, and markets get stabilised.

Characteristics:

• The product is known all over the market, and a low-income group market may emerge.
• Prices are reduced due to competition, while promotional expenditure remains high.
• Profits decline and marginal producers are forced out of the market.
• Supply exceeds demand for the first time, leading to saturation.
• Manufacturers broaden their product lines and introduce new models.

Strategies to lengthen this stage:

• Differentiating the product from competitors.
• Focussing on brand image.
• Extending the warranty period.
• Introducing reusable packaging.
• Developing new markets and finding new uses for the product.