Page 3: Purpose of the product life cycle
Knowledge of how the life cycle works is particularly important for a company like ASOS.com. The fashion industry is fast-moving and the individual product life cycles may be seasonable. This means that some items will only sell well during parts of the year. In addition, the lead time on the production and buying process means that ASOS.com must plan a season ahead. Fashion designers launch their new clothes collections in the same way. So, during winter 2008, ASOS.com would already have chosen and been planning for the promotion of its summer 2009 collection.
However ASOS.com enjoys an extended product life cycle due to the fact that the business has a large international market. In the southern hemisphere the seasons are the other way round to the UK. This, combined with an increasing trend to take winter holidays in sunny countries, means that summer items, such as swimwear, sell right through the year. Other items sell at unexpected times. For example, Ugg sheepskin boots would normally be considered a winter product. However, a few years ago, celebrities wearing them at pop festivals in the summer means they now sell all year round. As an online retailer, ASOS.com is not restricted in terms of space. It can offer products at times when high street retailers have to send certain categories of goods back to the warehouse. For example, ASOS.com's Holiday Shop performs very well at Christmas time.
Understanding the product life cycle also gives ASOS.com managers greater control.They are able to predict when revenue will flow in and calculate the profitability of product lines.
- They can plan the introduction and withdrawal of products. Some product lines will be highly seasonal. Other products such as classic blue jeans will have much longer life cycles and provide regular long-term revenue for the business. Managers therefore need to plan the appropriate type and level of promotion for different products.
- They can support products through the entire life cycle. They can plan pricing strategies to extract as much revenue as possible at every stage. For example; promotional discounts can be used to encourage large numbers of people to purchase a new product when it is launched. Premium pricing may apply to a new limited edition dress. Price reductions are often used at the end of the life cycle when the item is less popular and sales are declining.