Reference no: EM132587709

Product Life Cycle

A strategic approach to making product-mix and pricing decisions and looking for cost reduction opportunities requires a broad perspective of the product and how it adds value to the customer. The product life cycle describes all the stages of supplying a product or service from its initial conception, to its introduction, the satisfaction of the last customer, and the products' removal from the marketplace. The product life cycle recognizes that product costs are more than just the costs of making the product. An organization incurs considerable costs related to a product before the first unit is made and sold. Additional costs are also incurred after the product is sold because of delivery costs and customer service. These costs are incurred over the entire life of the product, which may be as short as a month or as long as 50 years. High-fashion clothing, computers, and electronic equipment tend to have very short product lives, since new innovations quickly render existing products obsolete. Other products have been around for many years, and are still popular.

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Question 1: How does an analysis of the product life cycle lead to lower costs?