Thursday, 1 March 2012

The PLC and the bubble: related or not?

Any good goes through multiple stages in a life of a product (the PLC). Those stages being: introduction, growth, maturity, decline. Similarly, steps of the good which may cause a bubble incorporates parallel phases: introduction, boom, bubble, burst. Does it have something in common? Some may argue that I am comparing two unrelated schemes (and mixing up marketing with finance), but it does have familiarities.

The length of each stage depends on an individual good. Although, the price pattern in PLC and the bubble demonstrates reversed characteristics. In the PLC, at the introductory stage the cost of a product is high, but sales volume is low; passing through the rest of the stages' price tends to decline increasing sales volume. In the bubble, a product may be stuck at the introductory stage for years or even centuries (until for some social or economic reasons it becomes madly popular), it associates low prices, but as time pass prices rise rapidly. However, when the good reaches its decline/burst stage, demand for it falls reducing the volume of sale and diminishing profits. All good things come to an end, just in the case of the PLC, the end of life for a product does not mean painful consequences to a society and a long recovery process, as in the case of the bursting bubble...

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