Tuesday, March 10, 2009

Use Product Life Cycles To Save Money

What you know about the market matters, if you want to save money on the things you buy. This is certainly the case with product life cycles. Understand them, and know where in the cycle a product is, and you get to pay a lot less.

Fortunately, the life cycle of most things sold is predictable. A product is born, it is popularized, and then it is commonly distributed. With common distribution comes lower prices. We have all seen this is recent years with DVD players, futon couches, MP3 players and more.

The trick to taking advantage of this knowledge to save money then, is simply to wait if you can. Once a product reaches its "mature" phase (common distribution), it is often less than half of what it cost originally. In fact, the quality and functionality of a $59 DVD player from Wal-Mart may be better now than the $600 ones were originally - and that;s a 90% drop in price.

More good news! Life cycles seem to be getting shorter, so you won't have to wait as long as in the past to get those low prices. Many new electronic products cost half as much a year after they come out. It may be tempting to be among the "trendsetters" that buy everything when it first comes out, but half off means that for a little waiting you can afford to buy twice as many things.

To save the most money, of course, you try to guess when the bottom has been reached on prices. A good indicator is when most people who want a product have it. At this point manufacturing costs have probably hit their low and competition is at its greatest.

For the absolute cheapest price, wait until it is a mature product and a new version is being introduced. The old version often gets really cheap as it is cleared out. While its true that you may need the new version for functionality with some products, with others the change is more one of style. If a new style of running shoe comes along, for example, the existing one may get really cheap, even though it does essentially the same thing.

Secret Codes For Pricing Cycles

Retailers sometimes have their own pricing codes that can be deciphered. A "price hacker," tries to break the codes and determine where things are in the pricing cycle. For example, some price hackers claim that when a price ends in "8" ($3.88, $7.28) at Target stores, the product price is beginning its descent, and when it ends in "4" it is as low as it will go.

Watch for clues to these codes, and you might figure them out, but if the store you are in doesn't use such price codes, you'll be doing a lot of investigating for nothing. A simpler way to determine what the prices mean? Ask a friendly employee, who may be happy to show off his or her insider-knowledge. In any case, learning to identify and talk to friendly employees may be one of the better ways to save money.

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