1.3.5 Marketing Strategy Flashcards
What is the product life cycle?
Shows sales of a product overtime
Helps with marketing decisions
Has implications for cash flow
Steps of the product life cycle
- Development
- Introduction
- Growth
- Maturity
- Decline
Steps of the product life cycle
- Development
- Introduction
- Growth
- Maturity
- Decline
- Development
Research and development develop the product
The marketing department does research
Costs are high as there are not any sales yet
High failure rate as it doesn’t have enough demand or the product cannot be made cheaply in order to make a profit
- Introduction
Product launches
Business heavily promotes the products to increase sales
Initial price may be high to cover costs (Price skimming)
OR the price can start low to encourage sales (Penetration pricing)
Competition is limited if its an innovative product
- Growth
New customers and repeat customers
Competitors may be attracted to the market
Product is often improved or developed and may be targeted at a new market segment
- Maturity
Sales reach a peak
Profitability increases also as fixed costs have been covered
Competiton may be high so demand falls
- Decline
Product doesn’t appeal to customers anymore
sales fall rapidly
The product is either withdrawn or sold to other businesses
Decline isn’t inevitable its usually caused by poor promotion, products becoming obsolete, change in consumer tastes.
Quality products can usually sell for a long long time
Extension strategies
Eg; product development and promotion
Aim is to increase sales that are starting to decline
Can change the way the business promotes the product
Product development involves the business improving or redesigning the product
EG: change the packaging
Mixed product portfolio
This is the combination of all product lines
The aim is to have a variety of products at different stages of the product life cycle
Therefore, if one product fails, the business can still depend on other products
The Boston Matrix
- Question marks
- Dogs
- Cash cows
- Stars
Valuable way of seeing where a product is positioned in the market
Helps influence decisions
Can predict what will happen to the product
Question marks
All new products start off as this
Small market share and small market growth
Need heavy marketing
Can help build the brand, maximise profits or sell off the product
Cash cows
High market share and low market growth
In the maturity phase
Bring in a lot of money
Stars
High market share and high market growth
Profitable and have the most potential
High demand product so money will be spent on capacity to keep up
Future cash cows
Dogs
Low market share and low market growth
If a product is still profitable but not growing, the business can harvest short term profit
If the product is no longer making a profit it can become obsolete and sold off.
