M Product

Question 1

What are the stages of the product lifecycle?

Answer 1

Development
Introduction
Growth
Maturity/saturation 
Decline

Question 2

Describe development

Answer 2

• When prototypes are still being created and tested.
• The product is not on the market yet so there are no sales or profit.
• Costs will be very high as capital is required for market research and developing the product.
• Means a loss is being made at this point.

Question 3

Describe introduction

Answer 3

• The product is just being released onto the market
• Sales will still be quite low as the product is new, it is still unknown to consumers.
• Costs will be very high as the business will spend a lot on promoting the product through advertising to make more consumers aware of it.
• Very low profits or even a loss is being made at this point as sales are low and costs are very high.

Question 4

Describe growth

Answer 4

• Sales are increasing as more and more people are becoming aware of the product due to promotion
• Advertising and promotion costs are still high to grow the awareness of the product
• As sales are rising, the product may start becoming profitable.

Question 5

Describe maturity/saturation

Answer 5

• Sales are at the highest they will ever be as the product has become well known among consumers
• Costs will be lower as advertising is not needed as much as the product is well known.
• Sales will being to fall as new products and competitors enter the market
• Extension strategies can be employed here to prevent decline

Question 6

Describe decline

Answer 6

• Sales are falling quickly as the product becomes out of trend and new technology emerges
• Costs are very low as there is no advertising
• As the product’s price is reduced, the product will become discontinued once it is no longer profitable to continue selling

Question 7

What are different extension strategies that could be employed?

Answer 7

• Change the packaging of the product
• Change the purpose of the product
• Change the price of the product
• Employ a different promotional campaign
• Change the name of the product
• Sell the product through a different outlet

Question 8

Benefits of maintaining a large product portfolio

Answer 8

• The business is able to sell products with seasonal fluctuations as one product’s sales fall during one season, another product’s sales will compensate for it
• It reduces risk as even if one product fails, another product’s profits will compensate for it
• Products in decline can be replaced by introducing new products
• The business can become more well known and reach more customers, increasing sales as they are in more markets
• It is easier for the business to launch new products as the business and brand is already well known to consumers

Question 9

Costs of maintaining a large product portfolio

Answer 9

• If one product gains a poor reputation, this could impact all of the brand’s other products
• Research and development costs can be high
• Marketing and advertising costs will be extremely high as a large amount of different products are having to be promoted

Question 10

Describe the Boston matrix

Answer 10

An analytical tool which identifies whether an organisation’s products are starts, cash cows, dogs or question marks.
Stars - high market growth, high market share
Cash cows - low market growth, high market share
Question marks - high market growth, low market share
Dogs - low market growth, low market share

Question 11

Benefits of Boston matrix

Answer 11

• Allows the business to identify which products to invest in (question marks and stars)
• Allows the business to identify which products to discontinue (dogs)
• It is simple and easy to understand

Question 12

Costs of Boston matrix

Answer 12

• A high market share does not always equal high profits

- Only considers current market position and doesn’t consider external factors.