PRODUCT LIFE CYCLE Flashcards
What is the first stage of the cycle?
Research and Development - Businesses will invest in researching a certain area of the market and if they discover a business opportunity, they may then take the time and resources to develop a product or service that fits a gap in the market.
What is the second stage?
Introduction - The stage where a business launches its product or service. Marketing and advertising is important in this stage
What is the third stage?
Growth - Expanding market Fast growing sales Cash flow may become positive The market grows, profits rise but this attracts the entry of new competitors
What is the fourth stage?
Maturity -
Slower sales growth as rivals enter the market
High profits for those with high market share
Cash flow should be strongly positive
Prices and profits fall
Advertising is persuasive to remind consumers the product exists
What is the fifth stage?
Decline - Falling sales Decline in profits & weaker cash flows More competitors leave the market Products could be withdrawn from production
Why do products enter the decline stage?
Technological advancements
Changes in consumer tastes and behaviour
Increased competition
Failure to innovate and develop the product
What is an extension strategy?
Businesses will try to keep the sales of a product at the highest level to increase sales and profit
Name some extension strategies?
Advertising – try to gain a new audience or remind the current audience of the product
Price reduction – makes the product more attractive to customers
Adding value – add new features to the current product, for example filters on smart phones
What are the key uses of the product life cycle?
- Forecast future sales trends
- Helps to correctly position the product and successfully
target the right market - Helps analyse and manage the product portfolio
