Product life cycle

Question 1

List the stages in the product life cycle

Answer 1

Development, introduction, growth, maturity, decline

Question 2

Development stage

Answer 2

New product develpoment (NPD)
Often complex
Absorbs significant resources
May not be successful
May involve a long lead time before sales are achieved

Question 3

Introduction stage

Answer 3

New product launched
Usually low sales
Low capacity utilisation and higher unit costs
Heavy promotion to make consumers aware of the product
Usually negative cash flow

Question 4

Introduction stage strategies

Answer 4

Aim = encourage customer adoption
High promotional spending to create awareness and inform people
Either skimming or penetration pricing
Limited, focused distribution
Demand initially from "early adopters"

Question 5

Growth stage

Answer 5

Much faster growing sales
Product gains market accepyance 
Unit costs fall with economies of scale
The market grows, profits rise but attracts the entry of new competitiors
Cash flow may become positive

Question 6

Gwoth stage strategies

Answer 6

Promote brand awareness
Intensive distribution - many new outlets
Market penetration
Wider target customer base
Improve the product - new feature, improved styling = more options

Question 7

Maturity stage

Answer 7

Slower sales growth as rivals enter the market = intenses competition and fight for market share
Low unit costs = very efficient
High profits for those with high market share
Weaker competitors start to leave the market
Prices start to fall
Cash flow should be strongly positive (less need for investment and marketing)

Question 8

Maturity stage strategies

Answer 8

Manage capacity and production
Promotion focuses on differentiation
Intensive distribution
Adopt extension strategies e.g. Attract new, late users, develop new uses, reposition in the market

Question 9

Reasons why products enter the decline stage

Answer 9

Technological advance
Changes in consumer tastes and behaviour
Increased competition
Failure to innovate and develop the product

Question 10

Decline stage

Answer 10

Falling stage 
Market saturation
Rapid fall in profit and weak cash flow 
More competitors leave the market
Excess capacity and rising unit costs

Question 11

Decline stage strategies

Answer 11

Maintain market share of whats left
Minimise marketing spend
Cut prices to stay competitive
Support loyal customers