Product life cycle

Question 1

What is the term for when products go through the stages of a life cycle very quickly?

Answer 1

fads.

Question 2

What is the stages of the product life cycle?

Answer 2

• Research and development
• Introduction
• Growth
• Maturity
• Saturation
• Decline.

Question 3

What is research and development (R&D)?

Answer 3

The product is being researched and developed. Prototypes will be made and tested. Changes may have to be made after research feedback.

Question 4

What impact on sales does R&D have?

Answer 4

There is no sales yet as the product is still being developed.

Question 5

What impact on profits does R&D have?

Answer 5

The product will actually be making a loss due to the costs of development and zero income from sales.

Question 6

What is introduction?

Answer 6

The product is launched. This usually coincides with introductory promotional activities to create ‘hype’ for the product.

Question 7

What impact on sales does introduction have?

Answer 7

Sales are slow to begin with as customers are unsure of the product. Customers may have to be persuaded to move from competitors products.

Question 8

What impacts on profits does introduction have?

Answer 8

The products begin to cut into the losses from development, but high promotional costs still result in a loss being made overall.

Question 9

What is growth?

Answer 9

The product has been on the market for some time, customers are fully aware of the product and are purchasing it.

Question 10

What impact on sales does growth have?

Answer 10

Sales start to rise rapidly. This can be the result of slightly reduced prices, lack of competition and/or consumer confidence in the product.

Question 11

What impact on profits does growth have?

Answer 11

Profits are starting to be made and losses from development and promotions during the initial stage are recouped.

Question 12

What is maturity?

Answer 12

The product has been on the market for some time. Competition enters the market.

Question 13

What impact on sales does maturity have?

Answer 13

Sales growth peaks and levels out. Many sales can still be made for a long time at this stage.

Question 14

What impact on profits does maturity have?

Answer 14

Profits can still be healthy but start to fall. The competition will take sales away and thus profits will fall.

Question 15

What is saturation?

Answer 15

The product suffers from too many competitors being in the market.

Question 16

What impact on sales does saturation have?

Answer 16

Sales begin to fall as consumers flock to competitors’ products.

Question 17

What impact on profits does saturation have?

Answer 17

Profits fall rapidly, especially if prices are slashed to encourage sales.

Question 18

What is decline?

Answer 18

the product’s life is nearing its end. The product will stop being produced.

Question 19

What impact on sales does decline have?

Answer 19

Sales fall rapidly and eventually the product will be withdrawn from the market.

Question 20

What impact on profits does decline have?

Answer 20

Profits continue to fall. Eventually, products may be sold at unit cost just to break even.

Question 21

Learn product life cycle diagram.

Answer 21

In class jotter.

Question 22

What is the extension strategy?

Answer 22

As sales (and profits) begin to fall as a product matures, a business can attempt to inject new life into the product. This is known as extending the product life cycle.

Question 23

What are the extension strategies?

Answer 23

• Lowering the price of the product, e.g. through a ‘sale’.
• Changing the place the product is sold, e.g. selling online.
• Altering the methods of promotion.
• Developing variations of the product, e.g. new flavours.
• Rebranding the product.
• Changing the packaging.
• Changing the use of the product.

Question 24

What is the impact of lowering the price of the product, e.g. through a ‘sale’?

Answer 24

Reducing the prices will make the product more affordable and therefore appeal to more market segments.

Question 25

What is the impact of changing the place the product is sold, e.g. selling online?

Answer 25

Making the product available in more places will mean it is seen by more potential customers, e.g. using e-commerce will mean a product can be sold worldwide.

Question 26

What is the impact of altering the methods of promotion?

Answer 26

Changing the way a product is promoted can increase sales simply by raising awareness of that product.

Question 27

What is the impact of developing variations of the product, e.g. new flavours?

Answer 27

Developing new varieties can mean the product appeals to the tastes and desires of different segments. Updating the product can utilise the latest technology so make customers want the product again, e.g. annual launches of the latest, updated smartphones.

Question 28

What is the impact of rebranding the product?

Answer 28

Changing the name of the product can create ‘hype’. A new name can appeal to different or wider market segments, e.g. Jif changed to Cif as they found that continental Europeans couldn’t pronounce Jif.

Question 29

What is the impact of changing the packaging?

Answer 29

Redesigning the packaging can make the product appeal to a new market segment, e.g. Harry Potter books also come in a more mature-looking front cover to entice more adults to buy them.

Question 30

What is the impact of changing the use of the product?

Answer 30

Extending or changing the use of the product can make it appeal to new markets or suit seasonal tastes, e.g. Cadbury’s Minirolls were released in ice-cream-inspired flavours and are suitable for freezing, ideal for summer.