Product life cycle Flashcards
What is the term for when products go through the stages of a life cycle very quickly?
fads.
What is the stages of the product life cycle?
- Research and development
- Introduction
- Growth
- Maturity
- Saturation
- Decline.
What is research and development (R&D)?
The product is being researched and developed. Prototypes will be made and tested. Changes may have to be made after research feedback.
What impact on sales does R&D have?
There is no sales yet as the product is still being developed.
What impact on profits does R&D have?
The product will actually be making a loss due to the costs of development and zero income from sales.
What is introduction?
The product is launched. This usually coincides with introductory promotional activities to create ‘hype’ for the product.
What impact on sales does introduction have?
Sales are slow to begin with as customers are unsure of the product. Customers may have to be persuaded to move from competitors products.
What impacts on profits does introduction have?
The products begin to cut into the losses from development, but high promotional costs still result in a loss being made overall.
What is growth?
The product has been on the market for some time, customers are fully aware of the product and are purchasing it.
What impact on sales does growth have?
Sales start to rise rapidly. This can be the result of slightly reduced prices, lack of competition and/or consumer confidence in the product.
What impact on profits does growth have?
Profits are starting to be made and losses from development and promotions during the initial stage are recouped.
What is maturity?
The product has been on the market for some time. Competition enters the market.
What impact on sales does maturity have?
Sales growth peaks and levels out. Many sales can still be made for a long time at this stage.
What impact on profits does maturity have?
Profits can still be healthy but start to fall. The competition will take sales away and thus profits will fall.
What is saturation?
The product suffers from too many competitors being in the market.
What impact on sales does saturation have?
Sales begin to fall as consumers flock to competitors’ products.
What impact on profits does saturation have?
Profits fall rapidly, especially if prices are slashed to encourage sales.
What is decline?
the product’s life is nearing its end. The product will stop being produced.
What impact on sales does decline have?
Sales fall rapidly and eventually the product will be withdrawn from the market.
What impact on profits does decline have?
Profits continue to fall. Eventually, products may be sold at unit cost just to break even.
Learn product life cycle diagram.
In class jotter.
What is the extension strategy?
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.
What are the extension strategies?
- 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.
What is the impact of lowering the price of the product, e.g. through a ‘sale’?
Reducing the prices will make the product more affordable and therefore appeal to more market segments.
