Product Life Cycle And Potfolio Flashcards
What are the stages of the product life cycle?
- Development
- Introduction
- Growth
- Maturity
- Decline
What is the point of the product life cycle?
The product life cycle helps managers plan their marketing activities
What is a product life cycle?
A model that describes/predicts the stages a product goes through during its life
What does the product life cycle help with?
- Forecast sales trends
- Market targeting and positioning
- Analyse and manage a product portfolio
- Focus investment in products
What is the development stage?
- Often complex
- Absorbs significant resources
- May not be successful
- May involve a long lead time before sales are achieved
What is the introduction stage?
- New product is launched
- Usually low sales
- Low capacity utilisation and high unit costs
- Heavy promotion to make consumers aware of product
- Usually negative cash flow
What are the strategies at the introduction stage?
Aim: encourage consumer adoption
- High promotional spending to create awareness and inform people
- Either skimming or penetration pricing
- Limited, focused distribution
- Demand initially from ‘early adopters’
What is the growth stage?
- Much faster growing sales
- Product gains market acceptance
- Unit costs fall with economies of scale
- The market grows, profits rise but attracts the entry of new competitors
- Cash flow may become positive
What are the strategies in the growth stage?
- Promote brand awareness
- Intensive distribution - many new outlets
- Market penetration
- Widen target customer base
- Improve the product
What is the maturity stage?
- Slower sales growth as rivals enter the market - intense 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
What are the strategies for the mature products?
- Manage capacity and production
- Promotion focuses on differentiation
- Intensive distribution
- Adopt extension strategies:
- attract new, late users
- develop new uses
- reposition in the market
What is the decline stage?
- Falling sales
- Market saturation
- Rapid fall in profits and weak cash flow
- More competitors leave the market
- Excess capacity and rising unit costs
Why do products enter the decline stage?
- Technological advance
- Changes in consumer tastes and behaviours
- Increased competition
- Failure to innovate and develop the product
What are strategies for the decline stage?
- Maintain market share of what is left
- Minimise market spend
- Cut prices to stay competitive
- Support loyal customers
What are some disadvantages of the product life cycle?
- The shape and duration of the cycle varies from product to product
- Strategic decisions can change the life cycle
- It’s hard to know exactly where a product is on its life cycle
- Length cannot be reliably predicted
- Decline isn’t inevitable
