Session 19 - product life cycle and the boston matrix Flashcards
Define product life cycle
The stages that products go through in their life, from development to withdrawal from the market
Give a description of the research and development stage of the product life cycle
New ideas/possible inventions/ market analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at?/Product Development and refinement. Test Marketing – possibly local/regional
Give a description of the launch/introduction stage of the product life cycle
Advertising and promotion campaigns. Target campaign at specific audience/ Monitor initial sales. Maximise publicity/High cost/low sales
Give a description of the growth stage of the product life cycle
Increased consumer awareness. Sales rise. Revenues increase. Costs - fixed costs/variable costs, profits may be made
Give a description of the maturity stage of the product life cycle
Sales reach peak. cost of supporting the product declines. Ratio of revenue to cost high. Sales growth likely to be low/Market share may be high
Give a description of the decline stage of the product life cycle
Product outlives/outgrows its usefulness/value. Fashions change. Technology changes. Sales decline. Cost of supporting starts to rise too far
Advantages of the product life cycle
Give managers the ability to plan what to do with the marketing strategy at each stage
Helps to create the marketing mix
Helps decide whether to withdraw certain products
Helps with planning the marketing budget
Disadvantages of the product life cycle
Not always clear what stage the product is in, there are grey areas
Not all products go through every stage
Products may remain in one stage for a very long time
Only one product per diagram, so not efficient
What are the 4 stages of the boston matrix
Dogs, question marks, stars, cash cows
What two factors determine which stage a product falls into the boston matrix
Market share, market growth
Which stage of the boston matrix has low market share and a low market growth
Dogs
Which stage of the boston matrix has low market share and a high market growth
Question marks
Which stage of the boston matrix has high market share and a high market growth
Stars
Which stage of the boston matrix has high market share and a low market growth
Cash cows
Define a product portfolio
A product portfolio refers to a range of products produced by a company or a brand
What does a question mark refer to for product portfolio
Building - this involves investment in promotion and distribution to boost sales and is often used with problem children (question marks)
What does a star refer to for product portfolio
Holding - this involves marketing spending to maintain sales and is used with rising star products.
What does a cash cow refer to for product portfolio
Milking - this means taking whatever profits you can without much more new investment and is often used with cash cow products
What does a dog refer to for product portfolio
Divesting - this involves selling off the product and is common with dogs or problem children
Advantages of the Boston Matrix
A useful tool for analysing product portfolio decisions
Provides an easy visual snapshot of the current position
Allows you to develop 4P strategic decisions
Identify the potential for growth
Disadvantages of the Boston Matrix
Market growth is not a good measure of a markets attractiveness
Market share is an inadequate measure of a product’s ability to generate cash
Ignores issues such as developing a sustainable competitive advantages
The product life cycle vary over time
Does not take account of environmental factors
