The product life cycle and Boston Matrix Flashcards
What is the product lifecycle?
The product lifecycle shows sales of a product over time, it is valuable for marketing strategies and has cash flow implications. Marketing decisions will be based on where in a products lifecycle it is.
What are the five stages of the product life cycle?
The development stage, the introduction stage, the growth stage, the maturity stage and the decline stage.
What is the development stage?
This is the R+D for the product.
- The marketing department does their MR.
- There are high costs as the previous points are expensive, and no sales at this point do not cover this cost.
Development at this point has a high failure rate as there is very often insufficient demand or it is too expensive to make the product.
What is the introduction stage?
When the product is first launched, in one or more markets.
- The business promotes the product heavily to promote sales.
- Businesses have to track demand to ensure they have the capacity to deal with it sufficiently.
-The business may use price skimming to cover the promotion costs.
- May also use penetration pricing.
- Sales surge but high fixed and variable costs stop early profits.
-Businesses will stop the product if it not performing well at this stage.
- Selling outlets will be limited.
- Limited competition theoretically.
What is the growth stage?
Fast growing sales, new and repeat customers.
-More competitors attracted to market - will coincide with more promotion.
-Products often developed or targeted at new segment.
- Rising sales see more outlets keen to sell it there.
What is the maturity phase?
Sales peak
-Profits increase as most fixed costs are covered.
Saturation point in the market - depends on the length of time the product lasts, price often reduced to increase demand.
- Few new customers, competition fierce.
What is the decline phase?
No appeal anymore - sales and profits decrease rapidly. (Could still profit if there are good promotional efforts.
- Sales may keep falling, so product taken off the market, could be sold to another business (divestment.) If competitors leave, sales could rise.
-Decline is not inevitable; does usually happen and will happen where products become obsolete or due to changing economic variables, poor marketing and other factors. However quality products with great design will sell for decades (Cadbury dairy milk.)
What are extension strategies? What do they do?
Extension stratergies keep a product going on for longer.
Some examples are; product development and promotion, used to pick up sales of declining products.
What is product development?
What is a product line?
Consists of related products (including different sizes of the same product), with similar characteristics, uses or target customers.
What is the product portfolio?
The combination of product lines produced by a business - all of their products.
How should an ideal product portfolio look for a business?
It should have a range of different products at different points in the life cycle to ensure they always have a secure stream of revenue incoming.
What is the Boston Matrix?
It is a model of product portfolio analysis that compares market growth with market share for all of the products in a businesses portfolio individiually, usually with circles which represent sales revenue of each product.`
What are the four types of products according to the matrix?
Dogs, rising stars, cash cows and question marks.
What are Question marks?
- Mostly all new products with small market share and high growth.
- They are not yet profitable and their success is inconclusive.
-They need heavy marketing and strong branding to succeed usually.
