Product LC

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http://www.bized.co.uk

Copyright 2006 Biz/ed

Product Life Cycles

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Product Life Cycles

Product Life Cycle shows the stagesthat products go through from

development to withdrawalfrom the market

Product Portfolio the rangeof products a company has in

development or available for consumersat any one time

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Product Life Cycles

Product Life Cycle (PLC): Each product may have a different life cycle PLC determines revenue earned Contributes to strategic marketing planning May help the firm to identify when

a product needs support, redesign,reinvigorating, withdrawal, etc.

May help in new product developmentplanning

May help in forecasting and managing cashflow

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Product Life Cycles

The Stages of the Product LifeCycle:

Development

Introduction/Launch

Growth

Maturity Saturation

Decline

Withdrawal

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Product Life Cycles

The Development Stage:

Initial Ideas possibly large number

May come from any of the following Market research identifies gaps in the market

Monitoring competitors

Planned research and development (R&D)

Creative thinking inventions

Futures thinking what will people beusing/wanting/needing 5,10,20 years hence?

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Product Life Cycles

Product Development: Stages New ideas/possible inventions

Market analysis is it wanted? Can it beproduced at a profit? Who is it likelyto be aimed at?

Product Development and refinement Test Marketing possibly local/regional

Analysis of test marketing results andamendment of product/production process

Preparations for launch publicity,marketing campaign

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Product Life Cycles

Introduction/Launch:

Advertising and promotion campaignsTarget campaign at specific audience?

Monitor initial sales

Maximise publicity

High cost/low sales

Length of time type of product

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Product Life Cycles

Growth:

Increased consumer awarenessSales rise

Revenues increase

Costs - fixed costs/variable costs,profits may be made

Monitor market competitorsreaction?

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Product Life Cycles

Maturity: 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

Competition likely to be greater Monitor market

changes/amendments/new strategies?

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Product Life Cycles

Saturation: New entrants likely to mean market is flooded

Necessity to develop new strategies becomes morepressing: Searching out new markets:

Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures media/music, etc.

Developing new uses Focus on adapting the product Re-packaging or format Improving the standard or quality Developing the product range

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Product Life Cycles

Decline and Withdrawal: Product outlives/outgrows its

usefulness/value Technology changes

Sales decline

Cost of supporting starts to rise too far

Decision to withdraw may be dependent onavailability of new products and whethertrends will come around again?

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Product Life Cycles

Sales

Time

Development Introduction Growth Maturity Saturation Decline

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The Boston Matrix The Boston Matrix:

A means of analysing the product portfolio

and informing decision making aboutpossible marketing strategies

Developed by the Boston Consulting Group a business strategy and marketingconsultancy in 1968

Links growth rate, market share and cashflow

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The Boston Matrix Cash Cows:

High market share

Low growthmarkets maturity stage ofPLC

Low cost support High cash revenue

positive cashflows

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The Boston Matrix Dogs:

Products in a lowgrowth market

Have low or decliningmarket share (declinestage of PLC)

Associated withnegative cash flow

May require largesums of money tosupport

Is your product starting toembarrass your company?

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The Boston Matrix Problem Child:

- Products having alow market share ina high growthmarket

- Need money spentto develop them

- May producenegative cash flow

- Potential for thefuture?

Problem children worth spendinggood money on?

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The Boston Matrix Implications:

Dogs:

Are they worth persevering with?

How much are they costing?

Could they be revived in some way?

How much would it cost to continue

to support such products?

How much would it cost to removefrom the market?

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Problem Children:

What are the chances of theseproducts securing a holdin the market?

How much will it cost to promotethem to a stronger position?

Is it worth it?

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Stars:

Huge potential

May have been expensive to develop

Worth spending money to promote

Consider the extent of their productlife cycle in decision making

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Cash Cows:

Cheap to promote Generate large amounts of cash

use for further R&D?

Costs of developing and promotinghave largely gone

Need to monitor their performance the long term?

At the maturity stage of the PLC?

Documents

Product LC