Transcript Product Life Cycle 2

The Product Life Cycle..what is happening?
747 Development
Starter
In pairs think about products that have been
successful but their sales have fallen, or the
product was re-launched, re-branded, etc…and
sales increased again.
ILLNESS
SPORT DRINK
TRASH
FASHIONABLE
Product Life Cycle
Product life Cycle = ‘Shows the sale of a product
over time’
Sales
Product Life Cycle
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Months / Years
Development Launch
Growth
Maturity
Saturation
Decline
Product Life Cycle – Mini Sales
Mini Sales
350,000
Sales of Cars
300,000
250,000
200,000
150,000
100,000
50,000
Years
Launch
Development
Growth
Maturity
Saturation
Decline
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
1959
1957
1955
0
Product Life Cycle Stages…
Research & Development =
Researching and developing the
product. This may takes weeks,
months or years. In this time
there is no positive cashflow.
Companies must manage their
liquidity.
Launch = Product will need heavy
investment in promotional
activities. In this time there is no
positive cashflow. Companies
must manage their liquidity.
Product Life Cycle Stages…
Growth = Sales and profit rise.
Cashflow becomes positive.
Maturity = Peak of sales. Positive
cashflow which can pay for further
product developments.
Saturation = No further sales are
likely.
Decline = Product sales fall as it is
less popular or the competition are
taking over.
Product Life Cycle & Cash Flow
Negative Cashflow
due to Research &
Development cost
Positive Cashflow in
Mini Sales
Growth,
Maturity &
Saturation
Cashflow positive
but falling as sales
decline
350,000
250,000
200,000
150,000
100,000
50,000
Years
Cashflow Development
Negative Cashflow at
launch due to
Promotion cost
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
1959
1957
0
1955
Sales of Cars
300,000
Product Life Cycle Stages & Marketing
Sales
Pricing Policy /
Competition
Promotion /
Advertising
Profits
Introduction
Growth
Maturity
Saturation
Decline
Low sales because
the product is new
Sales rise sharply
Sales increase
more slowly
Sales level off as
market saturation
is reached
Sales fall as new
products become
available or the
product goes out
of fashion
Product Life Cycle Stages & Marketing
Introduction
Growth
Maturity
Saturation
Decline
Sales
Low sales because
the product is new
Sales rise sharply
Sales increase
more slowly
Sales level off as
market saturation
is reached
Sales fall as new
products become
available or the
product goes out
of fashion
Pricing Policy /
Competition
Price skimming as
few / no competitors
Penetration pricing
by competitors as
a few competing
products are
introduced, small
reduction in your
prices to compete
with these
products
Competitive
pricing/promotional
pricing as
competition
becomes intense
Competitive
pricing/prices are
reduced to
compete with
existing
competitors, no
new competitors
enter the market
Price reductions to
encourage sales
as sales are
falling. Some
competitors stop
making the product
Promotion /
Advertising
Profits
Product Life Cycle Stages & Marketing
Introduction
Growth
Maturity
Saturation
Decline
Sales
Low sales because
the product is new
Sales rise sharply
Sales increase
more slowly
Sales level off as
market saturation
is reached
Sales fall as new
products become
available or the
product goes out
of fashion
Pricing Policy /
Competition
Price skimming as
few / no competitors
Penetration pricing
by competitors as
a few competing
products are
introduced, small
reduction in your
prices to compete
with these
products
Competitive
pricing/promotional
pricing as
competition
becomes intense
Competitive
pricing/prices are
reduced to
compete with
existing
competitors, no
new competitors
enter the market
Price reductions to
encourage sales
as sales are
falling. Some
competitors stop
making the product
Promotion /
Advertising
Informative
advertising as the
product is new, free
samples may be
given out to get
customers to try it
Informative
advertising as the
product is new,
free samples may
be given out to get
customers to try it
A lot of advertising
to encourage
brand loyalty and
to compete with
other very
competitive
products
A high and stable
level of
advertising, may
be promoting new
improved versions
of the original
product
Advertising
reduced or may
stop altogether as
sales fall
Profits
Product Life Cycle Stages & Marketing
Introduction
Growth
Maturity
Saturation
Decline
Sales
Low sales because
the product is new
Sales rise sharply
Sales increase
more slowly
Sales level off as
market saturation
is reached
Sales fall as new
products become
available or the
product goes out
of fashion
Pricing Policy /
Competition
Price skimming as
few / no competitors
Penetration pricing
by competitors as
a few competing
products are
introduced, small
reduction in your
prices to compete
with these
products
Competitive
pricing/promotional
pricing as
competition
becomes intense
Competitive
pricing/prices are
reduced to
compete with
existing
competitors, no
new competitors
enter the market
Price reductions to
encourage sales
as sales are
falling. Some
competitors stop
making the product
Promotion /
Advertising
Informative
advertising as the
product is new, free
samples may be
given out to get
customers to try it
Informative
advertising as the
product is new,
free samples may
be given out to get
customers to try it
A lot of advertising
to encourage
brand loyalty and
to compete with
other very
competitive
products
A high and stable
level of
advertising, may
be promoting new
improved versions
of the original
product
Advertising
reduced or may
stop altogether as
sales fall
Profits
Loss made due to
high development
costs
Profits start to be
made after
development costs
have been covered
Profits start to be
made after
development costs
have been covered
Profits at their
highest as sales
growth is high
Profits fall as sales
fall
Product Extension
Product Extension = ‘Aims to maintain or
increase sales by modifying one or more
elements of the marketing mix to extend a
product’s life’
Product
Place
What makes a successful product?
New variation to original
product; e.g. Diet Coke
with lime
New
promotion
campaign
Sell into new
markets; e.g.
Export
EXTENDING THE LIFE OF
THE PRODUCT
New improved
version of product
Make small
changes to the
product
See through
new places /
distribution
Product Extension
Product Extension Sales
Saturation
350,000
Saturation
300,000
Saturation
250,000
200,000
150,000
100,000
50,000
Months / Year / Years
Launch
Extension
Extension
Extension
41
39
37
35
33
31
29
27
25
23
21
19
17
15
13
11
9
7
5
3
0
1
Saless
Saturation
Product Extension - Mini
Product Extension - iPod