Transcript Product Life Cycle – Extension Strategies

The Marketing Mix:
Product
Product Life Cycle
Today you will know what the product life cycle is
You will understand the stages and the characteristics
of each
You will be able to apply this theory and understanding
to real products
Product Life Cycle
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When deciding on a marketing strategy a firm needs
to examine the existing position of its products
The product life cycle is a strategic tool that is used
to assess the position of the firm and its products
The product life cycle traces the sales of a product
over time.
Knowledge of the life cycle allows managers to adjust
their marketing strategies.
The Product Life Cycle
The typical path for a product can be divided into 6 stages.
Sales
Development
Introduction
Growth
Maturity
Cash Flow
Saturation
Decline
Time
1. Research and Development
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Market research is carried out, the idea for the product is
developed and a prototype produced
This is an expensive period for the company as no sales are
made because the product is not yet available
2. Introduction
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The product is put on sale.
Many products never reach this stage and
are abandoned after prototypes.
Sales growth is slow and heavy promotion is
needed to create brand awareness
E.g. Virgin Media – V+ system & Susan
Boyle
3. Growth
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Sales begin to rise as the product becomes known and
accepted by customers
Firms should begin to make profits at this stage as sales
revenue begins to outweigh the costs of promotion and
production
E.g. Sky Plus TV, recordable DVD player and the iphone
4. Maturity and Saturation
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Sales begin to stabilise and slow down.
Product is likely to have been in the market for some time
and may have numerous competitors who have launched into
the market.
This stage can last for many years with some products e.g.
Washing machines, DVD players
5. Decline
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Sales begin to fall as new more innovative products come into
the market
Firms are faced with decisions of whether to abandon the
product, or attempt to improve sales through extension
strategies
E.g. Personal CD players, Steam hair straightners
What use is the Product life cycle?
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The product lifecycle model helps managers plan their marketing
activities.
Marketing managers will need to adjust their marketing mix at different
stages of the product life cycle.
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In the introduction stage the promotion may focus on making people
aware that the new product exists.
In the maturity stage it is more likely to focus on highlighting the
difference between your product and its competitors.
At the beginning of the lifecycle technological products may be
launched with a high price i.e. the iPhone.
However overtime the price will fall as newer models are being
launched.
By considering the requirements of each stage of the lifecycle marketing
managers may adjust their marketing mix and activities accordingly.
The length of the stages of the lifecycle can not be predicted, for
example fad products will have a short lifecycle, many fashion products
only have a lifecycle of one season and some films are only popular for a
mater of weeks.
The Product life cycle & Capacity…
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The business must use the lifecycle model in their planning process.
Capacity and planned capacity is linked to predicted sales, therefore if the
product is about to enter into the growth stage of the lifecycle it is important
that the business plans to increase capacity to produce the product to ensure
that they are able to meet demand.
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Nintendo failed to match their capacity with the lifecycle of the Wii, in 2008 they did
not have the capacity to meet the demand for the Wii and as a result sales were
effected. Sony however benefited from this as they saw sales of the PS3 increase as a
result.
The Product life cycle & Cash Flow…
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Cash flow
During the development stage cash
flow will be negative as the business
is spending capital on research and
development, market research and
production planning, there is no
revenue at this stage as the product
has not been launched!
Once the product is on sales cash will
start to flow in, however outflows will
also be heavy as there will be
extensive spending on advertising.
It is important that businesses manage the cash flow throughout the product
lifecycle, it is often only as the product achieves high growth that it breaks-even.
The Product Life Cycle & the Marketing Mix
Complete the table below to show how the marketing mix activities will vary at different stages
of the product lifecycle.
Development
Sales
Costs per
unit
Product
Promotion
Place /
Distribution
Price
Introduction
Growth
Maturity
Decline
Student Activity
Draw a product life cycle for the following products:
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The Playstation One
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A 3G mobile phone
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Package holidays to Ibiza
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Heinz Baked Beans
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Levi Jeans
Questions
1. Give three factors that may influence the shape of the product life
cycle
2. Explain how the marketing of a product might vary at different
stages in its life cycle
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Product Life Cycle – Extension Strategies
Examples…
Below are some products
that have had their life's extended. Businesses have done this by using
extension strategies. What extension strategy has each of these products used? (think about how
they might have changed, how / when people use them.)
mples…
Examples…