business 1.3.5

• Product life cycle

  The different stages a product goes through from its conception to its eventual decline in sales
• Stages of the product life cycle

  • Development
  • Introduction
  • Growth
  • Maturity
  • Decline
• Product life cycle stages

  • Development: Focus on designing and developing the product
  • Introduction: Slow sales growth as the product is still new
  • Growth: Sales begin to increase rapidly
  • Maturity: Slowing sales growth as the product reaches peak market penetration
  • Decline: Sales begin to decline as the product becomes obsolete
• Implications for cash flow and marketing

  Cash flow and marketing strategy vary at each stage of the product life cycle
• Implications of the product life cycle for the business

  1. Development: High costs, negative cash flow, marketing focused on creating awareness

  2. Introduction: Negative cash flow, marketing focused on creating awareness and interest

  3. Growth: Positive cash flow, marketing focused on differentiating and building brand loyalty

  4. Maturity: Positive cash flow, marketing focused on maintaining market share and increasing profitability

  5. Decline: Negative cash flow, marketing may involve discontinuing, reducing price, or finding new uses
• Extension strategies

  Techniques used by businesses to extend the life of a product beyond its natural life cycle
• Types of extension strategies

  • Product-related
  • Promotion-related
• Product-related extension strategies

  1. Product improvements

  2. Line extensions

  3. Repositioning
• Promotion-related extension strategies

  Changing the marketing and promotion of the product to extend its life cycle
• Extension strategies

  Strategies businesses can use to continue to appeal to customers and extend the life of their products
• Product-related extension strategies

  • Product improvements
  • Line extensions
  • Repositioning
• Product improvements

  • e.g. Samsung releases new versions of its Galaxy Smartphone every year with upgraded features and improvements to the previous model
• Line extensions

  • e.g. Coca-Cola introduced Diet Coke and Coke Zero as line extensions of its original Coca-Cola
• Repositioning

  • e.g. when IBM's personal computer division started losing market share to other brands, it repositioned its products as high-end business machines and focused on the enterprise market
• Promotion-related extension strategies

  • Changes to advertising
  • Price promotions
  • Sales promotions
• Changes to advertising

  • e.g Kellogg's continues to recreate adverts for its Corn Flakes cereal which has been around since 1906
• Price promotions

  • e.g. Cyber Monday occurs on the first Monday after Thanksgiving in the USA and electronic firms discount prices significantly to boost sales of their products
• Sales promotions

  • e.g. many coffee shops offer a loyalty program where customers can earn a free drink for every six consumed
• Boston Matrix

  A tool used by businesses to analyse their product portfolio and make strategic decisions about each product
• Categories in the Boston Matrix

  • Cash Cow
  • Problem Child/Question Mark
  • Star
  • Dog
• Cash Cow


  Products with a high market share in a mature market, they generate significant positive cash flow but have low growth potential
• Problem Child/Question Mark


  Products with a low market share in a high-growth market, they have the potential to become stars if the company invests in their development
• Star


  Products with a high market share in a high-growth market, they generate significant positive cash flow and have the potential for continued growth
• Dog


  Products with a low market share in a low-growth market, they generate little revenue for the company and have no growth potential
• Types of markets


  • Mass markets
  • Niche markets
  • Business-to-business (B2B) markets
  • Business-to-consumer (B2C) markets
• Mass markets


  Characterised by large numbers of customers who have similar needs and wants, focus on building brand awareness and appealing to a broad audience
• Niche markets


  Characterised by smaller groups of customers with specific needs and wants, marketing strategies focus on targeting a specific segment of the population and building relationships with them
• Business-to-business (B2B) markets


  Focus on selling products to other businesses, the emphasis is on building relationships with other businesses and demonstrating how your product can help them be more successful
• Business-to-consumer (B2C) markets


  Focus on selling products/services directly to consumers, the emphasis is on building brand loyalty and creating a positive customer experience
• Methods of building customer loyalty


  • Providing excellent customer service
  • Offering loyalty cards
  • Offering saver schemes
• Customer service


  • When customers have a positive customer service experience, they are more likely to return and recommend the business to others
• Loyalty cards


  • Offer rewards or discounts for frequent purchases
• Saver schemes


  • Offer discounts or special pricing for customers who save money with them