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Booklet 8 - Product Life Cycle + Boston Matrix + Marketing Strategies -…
Booklet 8 - Product Life Cycle + Boston Matrix + Marketing Strategies
Product Life Cycle
The
product life cycle
shows the different stages a product goes through and the sales that can be expected at each point. This can help a firm plan ahead.
A diagram of the product life cycle.
There are
5 stages to the product life cycle
. Research and development, introduction, growth, maturity and decline.
Stage 1 Development
- During the development phase costs will be very high as the product is being designed and created, no sales or profit will be made as the product is yet to hit the market.
Stage 2 Introduction
- In the launch phase there will be still be very high costs as the firm will heavily promote the product so that its awareness is increased in the hope that sales will start to increase.
Stage 3 Growth
- In this phase products will start to enjoy rapid growth in sales and revenue and will start to see a positive cash flow.
Stage 4 Maturity -
In this phase products will reach its peak sales and start to face very competition from rivals. It is in a firms interest to keep sales at this point.
Stage 5 Decline
- During this phase product sales will start to fall due to the competition. The product may still be making a profit but will slowly start to decrease. Eventually this product may be taken off the market if it isn't making any profit.
A firm may use an
extension strategy
to prolong the life cycle of a product. They are used to extend the maturity phase and stop the decline phase beginning.
Some extensions strategies are
updating the product, adding value, extending the product range, changing the packaging and promoting the product differently.
Boston Matrix
The
Boston Matrix
is a tool used by firms to analyze their product portfolio in terms of market share and market growth.
There are
4 different sections
to the Boston matrix - star, cash cow, question mark / problem and dog.
Stars
have high market share and high market growth. This product is most likely in the growth phase of the product life cycle. Production of this product should stay consistent as eventually it would turn into a cash cow.
Cash cows
have high market share and low growth. They are most likely in the maturity phase of the product life cycle. This product should continue to be produced until it starts to decline.
Question marks
have low market share but high market. This product may have just been launched so it is unsure on how the product will do. It should be invested in while their market share builds.
Dogs
have low market share and low market growth. This product is in the decline phase and will be facing falling sales. if this product starts to make a loss then the product will likely be took off the market.
Marketing Strategies
A
marketing strategy
is a set of plans that aim to achieve a specific objective.
Market strategies for
mass markets
will cater to the majority regardless of their market segment. The price tends to be similar, non-price factors will be used to gain an advantage and are distributed through many channels.
Marketing strategies for
niche markets
will cater to a smaller segment of the market, products are designed for a specific purpose, promotion tends to be targeted.
There is two types of ways a business can operate -
B2B
marketing (business to business) or
B2C
marketing (business to consumer)
Many
business deal with other business
(B2B)
rather than consumers. For this type of marketing their advertising needs to be informative, involves large transactions, build close relationships with suppliers.
Businesses that deal with consumers (B2C)
will use marketing strategies of trying to persuade customers to buy their product, have a variety of distribution channels and try gain customer loyalty.
