The product life cycle

The product life cycle

describes the different stages a product goes through from its conception to its eventual decline in sales

five stages in the product life cycle

development, introduction, growth, maturity and decline

Companies should tailor their marketing strategies…

and manage their cash flow to ensure long-term profitability and success

Development - explanation

The focus is on designing and developing the product, The business usually sustains high costs for research and development, market research, and product testing.

Development - implication

• Cash flow is usually negative during this stage, as the company is investing heavily in the product without generating any revenue

• The marketing strategy during this stage is focused on creating awareness and generating interest in the product

Introduction - explanation

The stage begins when the product is launched. There are slow sales growth as the product is still new and unknown to most consumers

Introduction - implication

• Cash flow is usually negative as the business sustains high costs for promotion, advertising and distribution

• Marketing efforts are focused on creating awareness and generating interest in the product

Growth - explanation

The product enters this stage when sales being to increase rapidly. The business focus shifts to building market share and increasing production to meet the growing demand.

Growth - implication

• Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production

• The marketing strategy is to differentiate the product from its competitors and build brand loyalty

Maturity - explanation

Characterised by slowing sales growth as the product reaches its peak in terms of market penetration

Maturity - implication

• Cash flow is usually positive during this stage, as sales revenue continues to come in and costs are reduced through economies of scale(when unit costs fall as businesses expand their scale of production) and efficient production processes

• The marketing strategy aims to maintain market share and increase profitability by cutting costs and finding new markets

Decline - explanation

Starts when sales begin to decline as the product becomes obsolete or is replaced by newer products. The business focus shifts to managing the product’s decline and reducing costs.

Decline - implication

• Cash flow usually turns negative as sales revenue declines and costs associated with the products decline increase

• The marketing strategy may involve discounting the product, reducing its price to clear inventory, or finding new uses for the product

Extension Strategies to the Product Life Cycle

refers to the technique used by businesses to extend the life of a product beyond its natural life cycle. These strategies are designed to boost sales and maintain profitability for a product that has reached the decline stage of its life cycle.

Product-related extension strategies

Involves changing or modifying the product to make it more appealing to customers and extend its life cycle and can be achieved in one of three ways:

• Product improvements - Samsung releases new versions of its galaxy smartphone every year with upgraded features and improvements to the previous model

• Line extensions - Coca-Cola introduced diet coke and coke zero as line extensions of its og Coca-Cola

• Repositioning - In response to growing concerns about obesity and unhealthy fast food, McDonalds repositioned itself by introducing healthier menu items

Promotion-related extension strategies

Involves changing the marketing and promotion of the product to extend its life cycle and could include one or more of the following changes:

• Changes to advertising - Kellogg’s continues to recreate adverts for its cornflakes cereal which has been around since 1906

• Price promotions - ‘Back to School’ sales, retailers like Apple and Walmart offer significant discounts on school supplies, and clothing during the late summer months. This helps boost sales by targeting students, parents, and teachers who are preparing for the new school year

• Sales promotion - many coffee shops offer a loyalty problem where customers can earn a free drink for every six consumed