business 4.5 --The four P

product life cycle definition

shows the course that a product takes from its development to its decline in the market

stages in product life cycle

1. research and development

2. introduction (START graph)

3. growth

4. maturity

5. decline

• x axis : time , y axis :sales

stage 1 — R and D

research and development department developing ideas for new products + market research . No sales or revenue

• very high investments + highly negative cash flow

stage 2—launch /introduction

• product launched in market

• significant promotion to raise awareness and encourage sales

• sales starts to grow

• very high investment for marketing + negative cash flow

stage 3 — growth

• product enjoys sales growth and brand recognition

• rapid growth + price reduced to get competitive edge

• high investment (promotions) + positive cash flow

stage 4—maturity

rate of growth slows down although the firm has significant market share

• introduce pricing strategies like promotional pricing (1 for 1) / cheaper than competitors pricing

• low investment + highly positive cash flow

stage 5—decline

• sales revenue and profits fall

• cost cutting becomes inevitable (not generating any revenue so must cut cost to earn profit)

• little investment ,positive cash flow but falling

extension strategies definition

marketing techniques used to prolong a products life cycle

• when product is in a saturated market or enters decline stage of product life cycle

examples of extension strategies

1. sell existing products into new markets (carry out market research first)

2. find new uses for products(Eg: baking soda initially for baking now for laundry)

3. change the products packaging : change design /appearance/colour

4. target different market segments: eg new customers (health conscious etc)

5. develop new promotional strategies : encourage customers to use their products + rise in demand

for example coke

• when Pepsi entered it introduced : Coke Zero , coke cherry etc

• Coke Zero for health conscious , coke cherry for youngsters (new market segments)

• strong brand loyalty gained