Marketing Mix: Strategies Across Product Life Cycle

AS Business Studies Unit 2

Aims and Objectives

Aim:
Understand the product life cycle.

Level

Objectives:
Explain the features of each stage of the product life cycle

E-D

C-B
A-A*

Analyse the strategies which can be employed at each stage in the PLC

Evaluate the usefulness of the PLC

Look at this diagram, which stage is missing? Where would it appear on the diagram?

Starter

Explain the five stages of the product life cycle.

Give two reasons for using an extension strategy

R&D product Development Phase

Often complex Often costly May not be successful May involve a long lead time (time between concept and sales)

Product Development Strategies

Evaluate concept at each stage of development

Use market research to include a test launch to reduce risk of failure Manage costs effectively to ensure they are not over budget

Why would you discount products?

Why would you discount products in the R&D stage?

Why would you discount products?

Poor demand Short life cycle Competitors actions

High costs

External environment

Introduction Stage
New product launched Low sales levels Low CU High units costs Usually negative cash flow Heavy promotion of product

Why would you discount products?

Brainstorm the strategies you would use in the introduction stage of the product life cycle.

Introduction Strategies
Heavy advertising. High promotional spending to create awareness. Low price of products capture market share quickly. Or charge high price to recoup R&D costs as quickly as possible. Demand comes from early adopters.

Growth Stage
Expanding market but arrival of competitors. Fast growing sales. Rise in CU. Market share increasing. Cash flow becomes positive. Unit costs fall with economies of scale. Profits rise but attract new entrants.

Why would you discount products?

Brainstorm the strategies you would use in the growth stage of the product life cycle.

Growth Strategies
Advertising to create brand awareness. Intensive distribution. Price leadership. Target majority of potential buyers. Improve and adapt product.

Maturity
Slower sales growth as rivals enter the market = intense comp. High CU High profits for those with market share. Cash flow strongly positive. Weaker comp leave market.

Why would you discount products?

Brainstorm the strategies you would use in the maturity stage of the product life cycle.

Maturity Strategies
Product differentiation Competitor based pricing. Advertising Enter new segments Rationalisation of capacity

Decline Stage
Falling sales and profits Weak cash flow Competitors leave the market Decline in CU switch to alternative products

Decline Stage

Why do products enter the decline stage?

Decline Stage
Technological advance Changes in fashions Increased competition

Economic environment

Damaging publicity

Decline Stage

What strategies can a business use when the product enters decline?

Decline Stage
Terminate dead products Price cut to maintain competitiveness Promotion to loyal customers Target advertising more Extension strategy

Extension Strategies
Change promotion Find new uses for product Change product Reposition product

Change price Develop new market segment

Length of Product Life Cycles

Some are shorter than others. Technological and fashionable products have shorter life cycles. Whereas established products such as Coca Cola have very long ones! Coca Cola has not even seen a decline!

EV: Limitations of PLC

Shape varies Decision can change the course of the cycle Difficult to pinpoint where a product is Decline is not inevitable Duration of the cycle varies