life cycle of a product

Product Life Cycles and the Boston Matrix

•Introduction/Launch:

–Advertising and promotion campaigns

–Target campaign at specific audience?

–Monitor initial sales

–Maximise publicity

•Growth:

–Increased consumer awareness

–Sales rise

–Revenues increase

–Costs - fixed costs/variable costs, profits may be made

–Monitor market – competitors reaction?

–High cost/low sales

–Length of time – type of product

•Maturity:

–Sales reach peak

–Cost of supporting the product declines

–Ratio of revenue to cost high

–Sales growth likely to be low

–Market share may be high

–Competition likely to be greater

–Price elasticity of demand?

–Monitor market – changes/amendments/new strategies?

•Decline and Withdrawal:

–Product outlives/outgrows its usefulness/value

–Fashions change

–Technology changes

–Sales decline

–Cost of supporting starts to rise too far

–Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?

•The Boston Matrix:

–A means of analysing the product portfolio and informing decision making about possible marketing strategies

–Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968

–Links growth rate, market share and cash flow

•Classifies Products into four simple categories:

•Stars – products in markets experiencing high growth rates with a high or increasing share of the market

- Potential for high revenue growth

•Cash Cows:

–High market share

–Low growth markets – maturity stage of PLC

–Low cost support

•Dogs:

–Products in a low growth market

–Have low or declining market share (decline stage of PLC)

–Associated with negative cash flow

–May require large sums of money to support–High cash revenue – positive cash flows

•Problem Child:

-Products having a low market share in a high growth market

-Need money spent to develop them

-May produce negative cash flow

-Potential for the future?