Product Life Cycle and Portfolio
Revision Session:
Marketing Strategy
Bingo!
How many words or
phrases can you
remember that relate to
the product life cycle
and product portfolio?
Write 9 down now and
tick them off if they
appear on the screen.
Product
development
Introduction
Maturity and
saturation
Decline
Extension
strategies
Market share
Market
growth
The Boston
Matrix
Growth
2
Starter
Learning Objectives
Content
Conclusion
By the end of this session, you will be able to:
• Identify and define the key stages of the Product Life
Cycle
• Explain how to extend the Product Life Cycle
• Describe and analyse the product portfolio
3
Starter
Learning
objectives
Learning
Objectives
Content
Conclusion
Key Stages of the Product Life Cycle
Sales
Sales
Growth
Maturity
Introduction
Decline
Product
Development
0
Time
4
Starter
Learning Objectives
Content
Product
Life Cycle
Conclusion
Definitions: Product Life Cycle
Activity: Write a description of what happens at each of the
following product life cycle stages:
•
•
•
•
•
•
Product development
Introduction
Growth
Maturity and saturation
Decline
Extension strategies
5
Starter
Learning Objectives
Content
Product
Life Cycle
Conclusion
Definitions: Product Life Cycle
Stage
Definition
Product
development
Introduction
• Researched, designed, tested.
• Worthwhile = manufacture.
• No sales, cash flow or profits at this stage.
• Researching, developing, launching.
• Prices could be high (skimming) to cover cost of product
development or low (penetration) to gain a lot of customers
quickly.
• High spending on promotion.
• Unlikely to break-even, revenue/cash flow hopefully
increasing.
• Unit costs are high
6
Starter
Learning Objectives
Content
Product
Life Cycle
Conclusion
Definitions: Product Life Cycle
Stage
Definition
Growth
• Sales increasing at their fastest rate.
• Customers make repeat purchases, sales increase.
• Product starts to become profitable, competitors may launch
their own versions, price and promotion may need to be
reconsidered.
• Unit costs reduce.
Maturity and
saturation
• Sales are near highest, but rate of growth slowing down (new
competitors in market or saturation).
• Some businesses forced out of the market.
• Let product die or extend.
• Unit costs often at lowest.
• Promotion still often required to enforce position e.g. CocaCola.
Starter
Learning Objectives
Content
Product
Life Cycle
Conclusion
7
Definitions: Product Life Cycle
Stage
Definition
Decline
Extension
strategies
• Sales begin to fall - change in consumer tastes, new
technology, introduction of new products.
• Could still make a profit if prices high enough.
• No real promotion spend.
• Advertising: attract new audience or retain current audience
• Price reduction: more attractive to customers
• Adding value: new features to the current product (think
mobile specifications).
• Explore new markets: Geographical or new version targeted
at different segments
• Packaging: modernise or subtle changes
8
Starter
Learning Objectives
Content
Product
Life Cycle
Conclusion
Analysing the Product Portfolio
What is a Product Portfolio?
What do these have in common?
Market share:
does the product being sold have a low or high market share?
Market growth:
are the numbers of potential customers in the market growing or
not?
Starter
Learning Objectives
Content
Product
Portfolio
Conclusion
9
Market Growth Rate %
High
Low
The Boston
Matrix
Starter
High growth products,
strong compared with
competition. Often need
heavy investment to
sustain growth.
Eventually growth will
slow and Stars will
become Cash Cows
(assuming they keep
their market share)
Low market share
operating in high growth
markets. Have potential,
but may need
substantial investment to
grow market share at
the expense of larger
competitors. Big debate:
invest/allow to fail or
shrink?
Mature, successful
products, relatively little
need for investment.
Need to be managed
for continued profit to
continue to generate
the strong cash flows
that the company
needs for its Stars
Low market share in
unattractive, lowgrowth markets. May
generate enough cash
to break-even, but
rarely, if ever, worth
investing in. Usually sold
or closed.
High
Low
Relative Market Share
Learning Objectives
Content
Product
Portfolio
Conclusion
Balanced
Portfolio
Starter
Market Growth Rate %
High
Low
The Boston
Matrix
High
Low
Relative Market Share
Learning Objectives
Content
Product
Portfolio
Conclusion
Advantages and disadvantages: Boston Matrix
Useful tool for analysing product portfolio decisions
BUT:
•
•
•
•
Only a snapshot of the current position
Has little or no predictive value
Does not take account of environmental factors
Creating flaws which flow from the assumptions on which
the matrix is based
12
Starter
Learning Objectives
Content
Product
Portfolio
Conclusion
Extension Activity
Activity: The product above has been very successful for many
years, but sales are now declining rapidly. The budget is limited,
so you can only choose one strategy to try and extend its life
cycle.
What will this be, and why?
Starter
Learning Objectives
Content
Conclusion
Conclusion
13
Extension Strategies
Stage
Definition
Extension
strategies
• Advertising: attract new audience or retain current
audience
• Price reduction: more attractive to customers
• Adding value: new features to the current product
(think mobile specifications).
• Explore new markets: Geographical or new version
targeted at different segments
• Packaging: modernise or subtle changes
14
Starter
Learning Objectives
Content
Conclusion
Conclusion
Are you now able to:
• Identify and define the key stages of the Product Life
Cycle
• Explain how to extend the Product Life Cycle
• Describe the product portfolio and analyse this using
the Boston Matrix
15
Starter
Learning
objectives
Learning
Objectives
Content
Conclusion