(2) Unit 3.1 - Product Life Cycle

(2) Unit 3.1 - Product Life Cycle

1. The Boston matrix

   • Dog
     • Low market share
     • Low market growth
     • unsuccessful product
     • profitable, small positive cash flow
       • still on sale
     • unprofitable, negative cash flow
       • taken off sale
     • no point of investments
   • Problem child/ question marks
     • fast market growth
       • the market for the product may be growing fast. however the product may or may not mean the success of the product.
     • Low market share
     • small net cash flow
     • decision.
       • get rid of the product.
       • invest more in the product in the hope of a star outcome.
         • e.g. bring out another version of the product
           • this version may be successful.
         • more advertising
         • other promotion
   • Cash cow
     • Low market growth
     • High market share
     • a product is a cash cow in the Saturation pat of its life
       • the product is well established on the market and has continuous sales. this means it has a high market share as people are buying the product instead of other similar products available. - strong market share
       • similarly the product has stopped growing, so has a low market growth.
     • Maturity
       • cash cows are found at the maturity stage of life.
       • at the start of decline in sales
     • these products return a lot profit.
     • strong positive cash flow
     • little need for investments
   • Star
     • High market share
     • High market growth
     • growth stage of the product life cycle.
       • the product is still increasing sales. s has a high market growth
     • stars are very successful products
     • sales and profits will be growing
       • growth stage
     • spending money on new equipment and machinery to make the extra products
     • small positive cash flow as large income but also heavy costs
     • spending heavily on promotions (advertising) to increase customer sales
   • a model which analyses a product portfolio according to the growth rate of the whole market and the relative market of a product within the market; a product is placed in one of four categories- star, cash cow, problem child or dog
   • a type of this is

2. definition

   • Stages of the product life cycle
     • decline
       • positive - negative cash flow
       • use of extension strategies to boost sales
         • introduce a new prduct range to boost sales
         • advertise more to increase customer awareness of the product
           • promotion.
         • definition
           • method used to increase the life of a product and prevent it falling into decline
     • saturation
       • possitive cash flow
     • maturity
       • positive cash flow
       • cash cow
     • growth
       • problem child
       • sometimes positive or negative cash flow
         • depends on how many products have been sold, and how much money had been spent
     • introduction/launching the product.
       • negative cash flow
       • money used for promotion/advertisement
     • development
       • uses market research to develop the product.
       • negative cash flow
         • money needed for market research and the product development, but no products are being sold.
       • Dog

3. definition

   • the product life cycle shows the stages that a product goes through during its life

4. product portfolio or product mix

   • the combination or range of products that a business sells
   • businesses need to manage their products and continully bring out new or updated products to keep up sales

5. product portfolio analysis

   • investigation of the combination of products sold by a business
     • answers questions like:
       • which products are doing well?
       • should a product be taken off the market?
       • What can be done to increase sales?
         • Will advertising improve sales?

6. Liz Simpson

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