Product Life Cycle, Principles of Marketing Video Lecture | Principles of Marketing - B Com

hi there in this business topic video
we're going to take a look at a popular
and widely used theoretical model that's
particularly useful for marketing and
business strategy it's known as the
product life cycle the model is a
theoretical one in the sense that it
tries to predict or describe the stages
of sales growth that a product will go
through from the moment it's developed
and launched onto the market all the way
through is the end of its life as a
product and the stage in between and
it's a particularly useful model because
it comes in handy for doing things like
forecasting the likely path of sales of
the product over its life for assessing
where a product or brand is in terms of
its stage of its life cycle and how it
fits in with a product portfolio it can
also be useful in terms of determining
how to target and how to position a
product in a market and the financial
people find it handy when it comes to
determining whether to focus investment
on products particularly those that are
perhaps towards the end of their life
cycle let's take a look at the the model
try to explain the different stages and
also provide some examples of what we
mean most descriptions of the product
life cycle identify five stages
development introduction growth phase
and maturity phase and followed by the
end the decline phase the important
point to remember however is this is not
just about individual products the
product life cycle could also be applied
to a broad category of products it can
be applied to a brand or a particular
model it's a conceptual theoretical
model we track or try to predict the
sales trend of a product in its life
cycle by looking at two dimensions the
rate of sales and time obviously the
first phase development there should be
no sales because the products not yet
launched onto the market
once it is launched it enters the
introduction phase where normally sales
grow slowly as its adopted slowly and as
revenues and sales accelerated enters
what's known as the growth phase where
we see a steep increase in in the sales
performance the next phase is the
maturity phase where the sales growth or
rate of sales growth slows but sales
themselves may still be growing but not
as fast as during the growth phase and
finally there comes a point where actual
sales start to decline they tail off
sometimes quite sharply now the curve
the classic product life cycle curve we
illustrated in this slide before and
there are some examples out of out there
of pretty well known products whose
sales do appear to follow the classic
product life cycle shape and I've put
one on the screen there which is the
annual sales of Apple's classic iPod and
you can see quite clearly there's a very
strong growth phase and then around 2006
7/8 maturity phase and then since then
of course as Apple has introduced a
whole range of other products that
effectively do the same thing that the
Apple iPod does the Apple iPod very
quickly entered into its decline phase
let's just briefly look at each of the
the stages of the product life cycle
just so you're aware of what's involved
in each of them the development stage of
course is what it says on the tin it's
the process of new product development
and depending on what product on what
markets the business is operating in
this can be quite a complex or quite a
simple process it may take a long time
or it may be possible to get a mark a
product to market very quickly it all
depends on the nature of the product and
in particularly the need for research
and development and market research
before the product is launched once you
get into the introduction stage this is
where you find out whether your concept
is being accepted by the market Keith
remember with the introduction stage is
that not all customers will be aware of
the product in fact probably most of
your target customers won't be so
there's a need to spend quite heavily on
promotion to make your target consumers
aware of the new politics it's likely
that because of the low demand you're
operating it quite a low level of
capacity utilization and therefore
unique costs are relatively high and as
a consequence of that plus also the
investment in marketing required to make
the product launch and introduction
stage successful usually new products
are have a negative cash flow associated
with them so sales may be growing but
actually they're not generating cash so
the key with the strategy and marketing
strategy at the introduction stage is to
achieve your introduction objectives and
typically this is to find customers who
are willing to adopt the product often
they're known as early adopters
particularly if it's a product that's
not been seen before if it offers a new
way of doing things you may initially
find it quite hard to find distribution
for the product if you're relying on
intermediaries such as retailers and
distributors and you also need to make a
choice around pricing strategy so do you
adopt a what's known as a penetration
pricing strategy which is to offer a
particularly low price to try and
encourage people to to buy the product
or conversely do you offer a quite a
high price of premium price and try to
skim off the available profits even
though the the volume of output that's
demanded is quite low once you get to
the growth stage you start to identify a
product that is a winner and the key
here is to maximize the the the strength
of the growth phase and establish the
products as a successful product in the
marketplace so the growth stage is
always characterized by much faster
revenue growth more consumers finding
the product perhaps the word about
recommendation and a key response of the
market is often that competitors in the
market spot you've got a winner and they
try to replicate it or copy your product
so it's often the case in the growth
phase that you see lots of new
competitor products trying to enjoy the
same success that your product has had
however as you're making more unless
you're selling more you should see unit
costs start to fall particularly if
you're achieving economies of scale and
as a result the product ought to be
profitable and should generate a
positive cash flow depending of course
on the need for marketing spend to
sustain the growth stage so slightly
different strategies required in the
growth stage it's important to try and
maximize the distribution of the product
to reach us as why the target audience
as possible try and build market share
this strategy call market penetration
which you may have heard of when you've
looked at the ansoff matrix and of
course all the time you're looking to
continually improve the product perhaps
add some more features some different
styles some new options a constant
process of product development to try
and sustain the fast growth that you're
enjoying now when we get to the maturity
stage things get a little bit more
difficult particularly for businesses
that whose products are not the market
leaders the maturity stage is
characterized as we know by slowing
sales growth and typically that are now
quite a few competitors and competitive
products all fighting for a share of a
market that's starting to slow for the
biggest businesses the best products
this should be a good time for profit
should have low unit costs because
you're operating efficiently weaker
competitors will start to leave the
market or exit the market because of the
lack of sales growth and also because
prices will start to fall as competition
becomes more intense but the maturity
stage for a successful product can be a
very positive stage in terms of cash
flow if you think about it you've
already made all your investment you've
invested in product design development
and launch we've spent heavily on
marketing to build a customer base
you're almost certainly already invested
in the capacity to make the thing so
there's not that much more than you to
spend on this product you just enjoy the
profitable sales that it's in
that it's achieving so the key thing for
a mature product in particular and
market leading products is to try to
maximize the return so you're constantly
looking at the product to seeing whether
it can be slightly repositioned or
differentiated you're constantly trying
to maximize the distribution and also
you can start to implement what is known
as extension strategies can you find
some new users who are late to the
product but who could be quite
profitable can you find some new uses of
the product to extend that maturity
phase even longer can you slightly
reposition the product in the
marketplace to extend the maturity phase
I've put a picture of what is perhaps
the most the classic example of
extension strategies for a mature
product which is what happened to the to
the humble bottle of lucozade which
several decades ago was well known as a
high sugar high energy boost drink and
very cleverly the makers of lucozade
repositioned the product as a high
performance sports drink and the rest as
they say is history a great example of
an extension strategy the final stage
bad news for products that find
themselves in the decline stage their
sales are falling almost certainly the
market is falling as well we'll start to
see a significant reduction in profits
and cash flow because the revenues
aren't sufficient to cover the costs and
what happens is if this is a decline
phase for a market as a whole we see
competitors leaving the market but still
leaving capacity and there follows a
pretty intense battle to squeeze out the
last remaining pounds of profit before
the market and the product as a whole
becomes unsustainable now of course
there are lots of reasons why products
enter the decline stage chiefly these
days technological change is the key
reason the rapid advances in
technological change are said to be
shortening the product life cycles of so
many products and services but it's not
just that of course it can be just
simple changes in
my tea tastes and preferences and of
course it can be increased competition
perhaps providing a substitute product
an alternative product for yours the
decline phase can come across a business
and a product very quickly particularly
if a business fails to innovate and keep
on top of what competitors are doing so
that the right strategy for the decline
phase is is simple just try to make the
most of what's a difficult time cut back
on the marketing cut back on all
spending if you can continue to squeeze
a profit out of the product do so if you
can find a way of continuing to support
loyal customers do so but if you can't
bite the bullet close the product move
on
so that's briefly explaining there the
five stages of the product life cycle
and the key thing to remember is it's a
theoretical concept it's not meant to
predict precisely the sales of any one
particular product and almost by
definition the nature the shape the size
of the product life cycle for any
particular product in industry will vary
and also it's quite hard to know how
long the product life cycle will last
because as we can see there are lots of
factors that influence when a product
moves one from one stage to another it's
also possible to identify a whole bunch
of products like Heinz baked beans where
they're just there's no sign of a
decline phase there's something about
the product that means it's perhaps
always permanently going to be in a
maturity phase let's just briefly give
you a couple more examples of the life
cycle in action we'll just take the
consumer electronics sector as a good
starting point just to give you a flavor
for what do we mean by the different
stages of the lifecycle development
phase well you've seen it haven't we
they go into any Apple Store now you can
buy consumer drones there on the shelves
who knows what other consumer products
but using drone technology will arrive
over the next few months and years but
the key thing to remember is that drone
technology is increasingly a consumer
product and service but it was developed
like so many things out of investment
into research developed by the military
the launch phase a good example is the
the increasing flow of new products that
have been launched recently in what are
known as the wearable technology sector
so at each of the the big mobile
conferences in Barcelona we see dozens
and dozens of new wearable gadgets all
vying for the attention of the early
adopters growth phase well you know TVs
have been around a long time but ultra
high-definition displays televisions
monitors is now a very fast growing
segment of the display market and of
course we're not just talking about TVs
we're talking about interactive displays
of all kinds if you're looking for an
example of maturity look no further than
the LED TV set the staple standard TV
these days a highly mature product
globally still growing but very slowly a
classic example of the mature phase and
finally the humble DVD 10 years ago
would have all said that the DVD was in
the growth phase it is now as this
evidence shows on the chart firmly in
the decline phase as of course we're
switching from buying media
entertainment media in hard copy format
and increasingly deciding to to stream
it using our digital mobile devices
there we go that's been an introduction
to the product life cycle it's an
important model it can be used in lots
of different ways to support marketing
and business strategy and I hope you
found it useful