Thursday 3rd October 2013 Mr Nicholls Year 11 Business Thursday 3rd October 2013 Mr Nicholls

Objectives To identify the different stages of the Product Life Cycle in relation to specific business products.

Today… Today we will start looking at the Product Life Cycle – this is an important tool in marketing that helps a business identify when they need to launch new products in order to maintain sales… But let’s look in more detail….

The Product Life Cycle… Formal Definition: An important concept in marketing that describes the stages a product goes through from when it is first thought of, until it finally is removed from the market IMPORTANT: Not all products reach the final stage as some will continue to grow, and others will rise and fall over the course of time.

Stages of the Product Life Cycle There are 4 different stages that a product moves through when we are considering the Product Life Cycle: Introduction Growth Maturity Decline We measure these stages in relation to Time V Sales – so end up with a graph like we see above. Let’s consider each stage in a bit more detail…

Introduction Introduction basically means Researching and Developing the product, and then launching it into the market. Low level of sales. Low capacity utilisation High unit costs Heavy promotion Usually negative cash flow

Growth… At this stage, sales of the product are increasing at the highest rate we will see for the product. Fast growing sales Rise in capacity utilisation Expanding market/Arrival of competitors Cash flow MAY become positive Profits begin to rise Unit costs fall with economies of scale

Maturity At this stage, sales are normally at their highest, but the rate of growth is beginning to slow down (competition or market saturation). Battle for market share. High level of capacity utilisation High profits for those with high market share Cash flow positive Prices fall – however this will probably mean profits also fall

Decline This is the final stage where sales fall, and finally, the product is removed from sale. Falling sales Market saturation or competition Decline in profits More competitors leave the market Decline in capacity utilisation (capacity is switched to alternative products)

The result…

For example…

However… Sticking with the Ford Escort example….what did Ford do?

Therefore… Since businesses will continually update their product range in order to best cater for their customers, the product life cycle will keep going (as long as the business is successful)… Product 1 Product 3 Product 2

Also… Ideally, a business will try and keep a product from moving into the decline stage of the Product Life Cycle through – Advertising – reminding audience or gaining a new one. Price Reduction – more attractive to customers. Adding Value – adding new features to the current product (video messaging on mobiles…) Explore New Markets – sell abroad New Packaging – update things to make it look fresh, new and exciting…for example…

Think about it… In your books – could you draw a product life cyle for either: Playstation (1, 2, 3, 4) Apple iPod Apple iPhone