The Marketing Mix: Product

1. The Marketing Mix: Product Product Life Cycle Today you will know what the product life cycle is You will understand the stages and the characteristics of each You will be able to apply this theory and understanding to real products

2. Product Life Cycle • When deciding on a marketing strategy a firm needs to examine the existing position of its products • The product life cycle is a strategic tool that is used to assess the position of the firm and its products • The product life cycle traces the sales of a product over time. • Knowledge of the life cycle allows managers to adjust their marketing strategies.

3. Development Introduction Growth Maturity Saturation Decline Sales Cash Flow Time The Product Life Cycle The typical path for a product can be divided into 6 stages.

4. 1. Research and Development • Market research is carried out, the idea for the product is developed and a prototype produced • This is an expensive period for the company as no sales are made because the product is not yet available

5. 2. Introduction • The product is put on sale. • Many products never reach this stage and are abandoned after prototypes. • Sales growth is slow and heavy promotion is needed to create brand awareness • E.g. Virgin Media – V+ system & Susan Boyle

6. 3. Growth • Sales begin to rise as the product becomes known and accepted by customers • Firms should begin to make profits at this stage as sales revenue begins to outweigh the costs of promotion and production • E.g. Sky Plus TV, recordable DVD player and the iphone

7. 4. Maturity and Saturation • Sales begin to stabilise and slow down. • Product is likely to have been in the market for some time and may have numerous competitors who have launched into the market. • This stage can last for many years with some products e.g. Washing machines, DVD players

8. 5. Decline • Sales begin to fall as new more innovative products come into the market • Firms are faced with decisions of whether to abandon the product, or attempt to improve sales through extension strategies • E.g. Personal CD players, Steam hair straightners

9. What use is the Product life cycle? • The product lifecycle model helps managers plan their marketing activities. • Marketing managers will need to adjust their marketing mix at different stages of the product life cycle. • In the introduction stage the promotion may focus on making people aware that the new product exists. • In the maturity stage it is more likely to focus on highlighting the difference between your product and its competitors. • At the beginning of the lifecycle technological products may be launched with a high price i.e. the iPhone. • However overtime the price will fall as newer models are being launched. • By considering the requirements of each stage of the lifecycle marketing managers may adjust their marketing mix and activities accordingly. • The length of the stages of the lifecycle can not be predicted, for example fad products will have a short lifecycle, many fashion products only have a lifecycle of one season and some films are only popular for a mater of weeks.

10. The Product life cycle & Capacity… • The business must use the lifecycle model in their planning process. • Capacity and planned capacity is linked to predicted sales, therefore if the product is about to enter into the growth stage of the lifecycle it is important that the business plans to increase capacity to produce the product to ensure that they are able to meet demand. • Nintendo failed to match their capacity with the lifecycle of the Wii, in 2008 they did not have the capacity to meet the demand for the Wii and as a result sales were effected. Sony however benefited from this as they saw sales of the PS3 increase as a result. The Product life cycle & Cash Flow… • During the development stage cash flow will be negative as the business is spending capital on research and development, market research and production planning, there is no revenue at this stage as the product has not been launched! • Once the product is on sales cash will start to flow in, however outflows will also be heavy as there will be extensive spending on advertising. Cash flow It is important that businesses manage the cash flow throughout the product lifecycle, it is often only as the product achieves high growth that it breaks-even.

11. The Product Life Cycle & the Marketing Mix Complete the table below to show how the marketing mix activities will vary at different stages of the product lifecycle.

12. Student Activity Draw a product life cycle for the following products: • The Playstation One • A 3G mobile phone • Package holidays to Ibiza • Heinz Baked Beans • Levi Jeans Questions 1. Give three factors that may influence the shape of the product life cycle 2. Explain how the marketing of a product might vary at different stages in its life cycle

13. Product Life Cycle – Extension StrategiesBelow are some products that have had their life's extended. Businesses have done this by using extension strategies. What extension strategy has each of these products used? (think about how they might have changed, how / when people use them.)