Product Life Cycle

• • Product Life Cycle

  • Changing business strategies during each stage

  • Adjusting business to match competition

  • Exit plans

Products, like people, have life cycles. The product life cycle is broken into four stages: introduction, growth, maturity, and decline. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging.

Vocabulary

• • Exit Strategy

  • Sunk Costs

  • Economies of Scale

  • Introduction Stage

  • Growth Stage

  • Maturity Stage

  • Decline Stage

  • Sunk costs

  • Price Skimming

  • Penetration Pricing

  • Brand image

  • Competition

  • Profitability

  • Differentiation

  • Harvest Strategy

  • Cash cow

Product Life Cycle Development

This chart showcases the Product Life Cycle in regards to the

• Launch

• Product, Market, Fit (Right product, for the right customers, in the right location)

• When to exit a business endeavor (Exit Strategy and understanding Sunk Costs)

Product Life Cycle Profitability

The first chart seen here represents the relationship of Revenue, Costs, and Profits as it relates to the various stages of the Product Life Cycle. Note that in our introduction stage we are spending more money to develop, launch, and promote our products which exceeds our current sales (revenue) thus leading to a loss.

However, as our product gains traction within the market and sales (revenue) begins to increase, we start to see several things happening:

• More revenue to offset our initial and ongoing costs

• Ability to reach economies of scale (producing in larger quantities at a lower cost)

• Reducing the amount of money we spend on the initial advertising to introduce our product (e.g. have you ever seen a commercial for Starbucks?)

The second chart represents the same relationship as above, but now highlights the negative cash flow in the introduction stage and the net revenue in the later stages.

Product Life Cycle Competition

The last chart represents our ability to often enter a market with minimal competition and the impact of competition. These are a few of the issues that often arise:

• Immediate success with a new emerging product

• Competition entering the market at a mass scale

• Consumers may often purchase/use competitors (satisfied customers not loyal)

• Increased competition can often make continuing not worthwhile due to decreased profitability or competition who can produce the products cheaper

Product Life Cycle: Introduction Stage

Think About It: Introduction Stage

• • What is the significance of creating or bringing a new good or service to market?

  • Why are costs high during this stage?

  • Give two reasons why we often target the innovators or early adopters only?

Product Life Cycle: Growth Stage

Think About It: Growth Stage

• • Why will we start to see a higher profitability?

  • What are the four (4) things we need to focus on as a company when competition begins to enter the market? Why?

Product Life Cycle: Maturity Stage

Think About It: Maturity Stage

• • Why will we tend to experience declining sales and market growth?

  • Why would profitability begin to decline? Give an example.

  • How can this stage be beneficial to your company?

Product Life Cycle: Decline Stage

Think About It: Growth Stage

• • Much like the Growth and Maturity Stage, this type of differentiation is important to have your product succeed.

  • Why would someone choose to close their business instead of using the Harvest Strategy?

  • Why should businesses continually have a new product to introduce?

Additional Website

Here is another explanation of the Product Life Cycle. Do not use this as a substitute as the Think About It questions stem from the videos above.

Product Life Cycle

Complete and bring to class on scheduled due dates. You may print your work in our classroom prior to coming to class. Assignments can be submitted early, but late assignments will not be graded. Early or on time submissions may be returned for corrections in order to receive points, meet minimal requirements, or to improve your grade. Late assignments can be submitted for correction and to complete modules. Consideration for grade is given to those who complete all assignments.

All activities can be found above or in the Vocab document in the Resource section.

Homework (check online due dates)

1. Vocabulary definitions

2. Why do you think companies employ different pricing strategies for products?

3. Why do you think competition is good for consumers?

4. Why is competition bad for businesses?

For this assessment, we will be looking at two products: Sham Wow and Uber. For each of the products, define each of the stages and what the company did during those stages to bring about awareness and keep them relevant over time.

• • Include approximate timeline of each stage

  • Marketing efforts (Promotional Efforts)

  • Distribution or pricing changes

  • Reinventing the business, discovering new markets

• • https://www.nerdwallet.com/blog/average-credit-card-debt-household/

  • https://www.nerdwallet.com/blog/finance/financial-needs-versus-wants/

  • http://www.quickmba.com/marketing/product/lifecycle/