Lecture Notes: The Product Lifecycle Model

Introduction

• Purpose: Understanding a theoretical model used in marketing and business strategy known as the product lifecycle.
• Uses:
  • Forecasting sales over a product's life
  • Assessing product/brand position in its lifecycle and portfolio
  • Targeting and positioning strategies
  • Investment decisions at different lifecycle stages

Stages of the Product Lifecycle

1. Development Stage

• No sales as the product hasn't launched
  • Focus on product development, R&D, and market research

2. Introduction Stage

• Initial market launch with slow sales growth
  • Heavy promotion needed to create awareness
  • Likely negative cash flow due to marketing and low production levels
  • Strategies to consider:
    • Penetration pricing vs. premium pricing
    • Identify early adopters and gain distribution

3. Growth Stage

• Rapid sales increase and market acceptance
  • Competitors may enter the market
  • Unit costs decrease due to economies of scale
  • Improved profitability and positive cash flow
  • Key strategies:
    • Maximize distribution and market share (market penetration)
    • Continually improve and differentiate the product

4. Maturity Stage

• Slowed sales growth but steady sales volume
  • Competitive pressures increase, potentially lowering prices
  • High profitability due to low unit costs and established market
  • Strategies:
    • Reposition and differentiate the product
    • Implement extension strategies (new uses, new users)

5. Decline Stage

• Decreasing sales and market shrinkage
  • Increased pressure on profits and cash flow
  • Potential causes: Technological changes, shifts in consumer tastes, increased competition
  • Appropriate actions:
    • Reduce spending, cut back on marketing
    • Support loyal customers if possible
    • Consider discontinuing the product

Examples & Applications

• Apple iPod: Classic life cycle from strong growth to decline with the introduction of other Apple products.
• Lucozade: Used extension strategy to reposition as a sports drink.

Lifecycle applicability

• Broad categories: This model can be applied to individual products, brands, or product categories.
• Variability: Lifecycle duration and characteristics can vary greatly across products and industries.

Consumer Electronics Examples

• Development Phase: Consumer drones, initially developed for military use.
• Introduction Phase: Wearable technology like gadgets launched at tech conferences.
• Growth Phase: Ultra HD displays proliferating, rapid sales growth.
• Maturity Phase: LED TVs, still growing but at a slower rate.
• Decline Phase: DVDs, declining due to digital streaming services.

Conclusion

• The product lifecycle is a valuable model for marketing and strategic business planning.
• It provides insights into appropriate strategies at each lifecycle stage to maximize a product’s market potential.