[Music] this video we're going to have a look at one of our key marketing topics which is of course the product life cycle really useful tool for managers in this video what we're going to try and do is introduce you to the different stages of the product life cycle we're going to have a look at what might happen in the decline stage we're going to check out something known as extension strategies we're also going to try and talk you through some of the different uses or values of the product life cycle as a business tool and concept as well so if we kick off by talking you through those uh different stages first of all let's have a little look at the axes the pr life cycle is a concept that has a look at a business's product over time and what it looks at in particular is the sales of that product and the theory goes that a product's life its life cycle can be split down into different phases or different sections and it's a useful tool because how that product is managed or treated might be different during different stages of its life so it's a useful tool if managers can predict when a product is meant to move into a new or a different phase of its life cycle it might just trigger the planning and the execution of different marketing strategies that are utilized for that product so our products prices or promotions or play strategies might just be changed as that product moves through different stages of its life so you'll see from behind me there that the first stage of a product's life is where that product isn't even for sale it's known as the research and development phase the R&D phase and as the name suggests this is the period of time where the product is being invented where market research is being carried out perhaps to ascertain consumer wants and needs and research and development is being carried out so prototypes of the products might be being created tested refined and you different incarnations of the product will be perhaps thrown out until the business arrives at an end prototype that it is happy and that it has researched enough to be confident that it's a product that's ready for market and ready to launch so once that product has been finalized you'll see that it then moves into what's known as its introductory phase its formative weeks and months on the market now for some products that phase may be relatively short especially if that product is well promoted and well marketing uh and there's a little bit of anticipation about its launch and consumers become quickly aware of it and positive word of mouth spreads about it the introduction phase can be fairly short for some products they're a little bit more of a slow burner the introduction phase may be a little bit more lengthy you'll see at this stage that it's the first stage where sales of the product start to occur and towards the end of the introduction stage those sales may start to grow a little bit more rapidly and accelerate a little bit more until the product moves into what's known as its growth phase now during this phase this is where the product really starts to take off in terms of its sales so the sales will be higher week on week month on month and they may also be accelerating in their growth more rapidly than they were during the introduction phase now the growth stage can last for different periods of time depending on what this product is so some products might have a growth phase that lasts a relatively short period just weeks and months other products with a little bit more longevity to them might find that the growth phase actually lasts four years however a product won't continue growing indefinitely even if its growth stage lasts for decades all products will inevitably reach a point where their sales start to slow down the growth in them becomes less rapid and even the sales of them start to level off or hit their Peak so what that means is that the sales of the product may not be any higher uh than they were the month before or the week before now there's a couple of reasons why that occurs first of all you a product May reach the end of its technological usefulness so consumers may know that other newer updates are being launched soon and so the sales of this product May level off as consumers start to delay their purchasing decisions because they're waiting for a new release could also be because the market Market has become what's known as saturated that means that because this product has experienced success and growth and Rising sales other rival firms in the marketplace have developed their own similar versions of this product to rival it and so sales can't continue to accelerate even though there may still be some growth in the market because now there are more firms chasing those customers and there's more choice for consumers and so some inevitably rather than choosing our product drift to buy rival products instead now once we've been through that maturity phase and the market has become a little bit more saturated products will then go into a decline phase now this does not mean that sales of them have plummeted it just means that sales are declining and just like there may be various lengths of a growth stage products can have various lengths of a decline phase as well so some products May decline quite gently over the course of years as they sales gradually fade out for other products it can be more dramatic and it can be far more rapid and there may be a drop or a huge decline in St sales far more quickly now during that decline phase that business has got a key decision to make number one the business might decide that it is just going to let the sales of that product continue to gradually decline the business doesn't want to spend any more money promoting the product or developing new marketing strategies for it it's quite happy for the sales of that just slowly dwindle whilst behind the scenes they have other products in their portfolio that they are perhaps promoting more heavily and using to try and provide some kind of longevity to the business however some businesses might decide rather than just allow the sales to continue to decline and maybe potentially even withd draw the product from Market if sales are really declining quite rapidly they might try and resuscitate a product or rejuvenate it or try to boost sales back up again now if a business is going to do that it's going to need a tactic to make that work the sales of a product are likely to start increasing again if the business doesn't change any of the tactics that it uses there so these tactics that a business might put in place are known as extension strategies a tactic that boosts the declining sales of a product back up again and some extension strategies can be fairly simple like a little change in price a repackaging of the brand some uh extension strategies could be a little bit more ambitious it might be a new promotional campaign that will incur some cost that the business uses to try and bring the product back to the Public's attention or it could even be potentially maybe trying to Target new markets with the product again which can be a little bit more costly and there'll be promotions involved but by finding new market segments that might be attracted to the product we can hopefully grow its sales once more now we'll tell you a couple of other bits and pieces about the product life cycle you'll see from the diagram here behind me that the sales of a product are not necessarily matched throughout its life cycle by the cash flow that the product generates so products can be costly they require nurturing they require money funds being spent on them and no more so is this true than during the research and development phase phase so you'll see that during the R&D phase obviously there are no sales of the product there is no volume being sold but that is matched by the fact that the product is actually incurring cost the business is having to spend money on it so generating prototypes completing market research are all costly experiences that the firm needs to go through with this product and they're absorbing those costs at a time that the business isn't actually generating any sales revenue from the product so you can see that as our sales are flat the product hasn't been launched yet we're actually spending money on the product so this product actually has a negative cash flow it has more going out than this product can possibly hope to make us however you'll see even through the introduction and the growth phase even as our sales start to accelerate and our sales start to pick up this product may still actually be costing us more money than it's making us through sales revenue I.E it might have a negative cash flow initially and that's because we might have to spend so much money during that introduction and growth phase on promotions to try and stimulate awareness and trying to attract market share and sales to this product that we actually end up spending more on it than we are generating through the sales of it it might not be until the later stages of the growth phase that this product is actually starting to return to us more through sales revenue than we are spending nurturing and growing and developing awareness of this product what you'll also see though is once we get into the maturity stage that is where products May well start to really richly reward the organization that's selling them so this is the stage where we may even ease off on some of the expense of marketing the product and just enjoy the profits that it's generating for us as sales reach their maximum reach their Peak now we'll talk you through a couple of the reasons why the product life cycle is a particularly useful concept for marketing managers to use number one marketing managers need to make decisions about when they're going to launch new products and one concept that can help them with that decision is our friend the product life cycle so each product in a portfolio will have its own life cycle and if managers notice that several products are perhaps accelerating through stages of their life cycles and are perhaps all reaching that kind of end of growth maturity stage together that might just push managers to thinking about well we need to get other products other Concepts other ideas into the research and development phase now so that they can be launched in time for these other products that are hitting their maturity stage we need to be launching new things as those products move into the decline stage so it can almost send out triggers warnings to managers to help them in the planning of the timings of new product development and helping just Trigger or stimulate them in into perhaps coming up with new Concepts and new ideas and commissioning greater research and development to plan new products of the future another useful concept of it is helping in the managing of cash flows and the planning of budgets as well so managers can use the product life cycle to try and predict how long different stages of the product life cycle might last for and try and predict how long is it going to be until this product actually starts generating us a positive cash flow how long is it going to be until this product starts making us more in Revenue than it's costing us in terms of the promotions and the marketing budget that we're assigning to this project so it just helps managers manage the timings of cash flows helps them plan the budgets that they might need for projects for products that they're thinking about launching so it just helps managers really plan out the finance that products might require and how long it might be before they start returning to us those rewards that are greater than the costs the other way that it might be useful is just planning out what you're going to do with your marketing mix with those seven PS especially your prices promotions and maybe Place strategies as well so it may be that marketing managers have separate plans separate ideas for the product in different stages of its life cycle so if managers can predict when it's going to enter a new stage of its life cycle then it might be that that's the trigger for them once more to roll out different marketing strategies for that product so they may have certain promotions that they know they want to use during the introduction stage they may have a different pricing strategy that they know they want to switch to during the growth stage it may well be that they have new places that they want to start to distribute this product through once they hit the maturity stage but the product life cycle is almost like a way of timing when each of those new strategies need to be implemented so it can be useful for marketing managers in helping them to design how they're going to structure and time different tactics as part of their marketing mix so this is a nice concept for our business studies exams it's a very common concept to get asked about possibly asked questions about how we might Market at different stages of the product life cycle certainly we could get asked questions about how useful this is to marketing managers we should remember that this can be a difficult tool as as well I mean predicting when your product might enter different stages of its life cycle is an incredibly hazardous thing to do we should also say that predicting how long each of these stages might last for is again a very difficult thing to do and it may involve the use of other techniques like market research and extrapolation and correlation and other marketing tools but nonetheless this can still be a concept that marketing managers derive some benefits from so it's another one of our key marketing topics we'll uh we'll update with some more marketing topics in future videos but for now very best of luck with your revision