PPT ON PRODUCT LIFE CYCLES AND THE BOSTON MATRIX

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Product Life Cycles And The Boston Matrix  Presentation Transcript

1.Product Life Cycles and the Boston Matrix

2.Product Life Cycles and the Boston Matrix

3.Product Life Cycle (PLC):
Each product may have a different life cycle
PLC determines revenue earned
Contributes to strategic marketing planning
May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc.
May help in new product development planning
May help in forecasting and managing cash flow

4.The Stages of the Product Life Cycle:
Development
Introduction/Launch
Growth
Maturity
Saturation
Decline
Withdrawal

5.The Development Stage:
Initial Ideas – possibly large number
May come from any of the following –
Market research – identifies gaps in the market
Monitoring competitors
Planned research and development (R&D)
Luck or intuition – stumble across ideas?
Creative thinking – inventions, hunches?
Futures thinking – what will people be using/wanting/needing 5,10,20 years hence?

6.Product Development: Stages
New ideas/possible inventions
Market analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at?
Product Development and refinement
Test Marketing – possibly local/regional
Analysis of test marketing results and amendment of product/production process
Preparations for launch – publicity, marketing campaign


7.Introduction/Launch:
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Maximise publicity
High cost/low sales
Length of time – type of product

8.Growth:
Increased consumer awareness
Sales rise
Revenues increase
Costs - fixed costs/variable costs, profits may be made
Monitor market – competitors reaction?

9.Maturity:
Sales reach peak
Cost of supporting the product declines
Ratio of revenue to cost high
Sales growth likely to be low
Market share may be high
Competition likely to be greater
Price elasticity of demand?
Monitor market – changes/amendments/new strategies?

10.Saturation:
New entrants likely to mean market is ‘flooded’
Necessity to develop new strategies becomes more pressing:
Searching out new markets:
Linking to changing fashions
Seeking new or exploiting market segments
Linking to joint ventures – media/music, etc.
Developing new uses
Focus on adapting the product
Re-packaging or format
Improving the standard or quality
Developing the product range

11.Decline and Withdrawal:
Product outlives/outgrows its usefulness/value
Fashions change
Technology changes
Sales decline
Cost of supporting starts to rise too far
Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?

12.Product Life Cycles and the Boston Matrix

13.The Boston Matrix
The Boston Matrix:
A means of analysing the product portfolio and informing decision making about possible marketing strategies
Developed by the Boston Consulting Group – a business strategy and marketing consultancy in 1968
Links growth rate, market share and cash flow

14.The Boston Matrix
Classifies Products into four simple categories:
Stars – products in markets experiencing high growth rates with a high or increasing share of the market
- Potential for high revenue growth

15.Cash Cows:
High market share
Low growth markets – maturity stage of PLC
Low cost support
High cash revenue – positive cash flows

16.Dogs:
Products in a low growth market
Have low or declining market share (decline stage of PLC)
Associated with negative cash flow
May require large sums of money to support

17.Problem Child:
Products having a low market share in a high growth market
Need money spent to develop them
May produce negative cash flow
Potential for the future?

18.The Boston Matrix

19.Implications:
Dogs:
Are they worth persevering with?
How much are they costing?
Could they be revived in some way?
How much would it cost to continue to support such products?
How much would it cost to remove from the market?

20.Implications:
Problem Children:
What are the chances of these products securing a hold in the market?
How much will it cost to promote them to a stronger position?
Is it worth it?

21.Implications:
Stars:
Huge potential
May have been expensive to develop
Worth spending money to promote
Consider the extent of their product life cycle in decision making

22.Implications:
Cash Cows:
Cheap to promote
Generate large amounts of cash – use for further R&D?
Costs of developing and promoting have largely gone
Need to monitor their performance – the long term?
At the maturity stage of the PLC?

23.The Product Life Cycle and the Boston Matrix