Product Life Cycle
During Introduction the product is launched into the market
During Growth the product is successful; sales increase sharply and the product may make a profit for the first time
In Maturity the growth slows down but repeat customers continue to buy and customers become loyal. The market becomes saturated as rivals bring out competing products
In Decline the product is outdated and trhere is a big fall in sales, leading to withdrawal
Businesses can increase the life of a product using extension strategies. This involves slightly changing the product so that it has a fresh appeal to the target market or appeals to a new market segment.
Product Portfolio Analysis
Businesses sell a range of products.The is the PRODUCT MIX or PRODUCT PORTFOLIO.New products are constantly launched onto the market.
Product portfolio analysis helps a business to make decisions about:
- what products to launch and when
- when to withdraw a product
- what products are doing well or badly now and in future
- how to increase sales
The product life cycle and cash flow
Cash flow is the movement of money into and out of a business. Cash flow changes over the life of a product.
INTRODUCTION phase- net cash flow is negative (more money goes out than comes in)
GROWTH phase- net cash flow is positive but small (a little more come in than goes out)
MATURITY and DECLINE phases- at maturity, cash flow is likely to be positive; in decline, a business will start to experience cash-flow issues.
The Boston Matrix
The Boston Matrix is a product portfolio analysis tool used to plan the development of products. It can be closely linked to the product life cycle.