3.1 - MARKETINGLesson 7 – Product Life Cycle

Starter Activity

You are about to watch a short video about Fab lollies – listen out for how long the product has been on the market

and what changes have been made in that time

Learning OutcomesAll All Most

• Understand the four phases of the product life cycle• Understand what

is meant by an ‘extension strategy’

• Apply real-life products to the life cycle model• Describe various

extension strategy techniques that have been adopted by real-life businesses

• Explain the link between cash flow and the product life cycle

What is the ‘Product Life Cycle’?

• Businesses cannot expect a product to sell forever

• Just like human life, products progress through a life cycle from introduction (birth) to withdrawal (death)

• The product life cycle shows the stages through which, it is argued, a product passes over time

1959 - 2000

What is the ‘Product Life Cycle’?

• A product’s life cycle is the amount of time a business expects the product to sell for

• Some products can have a short life cycle i.e. technology or fashion items.

• Some products have had a long life cycle – Cadbury Dairy Milk has been on sale in the UK since 1905 and Kellogg’s Cornflakes since 1924

INTRODUCTION

What is the ‘Product Life Cycle’?

GROWTH MATURITY DECLINE

TIME

SALE

S RE

VEN

UE

0

Activity

You are going to be given a card that describes a feature of one of the stages of the product life cycle.

You need to decide which stage that your feature is referring to.

When you have decided, you need to come up to the front and blu-tak your card onto the product life cycle diagram

that is on the next slide…

INTRODUCTION GROWTH MATURITY DECLINE

TIME

SALE

S RE

VEN

UE

0

Task

1. Copy down the features of each stage of the product life cycle onto your product life cycle.

2. Think of a product which is in each stage of the product life cycle.

3. Extension task – for each product you have thought of how can the business manipulate the marketing mix to

maximise sales during that stage of the product life cycle?

What might an ‘Extension Strategy’ be?

• Manufacturers are likely to try to extend the maturity stage of the product life cycle for as long as possible, since this is usually the most profitable stage

• So they develop an extension strategy - a method used to increase the life of a product and prevent it falling into decline

• This involves slightly changing the product to give it a fresh appeal to its target market, or changing it in such a way that it appeals to a new segment of the market i.e. changing the design or use of the product

What is an ‘Extension Strategy’?

INTRODUCTION GROWTH MATURITY DECLINE

TIME

SALE

S RE

VEN

UE

0

What is an ‘Extension Strategy’?

• A good example of an extension strategy in use is the Sony Playstation:

1. Using the list of extension strategies shown on page 236 of the course textbook, can you think of some examples of real-life products that have had their life cycles extended? How were the extensions achieved?

2. Think time – 30 seconds3. Who goes first - wait for start4. In pairs, Partner A shares, Partner B listens5. Time up

6. Class discussion

Take timed turns listening,

sharing and responding

Think, Pair Share

What is an ‘Extension Strategy’?

Write a paragraph in your book explaining one way that one of the following businesses might extend it’s product life cycle:

• Cadbury• Playstation• Lego• Audi

Activity

Working as a pair, complete the table you have been given.

You need to consider what the cash flow situation might be at each stage of the product life cycle.

For example, is cash flow positive (more money coming in than going out) or negative (more money going out than

coming in) and by how much?

You will also need to consider the reason for the cash flow situation. You should use the text book to to help you with

this.

Cash Flow and the Product Life Cycle

LIFE CYCLE STAGE CASH FLOW SITUATION REASON

DEVELOPMENT OF THE PRODUCT

Negative – much more money going out than is coming in.

Money is being spent on research and development, materials and paying workers. No money coming in from sales.

INTRODUCTIONNegative – money starting to come in but still more going out.

Money is being spent on launching the product i.e. advertising and other promotion costs. Not much money coming in from sales.

GROWTH Positive – but only by a small amount.

Sales are growing so money coming in is increasing. However, promotion and production costs are high as the business produces more.

MATURITYPositive – much more money coming in than is going out.

All of the start-up and development costs have been paid. The value of sales is much higher than the costs of production.

DECLINE Negative – but only by a small amount.

Sales are declining and selling prices have to be reduced. If an extension strategy is used, this will cost money to put in place.

Learning OutcomesAll All Most

• Understand the four phases of the product life cycle• Understand what

is meant by an ‘extension strategy’

• Apply real-life products to the life cycle model• Describe various

extension strategy techniques that have been adopted by real-life businesses

• Explain the link between cash flow and the product life cycle

1. In pairs, take it in turns to suggest an example of a product that fits into one of the stages of the product life cycle

2. You should aim to think up 4 or 5 products for each stage of the life cycle

3. Go on until the time is up

In pairs, take turns to give your answers

Rally Robin