Product: The Product Life Cycle (OCR GCSE Business)

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Lisa Eades

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Stages of the Product Life Cycle

The product life cycle describes the different stages a product goes through, from its conception to its eventual decline in sales
There are typically four stages in the product life cycle
- Introduction, growth, maturity, and decline

Diagram: the product life cycle

The four stages a product goes through over its life span - from introduction to eventual decline — **The four stages a product goes through over its life span, from introduction to eventual decline**

The implications for cash flow and marketing vary at each stage of the product life cycle
Companies should tailor their marketing strategies and manage their cash flow to ensure long-term profitability and success

The Stages of the Product Life Cycle

Stage	Explanation	Implications for the Marketing Mix
Introduction	This stage begins when the product is launched It is characterised by slow sales growth as the product is still unknown to most consumers	Cash flow is usually negative, as the business usually incurs high costs for promotion, advertising and distribution Marketing efforts are focused on creating awareness and generating interest in the product
Growth	The product enters this stage when sales begin to increase rapidly The business focus shifts to building market share and increasing production to meet this growing demand	Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production Marketing strategy is used to differentiate the product from its competitors and build brand loyalty
Maturity	This stage is characterised by high sales but slowing sales growth Market saturation is likely	Cash flow is usually positive during this stage as sales revenue continues to come in and costs are reduced through economies of scale and efficient production processes Marketing strategy aims to maintain market share and increase profitability by cutting costs and finding new markets
Decline	Decline starts when sales begin to fall as the product becomes obsolete or is replaced by newer products The business's focus shifts to managing the product's decline and reducing costs	Cash flow usually turns negative as sales revenue declines and costs associated with the product's decline increase Marketing strategy may involve discontinuing the product, reducing prices to clear stock or finding new uses for the product

Extension Strategies

Extension strategies refer to the techniques used by businesses to extend the life of a product beyond its natural life cycle
- They are designed to boost sales and maintain profitability for a product that has reached the late maturity or decline stage of its life cycle
There are two types of extension strategies, which are often implemented at the same time
- Product-related extension strategies
- Promotion-related extension strategies

Comparison of Product and Promotion-related Extension Strategies

Extension Strategy	Explanation	Examples
Product-related	Changing or modifying the product to make it more appealing to customers This could involve improving or adding features, increasing capacity or redesigning its appearance or packaging Product-related extension strategies also involve targeting new markets with different product features	Product improvements e.g. Samsung releases new versions of its Galaxy Smartphone every year with upgraded features and improvements to the previous model Line extensions e.g. Coca-Cola introduced Diet Coke and Coke Zero as line extensions of its original Repositioning e.g. when IBM's personal computer division started losing market share to other brands, it repositioned its products as high-end business machines and focused on the enterprise market
Promotion-related	Changing promotional activity related to the product This could involve changes to advertising, different pricing tactics or attractive sales promotions Promotion-related extension strategies may also be used to target new markets	Changes to advertising, e.g Kellogg's continues to advertise its Corn Flakes which have been around since 1906 Price promotions, e.g. Cyber Monday occurs on the first Monday after Thanksgiving in the USA and electronic firms discount prices significantly in order to boost sales of their products Sales promotions: e.g. many coffee shops offer a loyalty programme where customers can earn a free drink for every six drinks consumed

Examiner Tip

In the exam, you could be asked to identify the stage of the life cycle at which a product is situated. Look for evidence about the speed at which sales are increasing.

Growing slowly = introduction or maturity
Growing rapidly = growth
Levelling out = maturity
Falling = decline

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