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Product Life Cycle and Extension Strategies

Extension strategies

Definition: A technique used by a business to extend the life of a product. The objective is to maintain and hopefully increase sales and profit of the product.

Examples

Uses of PLC

  • Helpful with planning and altering marketing strategies e.g. promotion, advertising and growth.
  • Can help to identify an extension strategy if needed (esp during maturity/decline stages).

Definition

  • Attracting market segments.
  • Increasing usage among existing customers.
  • Modifying the product (via packaging?).
  • Changing the image.
  • Targeting new markets.
  • Encouraging repeat buys (loyalty schemes, BOGOF deals etc.)

The Product Life Cycle

Strategic use tips

Drawbacks of PLC

A diagram which shows the different stages of sales that a product passes through over a period of time, from introduction to withdrawal from the market.

Development

  • A reflective concept / only predictions.
  • Each product experiences a different life-cycle (depending on consumer tastes).
  • A self-fulfilling model - management only knows how to gain growth so will be forced to spend more on marketing.
  • Strategies are usually supported by the main aims of the business.
  • These usually support marketing purposes through branding and promotion to help the growth market share.
  • R&D is important to help the product launch.
  • Focus on the Marketing mix (4 Ps).
  • Negative cash flow as product is not on the market yet (no sales, only expenses)
  • High expenditure on R&D (ideas are tested).
  • No idea whether idea will be profitable yet.

Decline

Introduction

  • Sales begin to fall due to changing consumer tastes and fast changing technology.
  • Revenue also drops.
  • A company may have to cut prices and spend more on promotion.
  • Cash flow still positive but will also fall.
  • The product is launched.
  • Prices are likely to be high to cover costs.
  • Good for fast moving consumer goods.
  • High marketing costs (through promotion).
  • Slow sales (= still negative)
  • Sales are starting to increase.
  • Not likely to make a profit.

Maturity

Growth

  • Sales and revenue reach their peaks (Same with cash flow).
  • The product will have a stable market share.
  • Competitors are likely to have made substitutes, making the market more saturated.
  • Start thinking about extension strategies.
  • All downhill from here!
  • Sales are rising rapidly.
  • The product is more recognisable and possibly profitable.
  • Revenue is now higher than expenditure.
  • Positive cash flow (finally!)
  • Prices are often lowered at this stage.
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