Product Life Cycles (revision) and the Boston Matrix working lunch video 7 part 4 PRODUCT LIFE CYCLE

Draw me the product life cycle & clearly label all parts! No of sales Draw me the product life cycle & clearly label all parts! Time line R&D

Product Life Cycle….. Saturation Maturity Decline Growth No of sales Saturation Maturity Decline Growth Launch / Introduction Time line R&D

Recap What is meant by an extension strategy?

Product Life Cycles revision Sales Effects of Extension Strategies Time

Product Portfolio Analysis Product portfolio analysis looks at the range of products and brands (product portfolio) that a firm has under its control. This type of analysis can help a firm identify where every single one of its products is positioned in the market. Perhaps the most common type of product portfolio analysis that firms use to analyse their product mix is the Boston Matrix. The AQA specification states that students need to know this form of product portfolio analysis. Richard Branson runs the Virgin Empire. How many different type of products does Virgin have under its control? 2.15 Product

What are the links between these images? PLC – in decline marmite= maturity, wispa = extension strategy, highlights & Ipod phone launch ….but also linked to Boston matrix..

Product Life Cycles and the Boston Matrix Product Life Cycle – shows the stages that products go through from development to withdrawal from the market Product Portfolio – the range of products a company has in development or available for consumers at any one time Managing product portfolio is important for cash flow

Product Life Cycles and the Boston Matrix 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

Product Life Cycles revision 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?

Product Life Cycles revision 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

Product Life Cycles revision 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

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

Product Life Cycles revision 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?

Product Life Cycles revision 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

Product Life Cycles revision 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?

Product Life Cycles and cash flow PLC and Profits Sales/Profits PLC Profits Time Losses Break Even

The Boston Matrix

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 What do these terms mean?

Boston Matrix – key terms..

Drawing the Boston Matrix

The Boston Matrix - STARS Stars – products in markets experiencing high growth rates with a high or increasing share of the market - Potential for high revenue growth

The Boston Matrix – Cash Cows High market share Low growth markets – maturity stage of PLC Low cost support High cash revenue – positive cash flows

The Boston Matrix - 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 Is your product starting to embarrass your company?

The Boston Matrix - ? Problem child Question mark ??? Or 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? Problem children – worth spending good money on?

The Boston Matrix Problem Children Stars Dogs Cash Cows Market Growth High Market Share Low High

What stage of the Boston Matrix are these at? Put these onto a grid

Boston Matrix Grid Problem Children Stars Dogs Cash Cows Market Growth High Low High Market Share

Boston Matrix Grid Problem Children Stars Dogs Cash Cows Market Growth High Video Low High Market Share

The Boston Matrix 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?

The Boston Matrix 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?

The Boston Matrix Implications: Stars: Huge potential – how? May have been expensive to develop – why? Is it worth spending money to promote? What issues are there with product life cycle?

The Boston Matrix Implications: Cash Cows: Why are they cheap to promote? Generate large amounts of cash – are these used for further R&D? Do you think there are any costs of developing and promoting these products? Is there a need to monitor their performance – the long term? What stage of the PLC are these at?

The Product Life Cycle and the Boston Matrix Importance of maintaining a balance of products in the portfolio at different stages of the PLC – Boston Matrix helps with the analysis (3) Cash from ‘C’ used to support growth of ‘D’ and possibly to finance extension strategy for ‘B’? Sales (2) Cash from ‘B’ used to support ‘C’ through growth stage and to launch ‘D’. ‘A’ now possibly a dog? (1) ‘A’ is at maturity stage – cash cow. Generates funds for the development of ‘D’ The product portfolio – four products in the portfolio (1) (2) (3) D B C A Time

Your go

Place these ‘eateries’ on a Boston Matrix grid…. McDonalds (global brand) Chick King (lesser known chicken restaurant) KFC Burger King Woodies Restaurant Chichester, (small but popular restaurant) Little Chef MGM Hotel Restaurant, Las Vegas (huge brand, single mega hotel) Subway A deli in London (small but popular deli) A hot dog stand in Brighton (cheap but low quality).

Boston Matrix Grid Problem Children Stars Dogs Cash Cows Market Growth High Low High Market Share

A chocoholics delight!

Using the choc’s delight images Plot a PLC & place each product on the cycle somewhere And Create a Boston Matrix grid using them as well

A chocoholics delight!

Homework Textbook p 205 Case study = Barbie!

Homework Complete the HRM definition sheet

Boston Matrix Grid Problem Children Stars Dogs Cash Cows Market Growth High Low High Market Share