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

2. 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

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

4. Recap
What is meant by an extension strategy?

5. Product Life Cycles revision
Sales
Effects of Extension
Strategies
Time

6. 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

7. 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..

8. 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

9. 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

10. 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?

11. 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

12. 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

13. 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?

14. 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?

15. 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

16. 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?

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

18. The Boston Matrix

19. 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?

20. Boston Matrix – key terms..

21. Drawing the Boston Matrix

22. 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

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

24. 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?

25. 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?

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

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

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

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

30. 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?

31. 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?

32. 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?

33. 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?

34. 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

35. Your go

36. 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).

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

38. A chocoholics delight!

39. 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

40. A chocoholics delight!

41. Homework
Textbook p 205
Case study = Barbie!

42. Homework
Complete the HRM definition sheet

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