Each product that appears on the market has a product life cycle, because let’s be honest times change and very few people are still walking around with a boombox – iPods were invented, luckily.
Anyway, there are four stages to this cycle, they are: induction, growth, maturity and decline.
So let’s take a closer look at the product cycle!
If a company feels that their product has reached maturity, they may choose to look into extension strategies. Extension strategies are used to extend the life cycle of a product. They may be necessary because a new product has not been developed to replace an ageing product. They may also be used if a product has a declining market share in a large or growing market.
When a product reaches maturity and profits start to decline, this means the product has reached saturation. Often this is because there are few new customers available to buy the product.
But as always there are some exceptions. Some products don’t necessarily follow this cycle because some never really take off in the first place.
Products in a fast growing market that are not selling as well as competing products can be considered question marks, also referred to as a problem child. These products are being beaten by the competition in a fast growing market. They are failing, but it is likely to be worth doing something about it – and maybe marketing the product!
And that’s how the life cycle comes into marketing. Promotion is part of the whole process of bringing a product or service to market. Effective promotion allows life cycles to be developed and prolonged. This then enables production and investment to occur with greater confidence which can be crucial if you’re trying to develop a product faster than your competitors!
Aside from the life cycle of a product, companies must consider where they want to place their product within a market.
Many companies place their product within a market using a product orientated approach. This means it will base its products or services on what it perceives as its internal strengths – pretty obvious!
Businesses with a product orientated approach to selling try to sell whatever they can make, without trying to find out if it is what the customers want. Sony grew hugely successful using this policy.
The clearest example was the Walkman cassette player, launched in the late 1970s. Marketing professionals said it would not sell because it had no recording facility – a generation of teenagers proved them wrong.
Similarly, McDonald’s approach with its products is heavily product orientated, with core products produced the same way in a range of very different international markets. The initial focus is on developing and making the product then trying to sell it to consumers.
Alternatively, asset-led orientation is when marketing decisions are based on the needs of the consumer and the strengths of the business – again it seems pretty obvious but it is a slightly different tack.
Balancing being product oriented with being asset-led orientated involves a business finding out what the market wants, and then asking the questions.
So finally, market orientation is when a business bases its marketing mix on its perception of what the market (customers) wants.
A company using market orientation invests time researching current trends in a given market. The company then develops a product strategy that caters to the wants and needs of its customers.
When the product launches, the company advertises the products as items that consumers already want rather than convincing them that the products are something they should want. For example, if a car company engages in market orientation, it will research what consumers most want and need in a car rather than produce car models meant to follow the trends of other manufacturers.
And that’s product life cycle and orientation complete! It’s all pretty straight forward but vital to know when looking closer at marketing strategies later on.
Next we’re going to look at the Boston Matrix!
As you may have guessed, price is a very important part of selling a product and with that comes quite a lot to learn about price and the strategies used.
The Boston Matrix is a model which helps businesses analyse their market share and improve market growth. The Matrix assumes a few things. Mainly it says that market share can be gained by investment in marketing and that market share gains will always generate cash surpluses.
It also states that cash surpluses will be generated when the product is in the maturity stage of the life cycle and that the best opportunity to build a dominant market position is during the growth phase.
Within the Matrix there are four categories: Stars, Cash Cows, Question Marks and Dogs.
But what exactly do these categories mean I hear you ask. Let’s find out!
Stars are high growth products competing in markets where they are strong compared with the competition. Often Stars need heavy investment to sustain growth. Eventually growth will slow and, assuming they keep their market share, Stars will become Cash Cows.
Cash Cows are very profitable products and expenditure on things such as advertising is relatively low. Customers know and understand the product, and brand value has been established. It is also likely that development costs have already been recouped, increasing profitability further.
Question Marks are products with low market share operating in high growth markets. This suggests that they have potential, but may need substantial investment to grow market share at the expense of larger competitors. Management have to think hard about Question Marks – which ones should they invest in? Which ones should they allow to fail or shrink?
Unsurprisingly, the term Dogs refers to products that have a low market share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Dogs are usually sold or closed.
Ideally a business would prefer products in all categories (apart from Dogs!) to give it a balanced portfolio of products. And that’s it, Boston Matrix done and dusted.