- The product life cycle describes the different stages a product goes through from its conception to its eventual decline in sales
- There are typically five stages in the product life cycle: development, introduction, growth, maturity, and decline
Diagram of the Product Life Cycle
The five stages a product goes through over its life span - from initial development 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 Product Life Cycle, Cash flow and Marketing Strategy
Stage
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Explanation
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Implication
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Development
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- The focus is on designing and developing the product
- The business usually incurs high costs for research and development, market research, and product testing
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- Cash flow is usually negative during this stage, as the company is investing heavily in the product without generating any revenue
- The marketing strategy during this stage is focused on creating awareness and generating interest in the product
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Introduction
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- The stage begins when the product is launched
- Characterised by slow sales growth as the product is still new and unknown to most consumers
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- 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
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|
Growth
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- 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
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- Cash flow usually turns positive during this stage as sales revenue increases and costs are spread out over a larger volume of production
- The marketing strategy is to differentiate the product from its competitors and build brand loyalty
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Maturity
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- Characterised by high sales but slowing sales growth
- Market saturation is likely
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- 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
- The marketing strategy aims to maintain market share and increase profitability by cutting costs and finding new markets
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Decline
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- Starts when sales begin to decline as the product becomes obsolete or is replaced by newer products
- The business focus shifts to managing the product's decline and reducing costs
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- Cash flow usually turns negative as sales revenue declines and costs associated with the product's decline increase
- The marketing strategy may involve discontinuing the product, reducing prices to clear stock or finding new uses for the product
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