Product Life Cycle (Cambridge (CIE) IGCSE Business): Revision Note

Stages of the product life cycle

• The product life cycle describes the different stages a product goes through from its conception to its eventual decline in sales

• There are typically four stages in the product life cycle: introduction, growth, maturity, and decline

The product life cycle diagram

Interpreting product life cycle diagrams

• Each stage of the product life cycles affects a business in different ways, such as changes in sales, profit, cash flow and how the product is marketed

• By recognising which stage a product is in, businesses can make better decisions to stay competitive and profitable

Introduction

• This stage begins when the product is launched

• Sales grow slowly as the product is still new and not widely known

• Cash flow is usually negative due to high promotion, advertising and distribution costs

• Marketing focuses on building awareness and interest

Growth

• Sales rise quickly as the product gains popularity

• The business works to increase market share and boost production to meet demand

• Cash flow often turns positive as revenue grows and costs are spread over more units

• Marketing aims to stand out from competitors and build brand loyalty

Maturity

• Sales remain high but growth slows due to market saturation

• Cash flow is usually strong as sales continue and costs fall through efficiency and economies of scale

• Marketing focuses on keeping market share and improving profits through cost-cutting or expanding into new markets

Decline

• Sales fall as the product becomes outdated or replaced by newer alternatives

• The business shifts to controlling the decline and cutting costs

• Cash flow may turn negative due to falling sales and higher related costs

• Marketing may involve discounting, clearing stock or finding new uses for the product

Extension strategies

• Extension strategies refer to the techniques used by businesses to extend the life of a product beyond its natural life cycle

• These strategies are designed to boost sales and maintain profitability for a product that has reached the late maturity or decline stage of its life cycle

Types of extension strategies

Enter new markets

• Selling the product in a new geographic area or to a new customer group

Find new uses for a product

• Promoting different ways the product can be used

Adapt the product or packaging

• Changing design, features, size or packaging to attract new interest

Increase advertising

• Launching a new advertising campaign to remind or attract customers

Increase sales promotion

• Offering discounts, loyalty rewards or competitions to increase short-term sales

Recommending a suitable extension strategy

• A business must carefully choose the right extension strategy based on its product, market and resources

Factors affecting the choice of extension strategy

1. Type of product

   • Some products are easier to adapt than others

     • For example, a smartphone can be upgraded regularly, while bottled water has fewer options for change

   • Perishable goods or fashion items may need quicker updates to stay relevant

2. Target market

   • The business must consider who its customers are and what they want

   • If the target market is young and trend-sensitive, advertising or new packaging may work well

   • If the market is price-sensitive, sales promotions could be more effective

3. Cost and budget

   • Some strategies are cheaper than others

     • For example, increasing advertising or offering promotions can be done quickly but may be costly

   • Adapting the product or entering new markets often requires more time and money

4. Competitor actions

   • If competitors release new versions or lower prices, a business may need to respond with an extension strategy

   • This helps maintain market share and keeps the product competitive

5. Brand image

   • A well-known brand must protect its reputation

   • Some strategies, like discounts, may hurt a premium brand’s image

6. Legal or cultural factors

   • When entering new markets, the business must consider different laws and customer preferences

   • Packaging, promotion, or even the product itself may need to change to suit the local culture or rules