O LevelBusinessCambridge (CIE)Business StudiesRevision Notes3. Marketing3.3 The Marketing MixProduct: The Product Life Cycle

Product: The Product Life Cycle (Cambridge (CIE) O Level Business Studies): Revision Note

Exam code: 7115

Danielle Maguire

Written by: Danielle Maguire

Reviewed by: Steve Vorster

Updated on

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 five stages in the product life cycle: development, introduction, growth, maturity, and decline

The product life cycle diagram

Product life cycle graph with five stages: development, introduction, growth, maturity, and decline plotted against time and sales volume.
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 impact of the product life cycle on cash flow and marketing strategy

Stage

Explanation

Implication

Development

  • The focus is on designing and developing the product

  • The business usually incurs high costs for research and development, market research, and product testing

  • 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

Introduction

  • The stage begins when the product is launched

  • Characterised by slow sales growth as the product is still new and unknown to most consumers 

  • 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

Growth

  • 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 

  • 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

Maturity

  • Characterised by high sales but slowing sales growth 

  • Market saturation is likely 

  • 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

Decline

  • 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

  • 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

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

  • There are two types of extension strategies which are often implemented at the same time

    • Product-related extension strategies

  • These are strategies that changing or modify the product to make it more appealing to customers 

  • This could involve improving or adding features, increasing capacity or redesigning its appearance

    • Product improvements e.g. Samsung releases new versions of its Galaxy Smartphone every year with upgraded features and improvements to the previous model

    • Line extensions, e.g. Coca-Cola introduced Diet Coke and Coke Zero as line extensions of its original Coca-Col

    • Repositioning e.g. when IBM's personal computer division started losing market share to other brands, it repositioned its products as high-end business machines and focused on the enterprise market

  • These strategies aim to change the promotional activity related to the product 

  • This could involve:

    • Changes to advertising e.g Kellogg's continues to recreate adverts for its Corn Flakes cereal, which has been around since 1906

    • Price promotions, e.g. Cyber Monday occurs on the first Monday after Thanksgiving in the USA and electronic firms discount prices significantly in order to boost sales of their products

    • Sales promotions, e.g. many coffee shops offer a loyalty programme where customers can earn a free drink for every six consumed

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Author
Reviewer
Danielle Maguire

Author: Danielle Maguire

Expertise: Business Content Creator

Danielle is an experienced Business and Economics teacher who has taught GCSE, A-Level, BTEC and IB for 15 years. Danielle's career has taken her from across various parts of the UK including Liverpool and Yorkshire, along with teaching at a renowned international school in Dubai for 3 years. Danielle loves to engage students with real life examples and creative resources which allow students to put topics in a context they understand.

Steve Vorster

Reviewer: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.

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