Professional English

in use: Marketing
Instructor: Ms. Nguyen Khoa Hong Minh
“
Product Life Cycles
& the Boston Matrix
”
1. Product Life Cycles
2. The Boston Matrix
3. The relationship between PLC and BCG matrix
1. Product Life
Cycles
Product Life Cycles
 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
Product Life Cycles
 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
Product Life Cycles
 The Stages of the Product Life Cycle:
 Development
 Introduction/Launch
 Growth
 Maturity
 Saturation
 Decline/Withdrawal
Product Life Cycles
 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
 Creative thinking – inventions, feeling
 Futures thinking – what will people be
using/wanting/needing 5,10,20 years hence?
Development stage

MS DOS -> windows

iPhone - > smart phones
Nano technologies
Kinect sensors ->
Robotics->
Product Life Cycles
 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
 Product Life Cycles

 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
Product Life Cycles

 Growth:
 Increased consumer awareness
 Sales rise
 Revenues increase
 Costs- fixed costs/variable costs, profits
may be made
 Monitor market – competitors reaction?
Product Life Cycles

 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?
Product Life Cycles
 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
Product Life Cycles

 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?
 Product Life Cycles
Sales
Development Introduction Growth Maturity Saturation Decline

Time
 Product Life Cycles and the Boston
Matrix
Sales

Effects of Extension
Strategies

Time
 Product Life Cycles
Sales/Profits PLC and Profits

PLC

Profits

Time
Losses
Break Even Point
2. The Boston
Matrix
 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
 Linksgrowth rate, market share and
cash flow
The Boston Matrix
 Classifies
Products into four
simple categories:
 Stars – products in markets
experiencing high growth rates
with a high or increasing share
of the market
- Potential for high revenue
growth
The Boston Matrix

 Cash Cows:
 High market share
 Low growth markets
– maturity stage of
PLC
 Low cost support
 High cash revenue –
positive cash flows
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
Is your product starting to
of money to support
embarrass your company?
The Boston Matrix
 Problem Child:
- Products having a low
market share in a high
growth market
- Need money spent to
develop them
- May produce negative
cash flow
Problem children – worth spending
- Potential for the good money on?
future?
 The Boston Matrix
Market Growth
High Problem Children Stars

Dogs Cash Cows

Market Share
Low High
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?
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?
The Boston Matrix
 Implications:
 Stars:
 Huge potential
 May have been expensive to
develop
 Worth spending money to promote
 Consider the extent of their
product life cycle in decision
making
The Boston Matrix
 Implications:
 Cash Cows:
 Cheap to promote
 Generate large amounts of cash – use
for further R&D?
 Costs of developing and promoting
have largely gone
 Need to monitor their performance –
the long term?
 At the maturity stage of the PLC?
The organization has a portfolio of all its
products and can see how well they are
performing in the markets and assess their
strengths and weaknesses.
It is very hard to assess the market share of the
product and of the market growth rate. It is also
difficult to assess which box in the cell matrix the
product will fall into as in different markets when
dealing internationally, a cash cow at home might be a
star or a novelty product in another market.
The relationship
between the PLC
and the BCG
Matrix
The difference between the BCG
Matrix and the Product life cycle
 1.
The corporate business Is divided into
four categories from two aspects of
market share and anticipated growth
rate; However, the product life cycle
is divided into four stages from two a
spects of sales and time.
The difference between the BCG
Matrix and the Product life cycle
 2.
The BCG Matrix can roughly judge
enterprise's overall operating
conditions, but the product life
cycle only reflects the market per
formance of a single product.
The difference between the BCG
Matrix and the Product life cycle
 3.
The BCG matrix mainly studies the
allocation and use of corporate
resources, but the produce life
cycle mainly studies the use of the
product marketing strategy.
The difference between the BCG
Matrix and the Product life cycle
 4.
The BCG matrix can reflects corporate a
variety of different business conditions,
but the product life cycle can not reflect
s all businesses and product in the curve.
The common points of
the BCG Matrix
and the Product life cycle
Problem child stage - Development
 At the start of its life, the product is being
designed, developed, launched and promoted;
 Net cash flow is likely to be negative:
• High investment
• Low rate of return.
 There is no guarantee that the product will
become successful
• Jump in any direction.
The common points of
the BCG Matrix
and the Product life cycle
Star stage - Growth
 If the product is successful, its growth
potential is greatest at the next stage.
 Net cash flow shoots up.
 Still a high cash injection is needed
• Marketing of the product
 Establish the product’s market share
 This is the shooting star
• Shoots upwards
The common points of
the BCG Matrix
and the Product life cycle
Cash cows – Maturity
 Product is established
 Generates income without the need for
further cash injection.
 It is the company’s breadwinner, earning
income and allowing investment in other
areas.
 Keep the cash cow for as long as possible so
that it can be milked.
The common points of
the BCG Matrix
and the Product life cycle
Dog Stage – Decline
 Declining cash flow
• New products from competitors
• Fashion or economic trends
• An injection of cash is needed to boost the
declining cash flow
• Or the company will wish to divest itself of
the product.
Ideally, a company should
enter the product/market
segment in its
introduction stage, gain
market share in its
growth stage, attain a
position of dominance on
its maturity stage and
maintain this dominant
position until the
product/market enter in its
decline stage, and then
determine the optimum
point for liquidation
This also remind about the importance of portfolio analysis,
and thus to decide, in which question mark, the
corporation should invest. If the question mark fails to
create market share, then it directly falls down to dog and
a lot of money waste along with valuable time.
 The Product Life Cycle and the Boston Matrix

Importance of
Sales (3)
(2) Cash
Cash
maintaining from
a ‘C’
from ‘B’
(1)
The ‘A’ is
productat maturity
used
stage to
used
balance to support
support
of
– cash products
cow.
portfolio
growth
in the – four
of funds
‘D’
portfolio and
atfor
(1) (2) (3) ‘C’ through
Generates growth
products
possibly
different in
toto the
finance
stages
the development ofof
stage and
portfolio
extension
the
‘D’ PLC ‘D’. strategy
– Boston
launch ‘A’ now
Matrix
for ‘B’?helps with the
possibly a dog?
analysis

B
A C

Time