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uk

Product Life Cycles and the Boston Product Life Cycles and the Boston
Matrix Matrix
• Product Life Cycle – shows the stages
that products go through from • Product Life Cycle (PLC):
development to withdrawal – Each product may have a different life cycle
– PLC determines revenue earned
from the market
– Contributes to strategic marketing planning
• Product Portfolio – the range – May help the firm to identify when
of products a company has in a product needs support, redesign,
development or available for consumers reinvigorating, withdrawal, etc.
at any one time – May help in new product development
planning
• Managing product portfolio – May help in forecasting and managing cash
is important for cash flow flow

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Product Life Cycles and the Boston Product Life Cycles and the Boston
Matrix Matrix
• The Stages of the Product Life • The Development Stage:
Cycle: • Initial Ideas – possibly large number
– Development • May come from any of the following –
– Market research – identifies gaps in the market
– Introduction/Launch
– Monitoring competitors
– Growth – Planned research and development (R&D)
– Maturity – Luck or intuition – stumble across ideas?
– Creative thinking – inventions, hunches?
– Saturation
– Futures thinking – what will people be
– Decline using/wanting/needing 5,10,20 years hence?
– Withdrawal

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Product Life Cycles and the Boston Product Life Cycles and the Boston
Matrix Matrix
• Product Development: Stages • Introduction/Launch:
– New ideas/possible inventions
– Market analysis – is it wanted? Can it be – Advertising and promotion campaigns
produced at a profit? Who is it likely – Target campaign at specific audience?
to be aimed at?
– Product Development and refinement – Monitor initial sales
– Test Marketing – possibly local/regional – Maximise publicity
– Analysis of test marketing results and
amendment of product/production process – High cost/low sales
– Preparations for launch – publicity, – Length of time – type of product
marketing campaign

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Product Life Cycles and the Boston Product Life Cycles and the Boston
Matrix Matrix

• Growth: • Maturity:
– Sales reach peak
– Increased consumer awareness – Cost of supporting the product declines
– Sales rise – Ratio of revenue to cost high
– Revenues increase – Sales growth likely to be low
– Market share may be high
– Costs - fixed costs/variable costs,
– Competition likely to be greater
profits may be made – Price elasticity of demand?
– Monitor market – competitors – Monitor market –
reaction? changes/amendments/new strategies?

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Product Life Cycles and the Boston Product Life Cycles and the Boston
Matrix Matrix
• Saturation: • Decline and Withdrawal:
• New entrants likely to mean market is ‘flooded’
• Necessity to develop new strategies becomes more
– Product outlives/outgrows its
pressing: usefulness/value
– Searching out new markets: – Fashions change
• Linking to changing fashions
• Seeking new or exploiting market segments – Technology changes
• Linking to joint ventures – media/music, etc. – Sales decline
– Developing new uses
– Cost of supporting starts to rise too far
– Focus on adapting the product
– Re-packaging or format – Decision to withdraw may be dependent on
– Improving the standard or quality availability of new products and whether
– Developing the product range fashions/trends will come around again?

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Product Life Cycles and the Boston Product Life Cycles and the Boston
Matrix Matrix
Sales Sales
Development Introduction Growth Maturity Saturation Decline

Effects of Extension
Strategies

Time Time

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Product Life Cycles and the Boston The Boston Matrix

Matrix
Sales/Profits PLC and Profits
• The Boston Matrix:
– A means of analysing the product portfolio
and informing decision making about
PLC
possible marketing strategies
– Developed by the Boston Consulting Group
Profits – a business strategy and marketing
consultancy in 1968
Time – Links growth rate, market share and cash
Losses
flow
Break Even

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The Boston Matrix The Boston Matrix

• Classifies Products into four simple • Cash Cows:
categories: – High market share
– Low growth
• Stars – products in markets markets –
experiencing high growth rates maturity stage of
with a high or increasing share of PLC
– Low cost support
the market
– High cash revenue
- Potential for high revenue growth – positive cash
flows

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The Boston Matrix The Boston Matrix

• Dogs: • Problem Child:
– Products in a low - Products having a
growth market low market share in
– Have low or declining a high growth
market share (decline market
stage of PLC) - Need money spent
– Associated with to develop them
negative cash flow
- May produce
– May require large
negative cash flow Problem children – worth spending
sums of money to Is your product starting to
support - Potential for the good money on?
embarrass your company?
future?

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The Boston Matrix The Boston Matrix

Market Growth
High Problem Children Stars • Implications:
• Dogs:
– Are they worth persevering with?
– How much are they costing?
Dogs Cash Cows – 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
Market Share from the market?
Low High

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The Boston Matrix The Boston Matrix

• Implications: • Implications:
• Problem Children: • Stars:
– What are the chances of these – Huge potential
products securing a hold – May have been expensive to develop
in the market? – Worth spending money to promote
– How much will it cost to promote – Consider the extent of their product
them to a stronger position? life cycle in decision making
– Is it worth it?

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The Boston Matrix The Product Life Cycle and the

Boston Matrix Importance of
(3) Cash from
a ‘C’
• Implications: Sales (2) ‘A’
Cash
is atfrom
maintaining
(1)
The product
used to support
‘B’
used
balance
maturityto ofsupport
products
stage –
• Cash Cows: portfolio
growth
in the of–‘D’
portfolio fourand
at
(1) (2) (3) ‘C’
cashthrough
cow. growth
productsstages
possibly
different
Generates in
to theof
finance
funds for
– Cheap to promote stage and
portfolio
to
the PLC
extension – Boston
development
launch ‘D’. strategy
‘A’ nowof
– Generate large amounts of cash – Matrix
‘D’
for ‘B’?helps with the
possibly a dog?
use for further R&D? analysis
– Costs of developing and promoting D
have largely gone
– Need to monitor their performance – B
A C
the long term?
– At the maturity stage of the PLC?
Time

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