Product Life Cycles and the Boston Matrix

                             Product Life Cycles and the Boston Matrix

*    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 and the Boston Matrix

*    Product Life Cycle (PLC):

  --   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 and the Boston Matrix

*    The Stages of the Product Life Cycle:

  --   Development

  --   Introduction/Launch

  --   Growth

  --   Maturity

  --   Saturation

  --   Decline

  --   Withdrawal



                             Product Life Cycles and the Boston Matrix

*     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 -- stumble across ideas?

  --    Creative thinking -- inventions, hunches?

  --    Futures thinking -- what will people be using/wanting/needing 5,10,20 years hence?



                             Product Life Cycles and the Boston Matrix

*    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 and the Boston Matrix

*    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 and the Boston Matrix

*    Growth:

  --  Increased consumer awareness

  --  Sales rise

  --  Revenues increase

  --  Costs - fixed costs/variable costs, profits may be made

  --  Monitor market -- competitors reaction?

                             Product Life Cycles and the Boston Matrix

*    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 and the Boston Matrix

*     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 and the Boston Matrix

*    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 and 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

  --   Links growth 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 of money to support

                                         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

-      Potential for the future?

                                         The Boston Matrix

                                         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 Product Life Cycle and the Boston Matrix