Product and Product Life

Cycle
 Product Life Cycle

Maturity

Growth Decline

Introduction

Time
 Product Life Cycle
Maturity

Growth Decline

Introduction

Typical pattern, highly varied

broadly representative

not necessarily predictive

instructive, not definitive

using the PLC to forecast brand performance is problematic

Diffusion Models

Innovators (First in)

Motivated by market knowledge

Imitators (Followers)

Motivated by interpersonal influences
Diffusion Model

Innovation
Rate
Total
New
Market
Innovators
Potential
Remaining
Potential
New
Already Buyers
Bought
New
Imitators
Imitation
Rate
Diffusion Model
Illustrative Penetration Pattern
100.%

90.%

80.%

70.%

60.%

50.%

40.%

30.%

20.%

10.%

0.%
0 1 2 3 4 5 6 7 8 9 10
Diffusion Model
Illustrative Buying Pattern

150 TOTAL BUYERS

100
IMITATORS

50

INNOVATORS

0
1 2 3 4 5 6 7 8 9 10
 Technology Adoption Life Cycle

34% 34%
2.5% 13.5%
Innovators Early Early Late 16%
adopters majority majority Laggards

Time of adoption of innovations

Product Life Cycle

Maturity

Growth
Sales Decline

Introduction

Profit
Loss Loss
Introduction

Low sales

High cost per customer acquired

Negative profits

Innovators are targeted

Little competition
Introduction

Product – Offer a basic product

Price – Skimming

Distribution – Build selective distribution

Advertising – Build awareness among early adopters

and dealers/resellers

Sales Promotion – Heavy expenditures to create trial

Growth

Rapidly rising sales

Average cost per customer

Rising profits

Early adopters are targeted

Growing competition
Growth

Product – Offer product extensions, service, warranty

Price – Penetration pricing

Distribution – Build intensive distribution

Advertising – Build awareness and interest in the

mass market

Sales Promotion – Reduce expenditures to take

advantage of consumer demand
Maturity

Sales peak

Low cost per customer

High profits

Middle majority are targeted

Competition begins to decline

Maturity

Product – Diversify brand and models

Price – Set to match or beat competition

Distribution – Build more intensive distribution

Advertising – Stress brand differences and benefits

Sales Promotion – Increase to encourage brand

switching
Decline

Declining sales

Low cost per customer

Declining profits

Laggards are targeted

Declining competition
Decline

Product – Phase out weak items

Price – Cut price

Distribution – Use selective distribution: phase

out unprofitable outlets

Advertising – Reduce to level needed to retain

hard-core loyalists

Sales Promotion – Reduce to minimal level

Product Life Cycle

Maturity

Growth
Sales Decline

Introduction

Profit
Loss Loss
Product Life Cycle
Regeneration - Intel

Pentium

486

386
 Product Life Cycle
Cash Flow Summary
Net Income

Cash Flow from Operations

and Investments

Intro-
Growth Maturity Decline
duction

Investment Intro-
Maturity Decline
duction Growth

Intro-
Growth Maturity Decline
duction
Business Portfolio => Cash Flow

Growth
Businesses
Intro
Businesses

External Financing CASH

Declining
Businesses
Mature
Businesses
 The Product Life Cycle and the BCG Matrix

Sales Importance of
maintaining a balance
(1) (2) (3) of products in the
portfolio at different
stages of the PLC

B
A C

Time
Linking PLC & Business Portfolio
Introduction Growth

High
Market Attractiveness
Develop or
Inflow
Invest/Grow
Withdraw
Cash Flow Position
Outflow

Harvest/
Earn/Protect
Divest
Low Decline Mature

Low High

Relative Business Strength

High Cost Low Cost

Competitive Cost Position
PLC Management

Maturity Longer

Growth

Higher Decline

Introduction

Faster

More profitably …
Thank You