Product Life Cycles and the Boston Matrix



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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
    • 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 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

  • Sales
  • Time
  • Development
  • Introduction
  • Growth
  • Maturity
  • Saturation
  • Decline
  • Product Life Cycles and the Boston Matrix
  • Sales
  • Time
  • Effects of Extension
  • Strategies
  • Product Life Cycles and the Boston Matrix
  • Sales/Profits
  • Time
  • PLC and Profits
  • PLC
  • Losses
  • Break Even Point
  • Profits

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
  • Is your product starting to
  • 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
  • Potential for the future?
  • Problem children – worth spending
  • good money on?

The Boston Matrix

  • Problem Children
  • Stars
  • Dogs
  • Cash Cows
  • Market Growth
  • Market Share
  • High
  • 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 Product Life Cycle and the Boston Matrix

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

Bostonská matice – zdroj : http://www.dpu.se/boston_e.html

And the reality....



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