Product Life Cycle 3

Meaning of Product Life Cycle Part 3


The ideal product planning based on the product life cycle

Increasing sales, increasing market share, optimizing profits and increasing cash flow are among the primary goals of a company. In order to achieve these goals, it is important to optimally steer product management, the marketing mix and sales through the right actions and measures. The following planning points should therefore be implemented as perfectly as possible in a company:

  • Sensible investments in marketing and advertising before going to market with a focus on optimizing marketing strategies
  • During the growth phase, the expenses for marketing have to decrease, so that more money is available for product further development. Ideally, the profits are used after break-even.
  • During the maturity phase, one must effectively stimulate growth in the market. This can be achieved by differentiating products and prices in order to address new target groups.
  • In the saturation phase you have to reduce costs and product prices. At the same time, investments must be made in sales and marketing in order to put the product above the competition. The aim should be not to lose market shares, but on the contrary to gain new ones. The products are called cashcows.
  • In the expiry phase, all investments are stopped and invested in a suitable successor product. You apply for this again. The prices are then to be designed in such a way that the obsolete product disappears from the warehouse as far as possible. This is also known as a sale.

Experience within the individual companies certainly plays a major role when it comes to making forecasts for the future. Experienced companies already know the optimal time to introduce a successor product, while others miss it and are pushed out of the market. Of course, it is also important to keep an eye on the market in order to keep an eye on the actions of the competition.

Product life cycle example Apple

To illustrate the product life cycle of a product, we can use the example of a well-known Apple product. Starting with the market launch through to the expiry of the product.

Apple’s iPod has sold over 300 million times worldwide and is still considered the most successful portable music player to this day. It was presented in October 2001 with the special feature of supporting all common MP3 formats and others. You could also save over 1,000 songs on it and users had the option of saving them on a 5 gigabyte hard drive. This made Apple the market leader with its iPod, because no other comparable device had these properties at the time. Let us now consider the individual life cycles using the example of Apple:

The introductory phase of the Apple iPod 2001

Even before it was launched in October, Apple was advertising it in commercial spots. As a result, the group sold 376,000 products within the first year. Based on these figures, the company decided to continue working on the product and improving it. Towards the end of 2003, sales rose to 937,000 units.

The growth phase

In January 2004, Apple achieved the ultimate breakthrough with the Apple iPod Mini, which was available in five different colors. Apple supplemented the product with the so-called “click wheel” to make the iPod suitable for on the go (for example during sports). Sales rose rapidly to 4.4 million. Even during this growth phase, Apple offered further product variants. We remember the iPod Shuffle from 2005, the iPod Nano, also from 2005, and the iPod Touch from 2007. The company’s growth increased, with 2007 sales reaching 50 million units. The product became the company’s mainstay of sales.

The maturity phase

From 2007 to around 2009, Apple restricted marketing for the iPod, only improving it slightly. Here it became clear that the maturity phase was reaching its peak. The sales figures rose in 2008 to only 54.83 million units sold. At this point, the iPod was no longer the mainstay of sales and only made up 28% of Apple’s total sales. At this point in time, Apple was already shining with new products, such as the iPhone, on which it was also possible to listen to music. One of the reasons why customers opted for the iPhone instead of an iPod and sales figures fell.

The decay of the Apple iPod

In 2008 and 2009 Apple was the market leader in music players of this format. The sales figures continued to decline in 2009, however. In 2010 the brand was only below 40 million units. Today, the iPod actually no longer plays a role as Apple’s sales driver. The product life cycle has reached full expiry, even if the company has not yet completely taken the iPod off the market (iPod Touch still available). The reason for this is likely to be the further development of the iPhone, which, thanks to its even larger memory, can store even more data and customers also use the smartphone to listen to music.

The BCG Matrix

According to gradphysics, the Boston Consulting Group Matrix , or BCG Matrix for short, supports companies in the strategy for their products or services. A precise analysis is carried out within these business units so that the chances of success for the product can ultimately be identified. It should also be about using the matrix to recognize whether the portfolio is well enough to be successful with a product in the long term.

The system was originally developed by founders for the Boston Consulting Group, which is why it still bears this name to this day. It was invented back in 1970, with the aim of giving a company a simple tool that they can use to plan for the long term. This then showed to what extent investments are worthwhile or in which product lines should be invested.

The matrix consists of four areas, each of which complements each other with certain factors. The matrix itself is in a coordinate system, with the x-axis representing the market share and the y-axis describing market growth. Halfway along the scale, a new zone begins within which your own products can be placed. Incidentally, the Boston Matrix is ​​also known as the “growth-share matrix”. The size of the circles shows how much sales the product generates. Various measures can be taken depending on the zone.

Product Life Cycle 3