Product Life Cycles

Question 1

What is the product life cycle?

Answer 1

The different stages that a product goes through over time.

Question 2

Name the stages in the product life cycle. (6)

Answer 2

1. Research and development
2. Launch
3. Growth
4. Maturity
5. Potential refresh/extension
6. Decline

Question 3

Each of the phases of the product life cycle drastically affect: (4)

Answer 3

1. Sales volume
2. Profit
3. Costs
4. Promotional activity and spend

Question 4

Describe the introduction stage of the product life cycle in terms of sales, marketing, pricing strategy/strategies, competition, profits and customer perception. (6)

Answer 4

Sales: slow due to customers being unaware of/unfamiliar with the product or service
Marketing: advertising will be informative and across multiple channels to ensure customers are made aware they exist.
Pricing strategy: penetration pricing or price skimming
Competition?: no if you have a niche product, yes is you’re in a competitive market.
Profits: likely be low due to high costs.
Customer perception: customers may not be aware the product exists.

Question 5

Describe the growth stage of the product life cycle in terms of sales, marketing, pricing strategy/strategies, competition, profits and customer perception. (6)

Answer 5

Sales: rapid growth/increase of sales
Marketing: persuasive, informative and regular
Pricing strategies: competitive pricing or cost-plus pricing to maintain profit
Competition?: yes because competitors will pay more attention to your product and try to take your market share
Profit: more likely now due to an increase in sales>revenue>profit
Customer perception: customers are now aware of the product and demand is high

Question 6

Describe the maturity stage of the product life cycle in terms of sales, marketing, pricing strategy/strategies, competition, profits and customer perception. (6)

Answer 6

Sales: whilst high, may be starting to fall
Marketing: saturation is likely to occur (everyone has one and doesn’t need another or buys as and when is necessary)
Pricing strategies: promotional or competitive pricing
Competition?: yes as competitors will try to copy the product to obtain market share.
Profits: advertising discounts and promotional offers may be needed to keep sales high. This will reduce costs for the business, which may cause a decrease in profit.
Customer perception: a well-established with a reputation that will either elongate sales or cause them to decline if negative.

Question 7

Describe the decline stage of the product life cycle in terms of sales, marketing, pricing strategy/strategies, competition, profits and customer perception. (6)

Answer 7

Sales: declining significantly
Marketing: gradually reduced until stopped
Pricing strategy: promotional pricing so the business can get some final sales before the product becomes obsolete
Competition: may have moved onto new products or ideas.
Profits: declining
Customer perception: customers see the product as old and start to switch to a newer replacement.

Question 8

Why is a product life cycle important?

Answer 8

Enables a business to know roughly what stage of the life cycle a product is so they can react appropriately.

Question 9

State a disadvantage of the product life cycle.

Answer 9

Does not account for external factors (e.g., a change in social trends).

Question 10

State an advantage of the product life cycle.

Answer 10

Businesses can try to spot trends in the market which can inform when to increase/decrease marketing spend, for example.