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Product Life Cycle

 

When a product is introduced it will go through a number of phases, these can be shown on the diagram overleaf.

 

 

 It can be seen from the diagram above that firms will experience a period of decline in sales.  Firms will attempt to use extension strategies to prevent the product from going into decline.  Firms will try to retain the period of saturation for as long as possible in order to maximise revenue.   There are various strategies that a firm could employ:

  • Finding new uses for the product, e.g., the basic technology in hot hair strippers is no different from that of a hairdryer.
  • Targeting new market segments with the existing product, e.g., when sales of Johnson and Johnsonís baby products started to fall, they repositioned the product and aimed it at adults or when sports clothes manufacturers successfully aimed their products at the fashion market.
  • If the product is marketed as a new brand with a different use, e.g., Lucozade was originally sold as a product to assist those recovering from illness, by selling it as a sports drink a huge increase in sales has been achieved.
  • By changing elements of the marketing mix, e.g., new promotional ideas and special offers can be used, Coca-Cola and Kellogs have successfully maintained high levels of sales through competitions and advertising campaigns.

 

The effect of extension strategies can be shown on the diagram below.

 

 

It is possible that decline is inevitable in certain markets as new technology makes existing products obsolete.  It is possible that with a creative marketing mix a firm will be able to maintain a high level of sales.

Further Reading

How Nestle have made use of extension strategies

 

 

E-mail Steve Margetts