- convenience goods
- speciality goods
- 70% of new products fail within 3 years because entering the market is the most difficult part of a product lifecycle. In order to enter the market, the product needs successful marketing and to meet the needs or wants of the consumers in order to gain enough recurring sales for the product to be deemed profitable. If the product cannot break through this initial barrier, then it will end up being a drag for the businesses revenue and will have to be discontinued. Also, there are some products that may not be intended to last more than 3 years. Many craze products such as Loom Bands and Fidget Spinners didn’t need to last 3 years to make the companies producing them a huge amount of money. So it isn’t vital for some products to last 3 years, whilst some more expensive products may need to last for a long time to be seen as successful, such as a watch. If the company stops selling them after 6 months then they seem like a low value product.
4) A star has a very rapid growth rate and a high market share—this makes it the top of the market and suggests it is a desirable/popular product. Whereas a dog is a much slower growing product which is likely to be focused on a much more niche market segment or a less succesful product. 5)
A theoretical model which describes the stages a product goes through over its life.
Development: Absorbs significant resources. May not be successful.
Introduction: New product launches. Low level of sales. Usually a negative cash flow. Heavy promotion needed.
Growth: Fast growing sales. Cash flow may become positive. Market grows, competition enters. Unit costs begin to fall with economies of scale.
Maturity: Slower sales. Intense competition. Fight for market share. Cash flow very high, positive. Weaker competitors leave the market.
Decline: Falling sales, market saturation. More competitors leave. Decline in profits and overall weaker cash flow.
Extension: Lower price, change the packaging.
Consumer and industrial products
Over the stages of the product lifecycle, we measure sales over time.
Stages are as follows:
Product Portfolio Analysis
Product portfolio analysis assesses the position of each product or brand in a firm’s portfolio to help determine the right marketing strategy for each.
- Boston Consulting Group developed this as a tool of portfolio analysis
- It can be applied to the portfolio of products produced by a firm or the portfolio of businesses owned by a firm.
- Portfolio is a collection of businesses or products that make up a business.
Firms should analyse their portfolio of products, categorised as:
The ideal would be a balanced portfolio, likley with products in every category.
The Product Lifecycle
- is concerned with individual products
The Boston Matrix
- is concerned with the firms overall cashflow
- Low share of a rapidly growing market
- Cash flow is negative
- Have potential but the future is uncertain
- Could become either a star or a dog
- Invest to increase market share
- Substaintial investment to achieve growth at the expense of powerful competitors
- Invest in promotion and other aspects of marketing
- Build selectively
- High share of rapidly growing market
- Position of leadership in a high growth market
- The product/business is relatively strong and the market is growing
- Require high marketing spending
- Net cash inflow is neutral or at best modestly positive
- Investment to sustain growth
- Build sales and/or market share
- Spend to keep competition at bay
- High share of a slowly growing market
- Mature stage in the product lifecycle
- Mature, successful product
- Dominant share
- Little potential for growth
- Large positive cash inflow
- Defend market share
- Aim for short term profits
- Little need for investment
- Little potential for further growth
- Reduce investment in order to maximise short term cash flow and profits
- Use profits from cash cows to invest in new products
- Dogs are either
- Products that have failed
- Products that are in the decline phase of their life cycle
- Low share of a slowly growing market
- Not gowing anywhere and no real potential
- Phase out or sell off (divest)
- Not worth investing in
- Any profit made has to be re-invested just to maintain market share
- Uses up more time and resources that can be justified
- Divest or, at most, focus on a defendable niche
How valuable is the Boston Matrix Model?
- A useful tool for analysing product portfolio decisions
- But it is only a snapshot of the current position
- Has little or no predictive value
- Focus on market share and market growth ignores issues such as developing a sustainable competitive advantage.