webster university boston consulting group’s growth/share matrix essentials of product life cycles...

Webster University

Boston Consulting Group’s Growth/Share Matrix

Essentials of Product Life Cycles

MRKT 5980

04/20/2304/20/23 Webster University INTB 5000Webster University INTB 5000 Page 2

Definitions

Product Life CycleProduct Life Cycle – shows the stages that – shows the stages that products go through from development to products go through from development to withdrawal from the marketwithdrawal from the market

Product PortfolioProduct Portfolio – the range of products a – the range of products a company has in development or available for company has in development or available for consumers at any one time. Managing product consumers at any one time. Managing product portfolio is important for cash flowportfolio is important for cash flow


Product Life Cycle (PLC):Product Life Cycle (PLC):• Each product may have a different life cycleEach product may have a different life cycle• PLC determines revenue earnedPLC determines revenue earned• Contributes to strategic marketing planningContributes to strategic marketing planning• May help the firm to identify when a product May help the firm to identify when a product

needs support, redesign, reinvigorating, needs support, redesign, reinvigorating, withdrawal, etc.withdrawal, etc.

• May help in new product development May help in new product development planningplanning

• May help in forecasting and managing cash May help in forecasting and managing cash flowflow

Product Life Cycle Fundamentals


The Stages of the Product Life Cycle:The Stages of the Product Life Cycle:

• DevelopmentDevelopment• Introduction/LaunchIntroduction/Launch• GrowthGrowth• MaturityMaturity• SaturationSaturation• DeclineDecline• WithdrawalWithdrawal



The Development Stage:The Development Stage: Initial Ideas – possibly large numberInitial Ideas – possibly large number May come from any of the following – May come from any of the following –

• Market research – identifies gaps in the marketMarket research – identifies gaps in the market• Monitoring competitorsMonitoring competitors• Planned research and development (R&D)Planned research and development (R&D)• Luck or intuition – stumble across ideas?Luck or intuition – stumble across ideas?• Creative thinking – inventions, hunches?Creative thinking – inventions, hunches?• Futures thinking – what will people be Futures thinking – what will people be

using/wanting/needing 5,10,20 years?using/wanting/needing 5,10,20 years?



Product Development: StagesProduct Development: Stages• New ideas/possible inventionsNew ideas/possible inventions• Market analysis – is it wanted? Can it be Market analysis – is it wanted? Can it be

produced at a profit? Who is it likely to be produced at a profit? Who is it likely to be aimed at?aimed at?

• Product Development and refinementProduct Development and refinement• Test Marketing – possibly local/regionalTest Marketing – possibly local/regional• Analysis of test marketing results and Analysis of test marketing results and

amendment of product/production processamendment of product/production process• Preparations for launch – publicity, Preparations for launch – publicity,

marketing campaignmarketing campaign



Introduction/Launch:Introduction/Launch:

• Advertising and promotion campaignsAdvertising and promotion campaigns• Target campaign at specific Target campaign at specific

audience? audience? • Monitor initial salesMonitor initial sales• Maximise publicityMaximise publicity• High cost/low salesHigh cost/low sales• Length of time – type of productLength of time – type of product



Growth:Growth:

• Increased consumer awarenessIncreased consumer awareness• Sales riseSales rise• Revenues increaseRevenues increase• Costs - fixed costs/variable costs, Costs - fixed costs/variable costs,

profits may be madeprofits may be made• Monitor market – competitors Monitor market – competitors

reaction?reaction?



Maturity:Maturity:

• Sales reach peakSales reach peak• Cost of supporting the product declinesCost of supporting the product declines• Ratio of revenue to cost highRatio of revenue to cost high• Sales growth likely to be lowSales growth likely to be low• Market share may be highMarket share may be high• Competition likely to be greaterCompetition likely to be greater• Price elasticity of demand?Price elasticity of demand?• Monitor market – changes/amendments/new Monitor market – changes/amendments/new

strategies?strategies?



Saturation:Saturation: New entrants likely to mean market is ‘flooded’New entrants likely to mean market is ‘flooded’ Necessity to develop new strategies becomes more Necessity to develop new strategies becomes more

pressing:pressing:• Searching out new markets:Searching out new markets:

Linking to changing fashionsLinking to changing fashions Seeking new or exploiting market segmentsSeeking new or exploiting market segments Linking to joint ventures – media/music, etc.Linking to joint ventures – media/music, etc.

• Developing new usesDeveloping new uses• Focus on adapting the productFocus on adapting the product• Re-packaging or formatRe-packaging or format• Improving the standard or qualityImproving the standard or quality• Developing the product rangeDeveloping the product range



Decline and Withdrawal:Decline and Withdrawal:

• Product outlives/outgrows its Product outlives/outgrows its usefulness/valueusefulness/value

• Fashions changeFashions change• Technology changesTechnology changes• Sales declineSales decline• Cost of supporting starts to rise too farCost of supporting starts to rise too far• Decision to withdraw may be dependent on Decision to withdraw may be dependent on

availability of new products and whether availability of new products and whether fashions/trends will come around again?fashions/trends will come around again?



Sales

Time

Development Introduction Growth Maturity Saturation Decline



Sales

Time

Effects of ExtensionStrategies



Sales/Profits

Time

PLC and Profits

PLC

Losses

Break Even

Profits



The Boston Consulting GroupThe Boston Consulting GroupGrowth/Share MatrixGrowth/Share Matrix

The Boston Consulting Group Matrix:The Boston Consulting Group Matrix:

• A means of analyzing the product portfolio and A means of analyzing the product portfolio and informing decision making about possible informing decision making about possible marketing strategiesmarketing strategies

• Developed by the Boston Consulting Group – a Developed by the Boston Consulting Group – a business strategy and marketing consultancy business strategy and marketing consultancy in 1968in 1968

• Links growth rate, market share and cash flowLinks growth rate, market share and cash flow


Classifies Products into four simple categories:Classifies Products into four simple categories: StarsStars – products in markets experiencing high – products in markets experiencing high

growth rates with a high or increasing share of growth rates with a high or increasing share of the marketthe market

- - Potential for high revenue growthPotential for high revenue growth



Cash Cows:Cash Cows:

• High market shareHigh market share• Low growth Low growth

markets – maturity markets – maturity stage of PLCstage of PLC

• Low cost supportLow cost support• High cash revenue – High cash revenue –

positive cash flowspositive cash flows



Dogs:Dogs:

• Products in a low Products in a low growth market growth market

• Have low or declining Have low or declining market share (decline market share (decline stage of PLC)stage of PLC)

• Associated with Associated with negative cash flownegative cash flow

• May require large sums May require large sums of money to supportof money to support

Is your product starting to embarrass your company?



Problem Child:Problem Child:- Products having a low market Products having a low market

share in a high growth marketshare in a high growth market- Need money spent to develop Need money spent to develop

themthem- May produce negative cash May produce negative cash

flowflow- Potential for the future?Potential for the future?

Problem children – worth spending good money on?



Problem ChildrenProblem Children StarsStars

DogsDogs Cash CowsCash Cows

Market Growth

Market Share

High

Low High



Implications:Implications: Dogs:Dogs:

• Are they worth persevering with?Are they worth persevering with?• How much are they costing?How much are they costing?• Could they be revived in some way?Could they be revived in some way?• How much would it cost to continue to support How much would it cost to continue to support

such products?such products?• How much would it cost to remove from the How much would it cost to remove from the

market?market?



Implications:Implications: Problem Children:Problem Children:

• What are the chances of these products What are the chances of these products securing a hold in the market?securing a hold in the market?

• How much will it cost to promote them How much will it cost to promote them to a stronger position?to a stronger position?

• Is it worth it?Is it worth it?



Implications:Implications: Stars:Stars:

• Huge potentialHuge potential• May have been expensive to developMay have been expensive to develop• Worth spending money to promoteWorth spending money to promote• Consider the extent of their product life Consider the extent of their product life

cycle in decision makingcycle in decision making



Implications:Implications: Cash Cows:Cash Cows:

• Cheap to promoteCheap to promote• Generate large amounts of cash – use for Generate large amounts of cash – use for

further R&D?further R&D?• Costs of developing and promoting have Costs of developing and promoting have

largely gonelargely gone• Need to monitor their performance – the long Need to monitor their performance – the long

term?term?• At the maturity stage of the PLC?At the maturity stage of the PLC?



Sales

Time

AB

C

D

The product portfolio – four products in the portfolio

(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


webster university boston consulting group’s growth/share matrix essentials of product life cycles...

Documents

product life cycle plc

definitionsproduct life

product needs support

different life cycleplc

development rdluck

development stage

fashionsseeking new

new entrants