This is the eighth part in our series of marketing articles, if you missed the first, second, third and fourth ones you can find them here: Marketing Series: An Introduction to Marketing, Marketing Series: Customer Orientated Marketing, Marketing Series: Determining what your customers want, Marketing Series: Market Research – How do we know which plan is the best? Marketing Part 5: Understanding the sales process, the psychology behind Customer Behaviour, Marketing Series Part 6: Analyse Customer Information and Marketing Series 7: Product Positioning, How you stand out against your competitors.
We have had a look our potential market share, in relation to public demand against competitor’s offerings. With this information we are in a better position to appreciate how our current range fits into a product life cycle.
The Boston consulting group classifies different types of products into four distinct categories:
- Stars: are growth products that sell in sufficient volume and margin to make a substantial impact on the profit of an organisation. They are popular with consumers and are sales are on an upward projectory.
- Cash Cows: are well established in the market place and require very little effort to generate substantial income. These are products that have reached maturity, with few threats or competition.
- Problem Childs: are new start-ups that are floundering to get market share and decisions need to be made with regard to allocating resources for relaunch or let them sink. This profile can be applied new products or existing ones that need a bit of a push to reach their potential.
- Dogs: are legacy items that have limited income potential but are kept around to fulfil the needs of existing clients. The decision to maintain these products may not be financial, but reputational as they satisfy the needs of a particular customer segment.
These profiles relate to the placement of these products on their respective life cycles. By their very nature, new products at high risk of failure and extra effort is required to gain sustainable market share. At first only innovators and early adopters will try the new brand, until it reaches mainstream acceptance. By definition there are fewer innovators around than the mainstreams so sales levels will be low and discount incentives may need to be applied. All effort in promoting new products at this stage should be seen as investing in future growth rather than just an expense.
Once it has proven itself within its target market, then it becomes a rising star. Income levels can now cover the initial investment, research and development and becomes pure profit. As the product reaches maturity less effort is need to maintain sales and you can sit back and just take the money, a Cash cow. Once your product is successful, then other companies will try to imitate you success with their own competitor options or substitutes.
Eventually, through developments in technology or changes in public taste, the product will go through a period of decline and decision will need to be made regarding its continuation. This forces the development of new product ranges to fill the space left by previous versions. The hardest thing at this stage is for business to lose their affection for existing products and continue innovating to remain relevant in the market space.
Each product will require different marketing strategies to appeal to particular segments of your customer base at different times within that products life. In the beginning it will require a greater slice of the marketing budget in order to get it to launch. A rising start will still need some support, where a cash cow just needs to remind existing customers that it is still around. Budgets are gradually reduced as the product is phased out of production.
To help define these strategies, we have developed a visual tool to place your product range within its relative position within the product life cycle. Try it to see where each stands and what marketing strategies are appropriate. Product Life Cycle Visualisation Tool
Next in the series we shall demonstrate how these theories play out in a case study.
Malcolm Ford has had 25 years business experience and has been involved conducting marketing campaigns for companies both in the UK and in Australia. He currently resells and implements Enterprise software systems.
