Product Life Cycle Explained | Apple iPhone & Coca Cola Examples — Transcript

Full transcript

1. 0:00This video explains the various stages that a typical product will go through
2. 0:03and what a business can do to increase demand during each stage, using coca-cola
3. 0:08and Apple's iPhone as real-life examples.
4. 0:20The product life cycle is an important concept in marketing it describes the
5. 0:25stages the product goes through, right from the point that the product is just
6. 0:29an initial design idea in the research and development stage, until the point
7. 0:33that the product is finally removed from the market at the end of its life.
8. 0:37However, it's important to note that not all products reached this final stage,
9. 0:42some continue to grow while others rise and fall very quickly. Ultimately, it is
10. 0:48critical that marketers understand the lifecycle of their product and business
11. 0:52executives should have a plan for dealing with products at every stage of
12. 0:56their lifecycle. So, first of all the product life cycle
13. 1:01starts at the research and development stage, this tends to be very time
14. 1:06consuming and costly as the product has been designed and isn't yet produced.
15. 1:10Therefore, there are no sales, so cashflow is negative at this stage.The next stage
16. 1:16is introduction which is when the product is launched to the market.
17. 1:20Typically the business would invest heavily in marketing and promotion of
18. 1:24the product and cashflow would usually be negative at this stage. Pricing
19. 1:28strategies are important at this stage and both penetration pricing and price
20. 1:33skimming are common strategies used to attract those early adopters or loyal
21. 1:37fans to purchase the product and get the ball rolling. Following the
22. 1:41introduction of the product sales will typically start to grow, Therefore the
23. 1:46growth stage comes next and is where sales start to increase rapidly
24. 1:49alongside demand for the product, also competitors may appear with similar
25. 1:54products as they try to replicate the businesses success. This is typically the
26. 1:59stage in which cash flow starts to turn positive and the business starts to see
27. 2:03a profit from the product. The next stage is maturity which is when demand for the
28. 2:08product starts to stagnate, although the product is typically well established
29. 2:13and well-known at this stage it tends to stagnate as there will also be high
30. 2:17competition in the market. However, a key positive for the business is that the
31. 2:21product is well established so cost of production and investment in marketing is
32. 2:26typically much lower, therefore cash flow tends to still be
33. 2:30positive during this stage. Common strategies during the maturity stage
34. 2:34include managing production levels to ensure the business doesn't over produce
35. 2:38whilst distributing the product to more businesses and retailers to reach a
36. 2:42wider audience commonly with a lower price tag following the maturity of the
37. 2:48product it enters the decline stage within which sales start to decrease and
38. 2:53the market is oversaturated with both competition and availability of products.
39. 2:57This leads to supply being higher than demand which is commonly influenced by
40. 3:02advancements in technology and changes in consumer buying behaviour, therefore it
41. 3:08is typical for a business to experience negative cash flow within this stage,
42. 3:11which eventually leads to the production and marketing of the product being
43. 3:15stopped to minimise costs whilst the price is cut to clearance to sell
44. 3:19off the final batch of units. Now it's very important to understand that a
45. 3:24business can actually prolong the life cycle before it enters the decline stage
46. 3:27through product extension strategies. If you consider the life cycle of Coca Cola
47. 3:33when their original product Coca Cola classic hit the maturity stage they have
48. 3:38had many strategies over the years to extend their brand and their core
49. 3:42product. This is typically through something called a line extension
50. 3:46examples of this include diet coke which is one of the most famous line
51. 3:51extensions for the company mainly targeting females to purchase the famous
52. 3:56soft drink. Then as a trend grew and health concerns around sugar became much
53. 4:01more serious they tried to attract males to a sugar-free alternative by
54. 4:05introducing coca cola zero. Other line extensions include cherry coke and more
55. 4:11recently in 2014 Coca Cola life, which had a very short
56. 4:15life cycle and was taken off sale in 2017 just three years after its release
57. 4:21so Coca Cola could simplify the choice between sugar and sugar-free options in
58. 4:25the UK. Another extension strategy would be
59. 4:27brand extension an example of this would be Coca Cola using their brand to expand
60. 4:32into a new market for example selling a range of chewing gum, essentially using
61. 4:37the brand of coca-cola to help the product become established in a new
62. 4:41market much quicker. Other examples of common extension strategies include
63. 4:46advertising with the aim of gaining and new audience or reminding the current
64. 4:50audience of the product. You've then got price reduction to make the product more
65. 4:54attractive to customers. You've then got adding value to the product such as
66. 4:59adding new features to the current product for example improving the
67. 5:02specifications on a smart phone. Exploring new markets such as selling
68. 5:07the products in new geographical areas or creating a version targeted at different
69. 5:11segments of the market is also quite a commonly used product extension strategy
70. 5:16and one final strategy is new packaging which is used to generate interest and
71. 5:22attract people to the product. Just have a think have you experienced any of
72. 5:26these product extension strategies in your lifetime have you seen any products
73. 5:30that you've been buying for years and all of a sudden they've had a change
74. 5:33whether that's a change in packaging the way they have been advertised to you or
75. 5:37are you getting more of the added value, just have a think whether you've ever
76. 5:41experienced that, it's most likely that you have. So now we will have a look at
77. 5:46the product lifecycle of Apple's iPhone. The iPhone was introduced to the market
78. 5:50in 2007 reporting 1.39 million sales, they hit the Growth stage fairly quickly
79. 5:56increasing from 1.39 million sales in their first year to 11.63 million sales in 2008
80. 6:04that's an increase of 736 %. Apple's iPhone
81. 6:10sales continued to grow for 8 years from 2008 to 2015
82. 6:15surprisingly having their biggest growth in the final year of this stage of the
83. 6:20product life cycle. A staggering increase of 62 million sales on top of 2014's 169
84. 6:27million sales. However, what you can clearly see from 2016 onwards is the
85. 6:32iPhone hitting the maturity stage within which sales actually decrease for the
86. 6:36first time ever a 19.3 million decrease
87. 6:40in unit sales in comparison to the previous year
88. 6:43as you can see sales in 2016 to 2018 have actually plateaued, a clear
89. 6:49indicator that the iPhone is currently in the maturity stage, so the question is
90. 6:53after a very strong first decade what's left for the Apple iPhone will the
91. 6:58product remain in the maturity stage for the next decade or will Apple actually
92. 7:02innovate a brand new concept which will cause the iPhone to enter the decline
93. 7:06stage just like the iPhone did to the iPod. So to finish off, we're just going
94. 7:11to look at a few key advantages and important limitations that should be
95. 7:15considered when making business decisions using the product life cycle. First of
96. 7:20all the product life cycle helps the business to forecast sales trends over
97. 7:24their lifetime, during a products life it allows the business to assess which
98. 7:29stage the product is in which helps the business to adapt their strategy to
99. 7:33increase sales and importantly to minimise the likelihood of it entering
100. 7:38the decline stage. It also allows a business to view its whole product
101. 7:42portfolio across the product life cycle to assess where their next investment is
102. 7:47best spent and it is a very simple tool for a business to use with the more data
103. 7:52a business has the more accurate it becomes. Now moving on to the limitations
104. 7:57that the business should consider when making investment decisions after using
105. 8:01the product lifecycle model, first of all not all products will follow the typical
106. 8:06shape of the life cycle whilst it is common that all products go for each
107. 8:10stage it cannot be assumed that they will, for example some products may excel
108. 8:15through the growth stage for years before hitting the maturity stage, whilst
109. 8:19others made quickly move from the growth stage straight into decline and miss the
110. 8:23maturity stage completely which can happen in instances such as being
111. 8:27replaced by innovation from competitors or demand in the market overall declines
112. 8:32quickly. However, a key consideration for a business is that the product life
113. 8:36cycle is only a prediction, a theory, not an exact science if you like.
114. 8:41Therefore, the product life cycle model should not be used in isolation to make
115. 8:46investment decisions hopefully that's helped you to get to grips with the
116. 8:49product life cycle. If it has, don't forget to like this
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