On October 23rd, 2014, we updated our
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shows the stages thatproducts go through from development to withdrawal fromthe market the range of products acompany has in development or available for consumers atany one time , Managing product portfolio is important forcash flow
• Each product may have a different life cycle• PLC determines revenue earned• Contributes to strategic marketing planning• May help the firm to identify when a product needs support, redesign, reinvigorating, withdrawal, etc.• May help in new product development planning• May help in forecasting and managing cash flow
• New ideas/possible inventions• Market analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at?• Product Development and refinement• Test Marketing – possibly local/regional• Analysis of test marketing results and amendment of product/production process• Preparations for launch – publicity, marketing campaign
• Advertising and promotion campaigns• Target campaign at specific audience?• Monitor initial sales• Maximise publicity• High cost/low sales• Length of time – type of product
• Sales reach peak• Cost of supporting the product declines• Ratio of revenue to cost high• Sales growth likely to be low• Market share may be high• Competition likely to be greater• Price elasticity of demand?• Monitor market – changes/amendments/new strategies?
• Searching out new markets: • Linking to changing fashions • Seeking new or exploiting market segments • Linking to joint ventures – media/music, etc.• Developing new uses• Focus on adapting the product• Re-packaging or format• Improving the standard or quality• Developing the product range
• Product outlives/outgrows its usefulness/value• Fashions change• Technology changes• Sales decline• Cost of supporting starts to rise too far• Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?
Sales Development Introduction Growth Maturity Saturation Decline Time
Sales Effects of Extension Strategies Time
Sales/Profits PLC Profits Time Losses Break Even
products in markets experiencing high growth rateswith a high or increasing share of the market .Potential for high revenue growth
High market shareCashCows Low growth markets – maturity stage of PLC Low cost support High cash revenue – positive cash flows
Dogs Products in a low growth market Have low or declining market share (decline stage of PLC) Associated with negative cash flow May require large sums of money to support
Problem Child:Products having a low market share in a high growth marketNeed money spent to develop themMay produce negative cash flowPotential for the future?
Market Growth High Problem Children Stars Dogs Cash Cows Market Share Low High
Are they worth persevering with?Dogs How much are they costing? Could they be revived in some way? How much would it cost to continue to support such products? How much would it cost to remove from the market?
What are the chances of theseProblem products securing a holdChildren in the market? How much will it cost to promote them to a stronger position? Is it worth it?
Huge potentialStars May have been expensive to develop Worth spending money to promote Consider the extent of their product life cycle in decision making
Cheap to promoteCashCows Generate large amounts of cash – use for further R&D? Costs of developing and promoting have largely gone Need to monitor their performance – the long term? At the maturity stage of the PLC?
The Ansoff Growth matrix is a tool that helps businessesdecide their product and market growth strategy.Ansoff’s product/market growth matrix suggests that abusiness’ attempts to grow depend on whether it marketsnew or existing products in new or existing markets
Favorite definition is: "The Ansoff growth matrix assistsorganizations to map strategic product market growth"In order to make a worthwhile analysis it is also important toconsider other factors, such as the condition of the market. Youwill need to know if it is in growth, decline or entering recession.Competition levels and amount of resources available need alsoto be taken into account.
The Ansoff Matrix was invented by H. Igor Ansoff. Ansoff wasprimarily a mathematician with an expert insight intobusiness managementTo portray alternative corporate growth strategies, IgorAnsoff presented a matrix that focused on the firms presentand potential products and markets (customers). Byconsidering ways to grow via existing products and newproducts, and in existing markets and new markets,
Looking at it from a business perspective, the low risk option is tostay with your existing product in your existing market: you knowthe product works, and the market holds few surprises for you.However, you expose yourself to a whole new level of risk byeither moving into a new market with an existing product, ordeveloping a new product for an existing market. The new marketmay turn out to have radically different needs and dynamics thanyou thought, and the new product may just not be commerciallysuccessful.And by moving two quadrants and targeting a new market with anew product, you increase your risk to yet another level!
Ansoffs matrix provides four different growth strategies:Market Penetration - the firm seeks to achieve growth with existing products intheir current market segments, aiming to increase its market share.Market Development - the firm seeks growth by targeting its existing productsto new market segments.Product Development - the firms develops new products targeted to its existingmarket segments.Diversification - the firm grows by diversifying into new businesses bydeveloping new products for new markets.
Market penetration is the name given to a growthstrategy where the business focuses on selling existingproducts into existing markets.
Market penetration seeks to achieve four main objectives:• Maintain or increase the market share of current products – this can beachieved by a combination of competitive pricing strategies, advertising, salespromotion and perhaps more resources dedicated to personal selling• Secure dominance of growth markets• Restructure a mature market by driving out competitors; this would requirea much more aggressive promotional campaign, supported by a pricingstrategy designed to make the market unattractive for competitors• Increase usage by existing customers – for example by introducing loyaltyschemes
A market penetration marketing strategy is very much about“business as usual”. The business is focusing on markets andproducts it knows well. It is likely to have good information oncompetitors and on customer needs. It is unlikely, therefore, thatthis strategy will require much investment in new marketresearch.
Market development is the name given to a growth strategy where thebusiness seeks to sell its existing products into new markets.There are many possible ways of approaching this strategy, including:• New geographical markets; for example exporting the product to anew country• New product dimensions or packaging• New distribution channels• Different pricing policies to attract different customers or create newmarket segments
Product development is the name given to a growth strategywhere a business aims to introduce new products into existingmarkets. This strategy may require the development of newcompetencies and requires the business to develop modifiedproducts which can appeal to existing markets
Diversification is the name given to the growth strategy where abusiness markets new products in new markets.This is an inherently more risk strategy because the business ismoving into markets in which it has little or no experience.For a business to adopt a diversification strategy, therefore, itmust have a clear idea about what it expects to gain from thestrategy and an honest assessment of the risks.