Product Life Cycle Explained | Apple iPhone & Coca Cola Examples

Summary

This video explains the product life cycle and its stages, using examples from Coca-Cola and Apple's iPhone. It highlights the research and development, introduction, growth, maturity, and decline phases, along with strategies businesses use to extend a product’s life, like line and brand extensions. The video also emphasizes the importance of understanding the life cycle for forecasting sales and making strategic decisions, while cautioning that not all products follow the typical path. Viewers are encouraged to reflect on their own experiences with product changes over time.

Takeaways

• 📈 The product life cycle is a key marketing concept, outlining the stages a product goes through from research and development (R&D) to its removal from the market.
• 💡 Not all products reach the decline stage—some continue to grow or quickly fall out of demand.
• 🚀 The R&D stage is time-consuming and costly, with no sales and negative cash flow.
• 📊 In the introduction stage, businesses heavily invest in marketing to attract early adopters, and pricing strategies like penetration pricing and price skimming are often used.
• 📈 The growth stage sees rapid sales increases, with competitors entering the market, and this is typically where cash flow becomes positive.
• 📉 The maturity stage shows stagnation in demand, but products are well-known, and marketing and production costs are lower, maintaining positive cash flow.
• 🔻 In the decline stage, sales decrease due to oversaturation or technological advancements, often leading to clearance sales and eventually discontinuing the product.
• 🛠️ Extension strategies, such as line extensions (like Diet Coke or Coca-Cola Zero), can prolong the product life cycle, delaying the decline stage.
• 📱 The iPhone, launched in 2007, experienced rapid growth until reaching maturity around 2016, with sales plateauing, indicating its current life cycle stage.
• 📉 While the product life cycle helps forecast trends and adapt strategies, it is only a theoretical model and may not apply uniformly to all products.

Q & A

What is the product life cycle?

The product life cycle is a marketing concept that describes the stages a product goes through, from initial design in the research and development phase to its eventual removal from the market.

What are the stages of the product life cycle?

The stages of the product life cycle include Research and Development, Introduction, Growth, Maturity, and Decline.

Why is the research and development stage important?

The research and development stage is crucial because it's where the product is designed. Although there are no sales and cash flow is negative, it lays the foundation for the product's success.

What happens during the introduction stage of a product?

In the introduction stage, the product is launched to the market. Businesses invest heavily in marketing and promotion, leading to negative cash flow. Pricing strategies like penetration pricing or price skimming are often used to attract early adopters.

How do competitors affect the growth stage?

During the growth stage, as demand and sales increase, competitors often enter the market with similar products. This can challenge the business, but it's also when the company typically starts to see positive cash flow and profits.

What characterizes the maturity stage of the product life cycle?

In the maturity stage, sales start to stagnate due to market saturation and high competition. However, costs related to production and marketing decrease, and cash flow remains positive.

How can businesses prolong the life of a product before it enters the decline stage?

Businesses can prolong the product's life by using extension strategies such as line extensions (e.g., Diet Coke, Coca-Cola Zero), brand extensions, advertising to reach new audiences, price reduction, adding value to the product, exploring new markets, or using new packaging.

What is the difference between a line extension and a brand extension?

A line extension involves introducing variations of the core product, such as Diet Coke targeting health-conscious consumers. A brand extension uses the established brand to enter a new market, like Coca-Cola expanding into selling chewing gum.

How has Apple’s iPhone followed the product life cycle?

The iPhone was introduced in 2007 and quickly moved through the growth stage, seeing rapid sales increases. By 2016, sales plateaued, marking the beginning of the maturity stage, where competition and market saturation slowed growth.

What are some advantages of using the product life cycle for business decisions?

The product life cycle helps businesses forecast sales trends, adapt strategies for different stages, minimize the risk of entering the decline stage, and assess where to invest next based on their product portfolio.

What are some limitations of the product life cycle model?

Not all products follow the typical stages. Some may move quickly from growth to decline, or skip maturity altogether. Additionally, the model is a prediction and should not be used in isolation for decision-making.

Outlines

00:00

📦 Product Life Cycle Overview

This video introduces the concept of the product life cycle, outlining the stages a typical product undergoes—from initial research and development (R&D) to eventual decline. Using real-life examples like Coca-Cola and Apple's iPhone, the importance of understanding the product's lifecycle is emphasized for effective business strategy. Each stage, from R&D, introduction, growth, maturity, to decline, is explained, highlighting marketing strategies and the financial impact of each stage.

05:03

🚀 Research, Development, and Introduction Stages

The first two stages of the product life cycle are discussed. The R&D stage is expensive and time-consuming with no sales and negative cash flow. The introduction stage involves heavy investment in marketing to raise product awareness. Common pricing strategies during this stage include penetration pricing and price skimming, aimed at early adopters to boost initial sales.

📈 Growth Stage

The growth stage is marked by increasing demand and sales as the product gains traction in the market. Competitors begin to appear, attempting to replicate the product's success. Cash flow turns positive, and businesses start seeing profits during this stage.

📊 Maturity Stage

In the maturity stage, the product's sales stagnate despite being well-known and established. Competitors and market saturation keep growth in check. Businesses benefit from reduced production and marketing costs, maintaining positive cash flow. Strategies focus on managing production and expanding distribution.

📉 Decline Stage

The product life cycle reaches the decline stage when sales decrease due to market saturation, competition, and changing consumer preferences. Cash flow turns negative, leading to reduced production and marketing efforts. Businesses often cut prices to clear out remaining stock and minimize losses.

🛠 Extending the Product Life Cycle

Companies can prolong a product's life cycle through extension strategies. Coca-Cola's successful line extensions, such as Diet Coke and Coca-Cola Zero, demonstrate how businesses adapt to changing consumer demands. Other extension strategies include introducing new features, exploring new markets, and altering packaging to attract customers.

📱 Case Study: The Apple iPhone

Apple's iPhone is used as a case study to illustrate the product life cycle. After its introduction in 2007, iPhone sales grew rapidly, reaching the maturity stage in 2016. Despite a slowdown in sales, the iPhone remains a dominant product. The video raises the question of whether Apple will innovate to extend the iPhone's life or if it will eventually enter decline.

📊 Key Insights and Limitations of the Product Life Cycle

The video concludes by discussing the benefits and limitations of the product life cycle model. While it helps businesses forecast sales and strategize for different stages, it is not a precise science. Some products may skip stages or experience unpredictable growth patterns. Businesses should use the model alongside other tools to make informed investment decisions.

Keywords

💡Product Life Cycle

The Product Life Cycle is a marketing concept describing the stages a product goes through from its initial idea to its removal from the market. The video emphasizes its importance for businesses to strategize at each stage, using examples like Coca-Cola and the iPhone to illustrate the stages of growth, maturity, and decline.

💡Research and Development (R&D)

R&D is the first stage of the product life cycle, where a product is designed but not yet produced. It is time-consuming and costly, with negative cash flow. The video explains that there are no sales at this stage, but investments are made to develop the product for future market launch.

💡Introduction Stage

The introduction stage is when a product is first launched in the market. Companies invest heavily in marketing and promotion to attract early adopters. The video mentions strategies like penetration pricing and price skimming used to boost demand during this phase.

💡Growth Stage

The growth stage is characterized by a rapid increase in sales and demand for the product. The video discusses how businesses start to see profits during this stage and face competition as other companies introduce similar products. The iPhone's significant sales growth is an example.

💡Maturity Stage

In the maturity stage, product sales stagnate as the market becomes saturated, but production costs are lower. The video notes that businesses must manage production levels carefully and may focus on reaching new audiences to maintain positive cash flow, as seen with Coca-Cola's strategies.

💡Decline Stage

The decline stage occurs when product sales decrease, often due to market saturation or changing consumer preferences. The video explains that companies may reduce production and lower prices to clear remaining stock. Coca-Cola's phased-out products like Coca-Cola Life are examples of products in this stage.

💡Product Extension Strategies

Product extension strategies are used to prolong a product's life before it enters the decline stage. The video highlights Coca-Cola’s use of line extensions like Diet Coke and Coca-Cola Zero, and brand extensions, such as branching into new markets like chewing gum.

💡Line Extension

Line extension involves creating new variations of an existing product, often targeting different market segments. The video gives examples like Coca-Cola introducing Diet Coke for females and Coca-Cola Zero for males, showing how companies expand product lines to attract different demographics.

💡Brand Extension

Brand extension refers to using a well-established brand to launch products in new categories or markets. The video mentions Coca-Cola using its brand to sell chewing gum, leveraging its brand recognition to gain a foothold in a new product market more quickly.

💡Penetration Pricing

Penetration pricing is a strategy where a product is launched at a low price to attract customers and gain market share. The video describes how businesses often use this strategy during the introduction stage to stimulate demand and encourage early adopters to try the product.

Highlights

The product life cycle is an essential concept in marketing that tracks a product's journey from initial design to market removal.

Not all products reach the final stage of decline; some continue to grow while others rise and fall quickly.

The research and development stage is time-consuming and costly, with no sales, resulting in negative cash flow.

During the introduction stage, businesses heavily invest in marketing and promotion, often using penetration pricing or price skimming strategies.

In the growth stage, sales increase rapidly, competitors may appear, and businesses begin to turn a profit.

The maturity stage sees demand stagnate, though the product is well-established, and cash flow remains positive due to reduced production and marketing costs.

In the decline stage, sales decrease as supply outstrips demand, often due to market saturation and technological advancements.

Businesses can extend the product life cycle through strategies such as line extensions, brand extensions, and targeted marketing.

Coca-Cola's product extensions, like Diet Coke and Coca-Cola Zero, helped prolong its life cycle by appealing to different consumer segments.

Apple's iPhone saw rapid growth after its 2007 launch, followed by a plateau, indicating it entered the maturity stage in 2016.

The product life cycle model helps businesses forecast sales trends, adapt strategies, and plan investments.

A key limitation of the product life cycle model is that not all products follow the typical stages, and it’s only a predictive theory.

Some products may bypass the maturity stage entirely, moving quickly from growth to decline due to market innovation or sudden shifts in demand.

The model allows businesses to view their product portfolio across different life cycle stages for more informed investment decisions.

The product life cycle is a simple yet powerful tool, but it should not be used in isolation when making business decisions.

Transcripts

This video explains the various stages that a typical product will go through

and what a business can do to increase demand during each stage, using coca-cola

and Apple's iPhone as real-life examples.

The product life cycle is an important concept in marketing it describes the

stages the product goes through, right from the point that the product is just

an initial design idea in the research and development stage, until the point

that the product is finally removed from the market at the end of its life.

However, it's important to note that not all products reached this final stage,

some continue to grow while others rise and fall very quickly. Ultimately, it is

critical that marketers understand the lifecycle of their product and business

executives should have a plan for dealing with products at every stage of

their lifecycle. So, first of all the product life cycle

starts at the research and development stage, this tends to be very time

consuming and costly as the product has been designed and isn't yet produced.

Therefore, there are no sales, so cashflow is negative at this stage.The next stage

is introduction which is when the product is launched to the market.

Typically the business would invest heavily in marketing and promotion of

the product and cashflow would usually be negative at this stage. Pricing

strategies are important at this stage and both penetration pricing and price

skimming are common strategies used to attract those early adopters or loyal

fans to purchase the product and get the ball rolling. Following the

introduction of the product sales will typically start to grow, Therefore the

growth stage comes next and is where sales start to increase rapidly

alongside demand for the product, also competitors may appear with similar

products as they try to replicate the businesses success. This is typically the

stage in which cash flow starts to turn positive and the business starts to see

a profit from the product. The next stage is maturity which is when demand for the

product starts to stagnate, although the product is typically well established

and well-known at this stage it tends to stagnate as there will also be high

competition in the market. However, a key positive for the business is that the

product is well established so cost of production and investment in marketing is

typically much lower, therefore cash flow tends to still be

positive during this stage. Common strategies during the maturity stage

include managing production levels to ensure the business doesn't over produce

whilst distributing the product to more businesses and retailers to reach a

wider audience commonly with a lower price tag following the maturity of the

product it enters the decline stage within which sales start to decrease and

the market is oversaturated with both competition and availability of products.

This leads to supply being higher than demand which is commonly influenced by

advancements in technology and changes in consumer buying behaviour, therefore it

is typical for a business to experience negative cash flow within this stage,

which eventually leads to the production and marketing of the product being

stopped to minimise costs whilst the price is cut to clearance to sell

off the final batch of units. Now it's very important to understand that a

business can actually prolong the life cycle before it enters the decline stage

through product extension strategies. If you consider the life cycle of Coca Cola

when their original product Coca Cola classic hit the maturity stage they have

had many strategies over the years to extend their brand and their core

product. This is typically through something called a line extension

examples of this include diet coke which is one of the most famous line

extensions for the company mainly targeting females to purchase the famous

soft drink. Then as a trend grew and health concerns around sugar became much

more serious they tried to attract males to a sugar-free alternative by

introducing coca cola zero. Other line extensions include cherry coke and more

recently in 2014 Coca Cola life, which had a very short

life cycle and was taken off sale in 2017 just three years after its release

so Coca Cola could simplify the choice between sugar and sugar-free options in

the UK. Another extension strategy would be

brand extension an example of this would be Coca Cola using their brand to expand

into a new market for example selling a range of chewing gum, essentially using

the brand of coca-cola to help the product become established in a new

market much quicker. Other examples of common extension strategies include

advertising with the aim of gaining and new audience or reminding the current

audience of the product. You've then got price reduction to make the product more

attractive to customers. You've then got adding value to the product such as

adding new features to the current product for example improving the

specifications on a smart phone. Exploring new markets such as selling

the products in new geographical areas or creating a version targeted at different

segments of the market is also quite a commonly used product extension strategy

and one final strategy is new packaging which is used to generate interest and

attract people to the product. Just have a think have you experienced any of

these product extension strategies in your lifetime have you seen any products

that you've been buying for years and all of a sudden they've had a change

whether that's a change in packaging the way they have been advertised to you or

are you getting more of the added value, just have a think whether you've ever

experienced that, it's most likely that you have. So now we will have a look at

the product lifecycle of Apple's iPhone. The iPhone was introduced to the market

in 2007 reporting 1.39 million sales, they hit the Growth stage fairly quickly

increasing from 1.39 million sales in their first year to 11.63 million sales in 2008

that's an increase of 736 %. Apple's iPhone

sales continued to grow for 8 years from 2008 to 2015

surprisingly having their biggest growth in the final year of this stage of the

product life cycle. A staggering increase of 62 million sales on top of 2014's 169

million sales. However, what you can clearly see from 2016 onwards is the

iPhone hitting the maturity stage within which sales actually decrease for the

first time ever a 19.3 million decrease

in unit sales in comparison to the previous year

as you can see sales in 2016 to 2018 have actually plateaued, a clear

indicator that the iPhone is currently in the maturity stage, so the question is

after a very strong first decade what's left for the Apple iPhone will the

product remain in the maturity stage for the next decade or will Apple actually

innovate a brand new concept which will cause the iPhone to enter the decline

stage just like the iPhone did to the iPod. So to finish off, we're just going

to look at a few key advantages and important limitations that should be

considered when making business decisions using the product life cycle. First of

all the product life cycle helps the business to forecast sales trends over

their lifetime, during a products life it allows the business to assess which

stage the product is in which helps the business to adapt their strategy to

increase sales and importantly to minimise the likelihood of it entering

the decline stage. It also allows a business to view its whole product

portfolio across the product life cycle to assess where their next investment is

best spent and it is a very simple tool for a business to use with the more data

a business has the more accurate it becomes. Now moving on to the limitations

that the business should consider when making investment decisions after using

the product lifecycle model, first of all not all products will follow the typical

shape of the life cycle whilst it is common that all products go for each

stage it cannot be assumed that they will, for example some products may excel

through the growth stage for years before hitting the maturity stage, whilst

others made quickly move from the growth stage straight into decline and miss the

maturity stage completely which can happen in instances such as being

replaced by innovation from competitors or demand in the market overall declines

quickly. However, a key consideration for a business is that the product life

cycle is only a prediction, a theory, not an exact science if you like.

Therefore, the product life cycle model should not be used in isolation to make

investment decisions hopefully that's helped you to get to grips with the

product life cycle. If it has, don't forget to like this

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