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.