Page 38 - Marketing the Basics 2nd

30 Marketing: the Basics
very low market share. The results can also be manipulated to create a desirable outcome. On a practical level it is often demoralizing for a business unit to realize that they are just a cow – merely fit to spin off their profit to support more ‘sexy’ products. In fact, if more of the profits which they produce were reinvested in their product it might actually have the potential for greater growth. Thus, too often, the model can be used to place far too much emphasis on promoting stars at the expense of cash cows.
THE PRODUCT LIFE-CYCLE
In biology, an organism’s life can be divided into four stages: birth, growth, adulthood and decline. The sales curve of a product over time also exhibits the same characteristics, though marketers prefer to label the four stages as introduction, growth, maturity and decline. This sequence is known as the product life-cycle. Figure 2.2 illustrates a typical product life-cycle. On the horizontal axis is the length of time the product is on the market, while on the vertical axis is sales revenue. As the figure shows, typically revenue for a product follows an elongated ‘S-shape’ curve over its lifetime.
A product’s ‘life’ begins with its introduction to the marketplace.
Sales volume is low, and losses are registered since all the costs
associated with developing and bringing the product to market are
borne. Resources are spent promoting the product to increase its
visibility. This is most critical time in a product’s life; most new
products fail and die off early. The job of the marketer is clear: to
Sales
1 Introduction 2 Growth
3 Maturity
4 Decline
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0 Time figure 2.2 The product life-cycle