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CPA The Product Life Cycle - YouTube
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[Music]
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consider your TV at home and compare it
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to the video store the cinema and
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Netflix before houses had TVs there was
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nothing to do so people went to the
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movies TV was exciting and then came the
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VCR to make it even better the ability
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to record and watch videos then Netflix
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came along and partially ruined the
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party for video stores but not for
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watching shows people still loved
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watching shows this provides a great
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example of how product life cycles work
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when video rentals were first introduced
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not many people had a VCR or Betamax
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player people went around to a friend's
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house to watch a movie together it was a
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social event more and more people
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enjoyed it and that experience led to a
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rapid growth in the market but once
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everyone had a video player and the
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average person was already watching one
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or two movies a week it became very
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difficult for any new growth to occur
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you can't rent out more videos than
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there are people or time to watch them
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just like a person who initially grows
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rapidly but then stops once they've
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reached maturity a product will also go
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through an introduction and growth phase
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and then mature renting movies from the
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video store was incredibly popular and a
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traditional way to spend a Friday or
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Saturday night but just like a person it
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entered a decline phase although people
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still want to watch movies the delivery
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mechanism the internet changed and
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transformed the market so now we have
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Netflix and Stan who initially started
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in the introduction phase and have now
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achieved significant growth classifying
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a product into the right stage of the
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life cycle is the first step this
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involves looking at the revenues across
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different time periods to track how the
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product is performing the next part of
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the analysis is to understand the impact
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on the business
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at different stages we have different
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issues to contend with in the
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introductory phase a large amount of
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cash is required for product development
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and marketing but sales are going to be
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low so there's going to be a cash
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deficit how are you going to fund this
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and what will you do if the product is
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not success
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this issued nearly sent Netflix bust
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when it first started and it nearly ran
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out of cash while it was still trying to
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win enough customers to cover its costs
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remember there's no guarantee that
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introduction will lead to growth coke
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with stevia is a good example of this
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during the growth phase there are enough
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customers to share between competitors
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so there's a chance to be cashflow
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positive but you also need to keep
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investing in the product by hiring more
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staff spending more on infrastructure
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and equipment and also keeping market
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share through advertising and marketing
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while the maturity phase has less growth
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occurring it's still a very positive
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place to be because less cash is
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required to be spent on maintaining the
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product this can often lead to a cash
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cow situation if you have a high market
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share but if you don't realize that
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maturity is arrived you can create
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significant problems Crocs were
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extremely popular and the organization
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built more factories and produced more
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inventory to cater for this future
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growth but the growth slowed and they
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lost millions because they were in
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maturity or even decline before they
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knew it you also need to be careful of
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the decline stage when things start to
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go bad with sales and revenues dropping
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you need to quickly evaluate if it is
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the end of the line for the product
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hanging on too long can lead to
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significant losses but with emotional
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attachment and years of organizational
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activity linked to making and selling a
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product can be very hard to stop
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production one final thing to note a
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product can experience rebirth or
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renewal if you think of vinyl records
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making a comeback you'll see that there
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can be opportunities to recreate
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products for a new market
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