Explain one way a business could extend the life of a product.
CAMBRIDGE
A level and AS level
Year Examined
February/March 2023
Topic
Product Management & Strategy
👑Complete Model Essay
Product Life Cycle Extension Strategies
The product life cycle is a crucial concept in business studies, illustrating the different stages a product goes through from its introduction to its eventual decline. Businesses strive to extend the life cycle of their products to maximize profitability and market share. One effective strategy for achieving this is price reduction.
Price Reduction as a Life Cycle Extension Strategy
Price reduction can be implemented at various stages of the product life cycle but is particularly effective during the maturity or early decline phases.
Maturity Phase
During the maturity phase, sales growth slows down as the market becomes saturated. Competition intensifies, and businesses need to find ways to maintain their market share. By reducing the price of their product, businesses can attract a wider customer base, including price-sensitive consumers who may have previously opted for competitor products. This can help to boost sales and extend the product's life cycle.
Early Decline Phase
As a product enters the decline phase, sales begin to fall. This could be due to several factors, such as changing consumer preferences, technological advancements, or increased competition. A price reduction can be a strategic move to stimulate demand and slow down the rate of decline. By making the product more affordable, businesses can entice customers who may have been considering switching to newer alternatives to stay loyal.
Example: Apple's iPhone SE
Apple is a prime example of a company that has successfully used price reduction to extend the life cycle of its products. When Apple releases a new iPhone model, older models are often discounted. For example, the iPhone SE (first generation) was initially launched in 2016. As newer models were released, Apple gradually reduced the price of the iPhone SE, making it an attractive option for budget-conscious consumers. This strategy allowed Apple to continue generating revenue from older models and extend their lifespan.
Conclusion
Extending a product's life cycle is a key objective for businesses aiming to maximize profitability. Price reduction is a viable strategy that can be employed at different stages of the cycle, particularly during the maturity and early decline phases. By implementing price reductions strategically, businesses can attract new customers, retain existing ones, and compete effectively in the marketplace. Apple's success with the iPhone SE exemplifies the effectiveness of this strategy in action.
Source:
*Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson Education.
Explain one way a business could extend the life of a product.
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A-Level Business Studies Essay Guide: Extending Product Life Cycles
This guide will walk you through writing an A-Level Business Studies essay focusing on extending the life of a product, using the example of reducing product price and more advertising. We'll cover relevant tips for scoring highly on your essay, specifically focusing on A02 (application) criteria.
Understanding the Essay Question
Before you start writing, ensure you fully understand the question. In this case, you need to:
- Identify one way a business can extend the product life cycle.
- Apply this strategy to a real-world example.
- Demonstrate both developed and limited application of the chosen strategy.
Choosing a Product and Strategy
Select a product whose life cycle you can analyze. Consider:
- Popularity: Choose a product you are familiar with and one that has a clear product life cycle.
- Stage of Life Cycle: Select a product that is in a later stage of the life cycle (maturity or decline) as this provides more opportunities for extending it.
For your chosen product, select one strategy for extending its life. For this guide, we'll use the following:
- Product Price Reduction (Developed Application): This strategy aims to attract new customers by making the product more affordable.
- More Advertising (Limited Application): Increased advertising can boost awareness but may not be as effective in a mature or declining phase.
Developed Application: Price Reduction
Example: Imagine a product like a popular smartphone model that has been on the market for a few years. It's likely in the maturity phase of its life cycle. Sales have leveled off, and newer models are being released.
Application: The company could decide to reduce the price of the existing model to attract budget-conscious customers and stimulate sales. This strategy could be developed in your essay by:
- Analyzing the impact of price reduction on sales: Discuss how lowering the price can make the product more appealing, potentially tapping into a new market segment.
- Examining the effects on profit margins: Analyze how price reduction impacts the business's profitability and whether it can be implemented without compromising revenue goals.
- Exploring potential challenges: Address possible issues like the need to manage customer expectations (e.g., price reduction might be perceived as a sign of declining quality).
- Offer real-world examples: Highlight companies that have successfully implemented a price reduction strategy to extend a product's life cycle.
Limited Application: More Advertising
Example: Using the same smartphone example, the company could also choose to increase advertising to boost awareness and attract new customers.
Application: This strategy can be limited in its application for a product in the maturity or decline phase. Discuss how:
- Advertising might not be as effective: Customers might already be familiar with the product, and more advertising may not significantly increase sales if the product itself is not appealing or has weaknesses.
- Advertising can be expensive: Increasing advertising spending can be costly and may not yield the desired return on investment.
- Alternative strategies might be more suitable: Consider strategies like product modification, new packaging, or targeted marketing to specific segments.
A02 Tips for Success
To excel in A02 (application) criteria, remember:
- Use real-world examples: Draw upon relevant case studies or companies that have used the chosen strategies.
- Analyze the impact and limitations: Don't just describe the chosen strategy; discuss its potential impact and limitations in the context of your chosen product.
- Show critical thinking: Provide evidence to support your claims and demonstrate a deep understanding of the concepts involved.
- Use relevant business terminology: Use terms like "product life cycle," "market share," "profit margin," "customer segmentation," etc., to demonstrate your knowledge.
- Structure your argument clearly: Use headings and subheadings to organize your essay logically and ensure a clear flow of ideas.
Extracts from Mark Schemes
Explain one way a business could extend the life of a product.
• One way to extend the life of the product e.g. reduce price, more advertising.
AO2 Application
• Developed application of one way to extend – reduce product price to attract customers and gain more sales.
• Limited application of one way – more advertising to attract customers.