Page 2: The product life-cycle
The traditional product life-cycle shows how a product goes through 4 stages during its life in the market place. At each stage in the product life-cycle, there is a close relationship between sales and profit so when a product goes into decline, profits decrease.
When a product is introduced to the market, growth is slow due to limited awareness. As the product is establishing itself, sales will start to increase during the period of growth. As the product reaches maturity, the company needs to inject new life into the product, either by creating brand extensions or variants otherwise the product will reach maturity and start to decline.
Before taking any investment decisions, Kellogg's undertook market research. It wanted to answer these questions:
- What changes taking place in society are likely to affect the product?
- How might new technologies affect our business?
- What are likely to be the future market trends?
- Where are the opportunities within the market place?
- What new categories would appeal to the target market?
- How far do consumers think the brand could stretch into the market for different product categories?
Kellogg's had to understand how the product could be extended into a series of variants which would keep the core product strong, but grow the brand as a whole.
Manufacturing capability is another key issue. If launches of new products are successful in global markets, Kellogg's must have the manufacturing capacity to meet consumer demand as well as the supply chain necessary to reach those consumers.