EnglandBusinessSyllabus dot point

How do businesses design products and set prices to win customers?

The marketing mix - product and price: the product life cycle and extension strategies, the design mix, the Boston Matrix, and pricing strategies including cost-plus, competitive, penetration, skimming, psychological and loss leader.

A focused answer to OCR GCSE Business J204 topic 2.4 on product and price, covering the product life cycle and extension strategies, the Boston Matrix, and the main pricing strategies.

Generated by Claude Opus 4.811 min answerUpdated 2026-06-02

Reviewed by: AI editorial process; not yet individually human-reviewed

Have a quick question? Jump to the Q&A page

Quick answer

The product life cycle traces a product's sales over time through introduction, growth, maturity and decline. Extension strategies (new packaging, reformulation, new markets, price changes, fresh promotion) prolong the maturity stage and delay decline. The Boston Matrix classifies a firm's products as stars, cash cows, question marks or dogs by market share and market growth, helping it manage a balanced portfolio. Pricing strategies include cost-plus (add a margin to cost), competitive (match rivals), penetration (a low launch price to win share), price skimming (a high launch price for a new, distinctive product), psychological (such as 2.99) and loss leader (selling below cost to attract custom). The right strategy depends on the product, the market and the firm's objectives.

Jump to a section

What this topic is asking
The product life cycle
Extension strategies
The design mix
The Boston Matrix
Pricing strategies
Try this

What this topic is asking

OCR J204 topic 2.4 (product and price) wants you to understand the product life cycle and extension strategies, the design mix, the Boston Matrix, and the main pricing strategies and when each is used. Product and price are two of the four Ps; this page covers them, and the partner page covers promotion and place. The exam often gives a product at a particular life-cycle stage and asks how the business should respond.

The product life cycle

Each stage needs a different marketing response. At introduction, the firm spends on awareness; in growth it builds distribution; at maturity it defends market share; in decline it decides whether to extend, harvest or withdraw the product. Knowing the stage tells a business where to focus.

Extension strategies

Extension strategies are cheaper than developing a brand-new product, so businesses use them to keep a successful product earning for longer before it declines.

The design mix

A strong design balances all three for its target market. A budget product leans on cost and basic function; a premium product leans on aesthetics and advanced function. OCR expects you to link the design mix to the segment the product targets.

The Boston Matrix

The matrix helps a business manage a balanced portfolio: cash cows fund the development of stars and question marks, while dogs are reviewed for withdrawal. It is a snapshot, so it must be used with judgement and kept up to date.

Pricing strategies

The choice depends on the product (new and distinctive favours skimming), the market (crowded favours competitive or penetration) and the firm's objective (winning share favours penetration). The strategy can change as the product moves through its life cycle.

Cost-plus pricing and the resulting margin

Set out the figures

A firm's cost to make one unit is $20$ . It uses cost-plus pricing with a $40\%$ mark-up.

Calculate the selling price

\text{Mark-up} = 20 \times 0.40 = 8.

\text{Selling price} = 20 + 8 = 28.

Check the profit per unit

\text{Profit per unit} = 28 - 20 = 8.

Interpret the result

Cost-plus pricing gives a selling price of $28$ and a guaranteed $8$ profit per unit, simple and safe because it always covers cost. The risk is that it ignores what customers will pay and what rivals charge: if competitors sell at $25$ , the firm may need a smaller mark-up or a different strategy to stay competitive.

Try this

Q1. State the four main stages of the product life cycle in order. [2 marks]

Cue. Introduction, growth, maturity, decline.

Q2. A unit costs $15$ to make and the firm adds a $20\%$ mark-up. Calculate the selling price. [2 marks]

Cue. Mark-up $= 15 \times 0.20 = 3$ ; selling price $= 15 + 3 = 18$ .

Exam-style practice questions

Practice questions written in the style of OCR exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.

OCR J204/01 20182 marksIdentify two stages of the product life cycle. (Paper 1, Section A)

Show worked answer →

A 2-mark AO1 recall question, one mark per correct stage. The stages are introduction (launch), growth, maturity and decline (development before launch is sometimes also credited). Any two of these in the right sense score. A common error is to give marketing actions (such as "advertising") rather than life-cycle stages.

OCR J204/01 20226 marksA confectionery business sells a chocolate bar that has reached the maturity stage of its life cycle, with sales no longer growing. Analyse two extension strategies the business could use to maintain sales. (Paper 1, Section B)

Show worked answer →

A 6-mark "analyse" needing two developed chains applied to the chocolate bar. Strategy one (new packaging or reformulation): updating the wrapper or adding a new flavour refreshes interest, so existing customers keep buying and new ones try it, which means sales are sustained for longer in maturity. Strategy two (new markets or promotion): promoting the bar to a new segment or in a new region, or running a price promotion, reaches buyers it had not before, so the customer base widens and the decline stage is delayed. Markers reward two valid extension strategies, each developed with a chain that refers to the chocolate bar and its maturity stage.

Related dot points

Sources & how we know this

OCR GCSE Business (J204) specification — OCR (2017)