In the Growth Stage of the product life cycle the market is aware of the product you have introduced. Now sales have the potential to significantly increase and profitability will begin to rise. This is the result of economies of scale – the reduction in cost per unit resulting from increased production, realized through operational efficiencies.
Your advertising and distribution channels have paid off! More consumers are aware of your product in the market and competition is on the rise. Other manufacturers will think of a product that will compete with yours and this will result in a price decrease.
Picture this, say you came up with a lipstick that is both a moisturizer and a sunscreen that changes color when you change body temperature – when you feel hot your lips will turn hot red and if you feel chilly it turns into neutral pink. You gave samples at Target, WalMart and other stores for customers to try. Anita Wantaproduct, editor-in-chief of American Fashion picked your product as the new “IT” thing of the season.
Because of the feature article in American Fashion, people will become aware about the lipstick and everybody (well at least the women) will want to have one or two for each purse. Lancome and Maybelline came out with a similar lipstick but in a different shade. This may prompt you to reduce your price from the original $10 each to $8.95.
What do you think will happen next? Will it continue to rise and be an item in every woman’s purse? Or will it be just another ordinary lipstick?
Grow Your Sales,
p.s. I don’t think they should directly compete with the other products and lower their price, but that can be discussed later.