From the above graph, it is clear that sales vary with time and hence the strategies used in each of these stages should be different.
Introduction stage – In this stage, sales maybe low and hence the profit would be low. The firm has to engage in heavy promotion to create awareness about the product in the market. Cost plus formula is generally used for determining the price of the product.
Growth stage – Sales in this period are rapidly rising and so are the profits. Promotion is not that aggressive. However, firms do offer warranties and other offers to promote the product. The main aim is to increase the market share.
Maturity stage – In this stage, sales have reached a peak and even the profits have reached the peak. Here the strategy is to maximize profits and also retain the market share. The firm also tries to price the product in the same range as that of the competitor. The firm tries to diversify and bring in variations by creating newer models. Thus, strong distribution networks are built and the promotion is increased to create awareness about the new brands.
Decline stage –Here, both sales and profits are declining. The strategy is to incur minimal or no expenditure on this product and milk it as much as possible before it declines completely. Hence prices are cut. Promotion is minimized.
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