Sales product variety and competition increase rapidly during the phase of the sales life cycle

In which of the following stages of product life cycle a company reduces sales promotion to take advantage of heavy consumer demand?

1. Introduction
2. Growth
3. Maturity
4. Decline

Answer (Detailed Solution Below)

Option 2 : Growth

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Product Life Cycle:

1. The term product life cycle refers to the length of time a product is introduced to consumers into the market until it's removed from the shelves.
2. The life cycle of a product is broken into four stages—introduction, growth, maturity, and decline.
3. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase advertising, reduce prices, expand to new markets, or redesign packaging.
4. The process of strategizing ways to continuously support and maintain a product is called product life cycle management.

1. Introduction Stage:
   • The introduction stage shows low sales numbers as the product is being introduced in the market.
   • Profit is zero or negative in this stage because of the heavy expenses of product introduction. 
   • Sales Promotion Strategy: Use heavy sales promotion to entice trial.
2. Growth Stage:
   • With proper marketing, a product can go into the growth stage.
   • During the growth stage, sales rise rapidly as consumers begin to accept the product.
   • The production runs become longer, and economies of scale are achieved, reducing per-unit cost, and also helping profits to increase rapidly. 
   • Sales Promotion Strategy: Reduce to take advantage of heavy consumer demand.
3. Maturity Stage:
   • During the maturity stage of the product life cycle, the sharp growth in sales begins to slow, and profits at the beginning of this stage decline. 
   • The most notable characteristic of this stage is the peaking of the product’s sales and profit curves.
   • At the beginning of the maturity stage, sales continue to grow but at a much slower rate.
   • Towards the end of this stage, sales and profits will start to fall fairly rapidly.
   • This stage is characterized by severe competition as many brands enter the market.
   • To combat competition, marketing costs increase substantially results in a reduction in profits. 
   • Sales Promotion Strategy: Increase to encourage brand switching.

For any product, it’s PLC will go to the decline stage, where the product’s sales and profits fall very quickly, and most competitors leave the market. Sales Promotion Strategy: Reduce to a minimal level.

Thus, option 2 is the correct answer.

estions 13-1 through 13-18–1 What is target costing?

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13-2A firm has two options for reducing costs to a achieve a desired target cost:3–2 Explain the two methods for reducing total product costs to achieve a desired tarhich is more common in the consumer electronics industries? In the specialized equanufacturing industries?

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–3 What does the term sales life cycle mean? What are the phases of the sales life cyffer from the cost life cycle?13-3

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Chapter 13 - Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and StrategicPricingCHAPTER 13COST PLANNING FOR THE PRODUCT LIFE CYCLE:TARGETCOSTING, THEORY OF CONSTRAINTS,AND STRATEGIC PRICINGQUESTIONS13-1A firm has two options for reducing costs to a target cost level:a. Reduce costs to a target cost level by integrating new manufacturingtechnology, using advanced cost management techniques such as activity-basedcosting, and seeking higher productivity through improved organization and laborrelations.This method of cost reduction is common in specialized equipmentmanufacturing.b. Reduce cost to a target cost level by redesigning a popular product.Thismethod is the more common of the two, because it recognizes that designdecisions account for much of total product life cycle costs (see Exhibit 13-3). Bycareful attention to design, significant reductions in total cost are possible. Thisapproach to target costing is associated primarily with Japanese manufacturers,especially Toyota, which is credited with developing the method in the mid1960s. This method of cost reduction is common in consumer electronics.13-2The sales life cycle refers to the phase of the product’s sales in the market - fromintroduction of the product to decline and withdrawal from the market.Incontrast, the cost life cycle refers to the activities and costs incurred indeveloping a product, designing it, manufacturing it, selling it and servicing it. Thephases of the sales life cycle are:Phase One: Product Introduction.In the first phase there is littlecompetition, and sales rise slowly as customers become aware of the newproduct.Costs are relatively high because of high R&D expenditures and capitalcosts for setting up production facilities and marketing efforts.Prices arerelatively high because of product differentiation and the high costs at this phase.Product variety is limited.Phase Two: Growth.Sales begin to grow rapidly and product varietyincreases.The product continues to enjoy the benefits of differentiation.Thereis increasing competition and prices begin to soften.Phase Three: Maturity.Sales continue to increase but at a decreasing rate.There is a reduction in the number of competitors and product variety. Pricessoften further, and differentiation is no longer important.Competition is based oncost, given competitive quality and functionality.Phase Four: Decline.Sales begin to decline, as does the number ofcompetitors.Prices stabilize.Emphasis on differentiation returns.Survivors areable to differentiate their product, control costs, and deliver quality and excellentservice.Control of costs and an effective distribution network are key tocontinued survival.

During which stage of the sales life cycle of a product do sales continue to increase?

Which of the following is consistent with the growth stage of the product life cycle?

Is a technique in which the firm determines the desired cost for the product or service given a competitive market price so the firm can earn a desired profit?

What will happen to a firm if it continues to produce the same products in a saturated market?