Product Life Cycle: When Do Promotional Expenditures Increase?

At which stage of the Product Life Cycle would promotional expenditures most likely increase as a company reacts to increasing competition?

Choose one:

A. Introduction

B. Growth

C. Maturity

D. Decline

Answer:

The stage in the Product Life Cycle where promotional expenditures would likely increase in response to increasing competition is the Growth stage.

The stage of the Product Life Cycle (PLC) where promotional expenditures would most likely increase as a company reacts to increasing competition is the Growth stage. During this stage, customer demand grows, sales volumes increase, and the product begins to gain popularity and awareness. As the competition starts to increase, so do promotional efforts.

This increase in promotion is a strategy used by companies to differentiate themselves and attract more customers, as they respond to the potential for higher profits and stave off increased competition.

The decision to increase promotion is related to a concept in economics: response to profits and response to losses, where firms may enter or exit the market. In the context of the PLC, during the growth stage, existing firms may expand their production and new firms might enter the market, spurred on by the prospects of higher profits. As competition increases, firms amplify promotional expenditures to sustain the growth stage for as long as possible.