How does a firm’s pricing policy relate to the product’s life cycle? When a company launches a new product, it knows the product won’t last forever. However, the company does expect to earn a satisfactory profit to cover all the effort and risk that went into launching it. A firm can never accurately predict the lifetime of a product, but the lifetime involves four distinct stages. These four stages are collectively known as the Product Life Cycle (PLC). The first stage is the introduction stage, when the product is first launched. Sales growth tend to be low as consumers are ‘introduced’ to the existence of the product. At this stage therefore, profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and build their inventories. Promotion spending is especially high to ....

Number Of Pages: 4

Number Of Words: 1095

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