Growth Stage

If the new product satisfies the market, it shall enter a growth stage, in which stage sales will begin climbing rapidly. The early adopters shall continue to buy, and later buyers will begin following their lead, especially if they hear favourable word of mouth. Attracted by the opportunity for profit, new competitors shall enter in the market. They will introduce a new product features, and the market will expand. The increase in competitors leads to an increase in the number of distribution outlets, and sales jump only to build reseller inventories. Cost remains where they are or fall just slightly. Companies keep their promotion spending at the similar or a slightly higher level. Educating the market remains a goal, but the company has to also meet the competition now.

Profits increase at the time growth stage, as promotion prices are spread over a large volume and as unit manufacturing prices fall. The firm uses many strategies to sustain rapid market growth as long as possible. It enhances product quality and adds new product features and models. It enters new distribution channels and new market segments. It shifts some advertising from building product alertness to building product conviction and purchase, and it lowers cost at the correct time to attract more buyers.

In the growth stage, the firm faces a trade-off among high market share and high present profit. By spending big amount of money on product improvement, distribution and promotion, the company may capture a dominant position. In doing so, though, it gives up maximum current profit, which it wishes to make in the next stage.