growth stage

Overview

A product, after initial commercialization, usually goes through an S-shaped sales pattern over time before it reaches a point of wide acceptance in the marketplace. The lower tail of this curve corresponds to a period of slow growth in sales, and is called the Introduction Stage.

Immediately following the introduction stage is a period of rapid growth, commonly referred to as the growth stage of the product life cycle. This stage is, in turn, followed by a tapering off of the rate of sales growth, represented by the top tail of the S-curve, and this leads into the maturity stage. The curve is shown below:

The growth stage is marked by a number of features beyond simply a rapid growth in sales, and these features have many implications for marketing strategy decisions.

A number of generalizations may be made about the growth stage of the life cycle. It is characterized by a broadening of the target market beyond the narrow group of early-adopters who purchased the product during the introduction stage. This market expansion brings an increase in the size of the overall market and accompanying profits, which may attract new competitors.

Benefits

Marketing managers should be alert to the signs that accompany the movement of a product from the introduction to the growth stage. An understanding of these signs would also include knowledge of the appropriate decisions that should be made in each of the following areas:

  • Target Market: During the growth stage, the product gradually finds acceptance in wider segments of the population. These segments are considerably less innovative and risk-prone than the market that purchased the product in the introduction stage. In the growth stage the market has some knowledge of the product since it is no longer entirely new.
  • Product: The product itself undergoes some changes during the growth stage. Modifications that enhance it and clearly differentiate it from competitive products greatly increase its acceptance by the new target market. Such modifications may include minor changes in the physical product as well as new sizes, colors and packaging.
  • Promotion: During the growth stage, the promotional support for the product must be increased substantially. This entails more widespread advertising in different media designed to reach the new segments. The informational content of the advertising may be greater, depending upon the “newness” of the product.
  • Distribution: As in the case of promotion, the growth stage requires wide distribution through new types of outlets. Designer clothing, for example, moved during the growth stage from exclusive department and specialty stores to mass merchandise and discount outlets.
  • Price: As both the size of the market and competition increase in the growth stage, prices gradually become lower. Demand changes from inelastic in the introduction stage to somewhat elastic in the late growth stage.

Implementation

For the marketing decision-maker to employ the best marketing mix during the growth stage, it is first necessary to develop a definite measure to determine when the growth stage of a product actually begins.

Such a measure should also take into account the distinction between the growth stage of the product category as a whole and the growth stage for the firm’s individual brand or model. This distinction is important because both the product category and individual brands will have life cycles similar in shape, but will not correspond to each other on a one-to-one basis.

For example, fruit-flavored drinks may be in the growth stage, although the soft drink market as a whole is in the maturity stage. The marketing decision-maker should begin by developing a measure of the overall potential for the product category.

This task requires a considerable degree of experience and judgment. If a new diet soft drink is contemplated, estimates of the potential per capita consumption must be made for all soft drinks.

Thereafter, estimates of the share that diet drinks can attain will also have to be determined. Once these data are available, a measure of the current saturation of the market, i.e., a ratio of the size of the market at present to its overall potential, can be worked out.

The growth stage would then be at the intermediate level of saturation, and the marketing manager can use sales data to monitor this factor on an ongoing basis.

Other factors indicative of a growth stage, such as rapid increases both in the sales rate growth and in the number of competitors entering the field, may be assessed to aid in decision making for products in this stage. When the decision-maker observes these factors operating in concert, it will be clear that the first phase of the growth stage has begun.

This phase continues as long as the rate of sales increases. When growth slows, the second phase begins. Prices begin to be under considerable pressure, and there is a shakeout in the market with smaller, marginal producers dropping out.

This two-phase distinction is important because a decline in profits may indicate that phase two is about to begin, and only the shrewd marketer can steer his product through this hazardous phase and into maturity, by employing proper strategies.

Evaluation

Thus far, many of the features of the growth stage have been identified, and a number of questions have been suggested that decision-makers should address during this stage. Specifically, some of these are:

  1. What is the market potential for the product category, and what share of this potential can a specific brand expect to attain?
  2. Has there been a recent increase in the rate of sales growth for the product?
  3. What is the competitive situation? Are new competitors entering the market?

Once the decision-maker has determined that the product is clearly in the growth
stage, various other questions can help determine appropriate marketing decisions:

  1. What information about this product should be included in the promotional program so as to increase its acceptance to new market segments?
  2. What media will best reach the wider market?
  3. Are wider distribution channels needed to reach this market?
  4. When will prices begin to feel competitive pressure?
  5. What economies of scale in the production and marketing of this product are possible, in order to assure survival in the second phase of the growth stage?

Conclusion

The growth stage of a product’s life cycle has many unique features which require close attention of marketing managers. It is the most profitable of all the lifecycle stages, yet it is also the most hazardous and requires close attention, not only to recognize when it begins but to choose proper strategy throughout its phases.

Applications to Small Business

Small businesses would be well advised to consider carefully the appropriate marketing decisions in the growth stage. This is because it comes soon after a period of slow growth and heavy cash outflow during the introduction stage.

Without proper resource planning smaller firms may not be able to exploit the opportunities of the growth stage for sheer lack of resources. Some of the frequent problems include a lack of manpower and inventory when sales start to grow rapidly. An accompanying shortage of space, plant and equipment is also likely.

It is inherently more difficult for small businesses to determine market saturation points because these firms are faced with narrow, vaguely defined markets. Also, after a period of low sales growth, the business may be attitudinally unprepared for the explosive increases that characterize the growth stage.

For these reasons, smaller firms must develop the judgment necessary to read market signs of the growth stage. Failure due to inadequate planning in a market with growth opportunities is more difficult to face than failure in a declining market.

 

The expert's thoughts on direct response - growth hacking - performance-based marketing activities - DIRECT MARKETING

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