Chapter 11Product Life Cycle

Entrepreneurship & Small Business Management

• Maturity• Decline

• Growth• Introduction

IntroductionGrowth

Maturity

Decline

INTRODUCTION• One of two methods is often used when

introducing a product – price skimming or penetration pricing.

• Price skimming involves charging a high price to recover costs as quickly as possible. Then the price is dropped when the product is no longer unique.

• Penetration pricing builds sales by charging a low initial price to keep unit costs to customers as low as possible. This approach can discourage competition.

Entrepreneurship & Small Business Management

GROWTH

• In the growth stage, sales are increasing and unit costs are decreasing.

• If you skimmed, you would need to lower prices to appeal to price-conscious customers.

• If you were penetrating, very little price change would be necessary, but promotion costs would increase.

Entrepreneurship & Small Business Management

Maturity

• During the maturity stage, you would need to look for new markets and possibly make product improvements to hold prices.

Entrepreneurship & Small Business Management

Decline

• In the decline stage, you would cut prices to stimulate sales or clear inventory.

Entrepreneurship & Small Business Management

$3.89$2.50