IMPROVED CONTROL AND UTILIZATION OF COSTS

As the number of customers and product variations increases during the growth stage, a firm may justifiably allocate costs among them arbitrarily. New customers and new products initially require technical, sales, and managerial support that is reasonably allocated to overhead during growth, since it is as much a cost of future sales as of the initial ones. In the transition to maturity, a more accurate allocation of incremental costs to sales may reveal opportunities to significantly increase profit. For example, one may find that sales at certain times of the year, the week, or even the day require capacity that is underutilized during other times. Sales at these times should be priced higher to reflect the cost of capacity.

More important, a careful cost analysis will identify those products and customers that are simply not carrying their weight. If some products in the line require a disproportionate sales effort, that should be reflected in the incremental cost of their sales and in their prices. If demand cannot support higher prices for them, they are prime candidates for pruning from the line. The same holds true for customers. If some require technical support disproportionate to their contribution, one might well implement a pricing policy of charging separately for such services. While the growth stage provides fertile ground in which to make long-term investments in product variations and in developing new customer accounts, maturity is the time to cut one's losses on those that have not begun to pay dividends and that cannot be expected to do so.

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