MARKET GROWTH

Buyers are increasingly informed about product attributes either from personal experience or from communication with innovators. Consequently, they are increasingly responsive to lower prices. If diffusion strongly affects later sales, price reductions can substantially increase the rate of market growth and the product's long-run profitability. Moreover, cost economies accompanying growth usually enable one to cut price while still maintaining profit margins. Although competition increases during this phase, high rates of market growth enable industry-wide expansion, which generally limits price competition. However, price cutting to drive out competitors may occur if market share in growth is expected to determine which competing technology becomes the industry standard, or if capacity outstrips sales growth.

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