Final answer:
During the introduction stage of the product life cycle, a firm focuses on informative advertising and differentiation to promote a new product. The aim is to educate potential customers and create awareness, establishing a firm foothold in the market and, thereby, potentially increasing demand and profits.
Step-by-step explanation:
During the introduction stage of the product life cycle, a firm would focus on certain types of promotion to generate awareness and stimulate demand for the new product. The promotional strategies often involve informative advertising and differentiation. Informative advertising aims to educate potential customers about the new product, its features, uses, and benefits.
This also includes highlighting the physical aspects of a product, which can be key factors that advertisements emphasize, such as an 'unbreakable bottle' or 'freezer-to-microwave' capabilities. Moreover, firms may try to establish a unique brand identity to set their offering apart from competitors'. The location of a firm and its accessibility might also be promoted as a unique selling point, especially if it provides convenience or accessibility advantages.
In the realm of monopolistic competition, advertising efforts could make a firm's perceived demand curve become more inelastic, meaning customers become less sensitive to changes in price, or it could cause demand for the firm's product to increase, thereby shifting the firm's perceived demand curve to the right. Either of these changes can lead the firm to sell a greater quantity or to charge a higher price, enhancing its profits. The goal in the introduction stage is to build customer interest and lead to the trial of the new product.