A-AS Level (CIE) Business Studies Paper-1: Specimen Questions with Answers 39 - 39 of 50

Question 39

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Essay▾

Explain the various stages of Product Life Cycle.

Explanation

The product has a life cycle starting from its birth, it passes through four stages, until it is finally abandoned. These stages are:

  • Introduction: It can be considered as the birth stage in which the product evolves out of production and launched in the market customers to buy it the first time. It is a period of slow sales growth; profits are non-existent because of heavy expenditure on advertisement and selling. The profits will be very low or negative as part of the investment recouped in other selling and logistic expenditures.
  • Growth: This is a period of rapid market acceptance and substantial profit improvement. Repeat sales starts and brand awareness is on a high in the market. It is here that similar other new products begin to appear in the market and offer competition. Prices remain same. companies maintain their promotional expenditures at the same or at a slightly increased level to maintain position in the market.
  • Maturity: This stage faces slowdown in sales growth because the product has achieved acceptance by most potential customers. Profits stabilize or decline because of increased competition. Sales flatten because of market saturation. ring this stage, the manufacturers introduce new models of product or bring discounts or freebies to promote brands with a view to retaining their position in the market. In economic terms, it is a stage where supply exceeds demand. Some of promotional efforts and selling tactics may lengthen the span of this stage but they will avoid declining stage to come.
  • Decline: Sales show a fast-declining trend and profits erode. Competition becomes severe and even loyal customers attaches to new products of competitors. It is the ending phase of product՚s life cycle. Company reduces the marketing expenditure, liquidate the product from weak markets, cut the prices to clear stocks, reduce advertising and sales promotion to minimal level to retain hard-core loyal. A product should be eliminated when customers not find a proper place in a firm՚s product line.

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