Question

which stage of the product life cycle is the largest profit stage for companies?

A) market introduction

B) market maturity

C) stagnation

D) sales decline

E) market growth

Answer 1

Correct option is E

Market growth is a stage of the product life cycle where the product has been accepted by customers and the company strives to increase market share. The product demand increases in the market which leads to sales growth. The innovative product has limited competition in the market, so companies can remain the price of the product at a higher level which results in more profit. Thus market growth is the largest profit stage for companies.

Other options are incorrect because -

A) Market introduction - It is the second stage of product life cycle after product development. It is about developing a market for the product and product awareness. Marketing cost is highest at this stage. Less profit or no profit is seen at this stage.

B) Market Maturity - At this stage, the product competes with other similar products in the market and thus its pricing drops. Production costs may decline at this stage due to more efficiency in the manufacturing process. Companies mainly focus on the promotion of the product or service.

C) Stagnation - It occurs at the maturity stage. Once the sales volume stops increasing, revenue stops growing. Thus the profits stagnation takesplace.

D) Sales decline - Reaching the end of product life cycle, the decline is seen. This stage is associated with decreasing revenue due to market saturation, high competition, and change in customers' needs.