Stages of the Product Life Cycle

1. Introduction Stage:
   The product or service offers something new to customers. Since consumers do not know much about the product or service, advertising costs are likely to be high to raise their awareness. Although there may not be competing products, sales are usually low at this stage, hence very low or no profits.
2. Growth Stage:
   At this stage, total sales demand for the product or service grows faster. As a result, new entrants are attracted into the market expecting high demand and profits. At the early stage of this phase, existing producers in the market begin to earn some profits.
3. Maturity Stage:
   Total annual sales remain relatively stable during this stage, with prices and profits stabilizing. Since there no longer exists an opportunity for growth, companies then embark on differentiation strategies to distinguish their products from those of competitors to improve their sales volumes and profits.
4. Decline Stage:
   Total customer demand for the product starts to fall at this stage, with a consequent fall in profits, forcing less profitable competitors to leave the market. Eventually, it becomes impossible to produce and sell the product at a profit, so those remaining in the market discontinue its production.

(4 points x 2.5 marks each = 10 marks)