Answer to Question 1
C
Answer to Question 2
A product life cycle has four major stages: introduction, growth, maturity, and decline. As a product moves through its cycle, the strategies relating to competition, pricing, distribution, promotion, and market information must be evaluated periodically and possibly changed.
The introduction stage of the product life cycle begins at a product's first appearance in the marketplace, when sales start at zero and profits are negative. Profits are below zero because initial revenues are low, and the company generally must cover large expenses for product development, promotion, and distribution.
During the growth stage, sales rise rapidly; profits reach a peak and then start to decline. The growth stage is critical to a product's survival because competitive reactions to the product's success during this period will affect the product's life expectancy. Profits begin to decline late in the growth stage as more competitors enter the market, driving prices down and creating the need for heavy promotional expenses.
During the maturity stage, the sales curve peaks and starts to decline, and profits continue to fall. This stage is characterized by intense competition because many brands are now in the market. Competitors emphasize improvements and differences in their versions of the product. As a result, during the maturity stage, weaker competitors are squeezed out of the market.
During the decline stage, sales fall rapidly. When this happens, the marketer considers pruning items from the product line to eliminate those not earning a profit. The marketer also may cut promotion efforts, eliminate marginal distributors, and, finally, plan to phase out the product.
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