National Evaluation Series (NES) Business Studies Practice Test

Which strategy is often employed during the growth stage of a product's life cycle?

1. Maximizing market share through discount pricing

2. Focusing on customer retention through loyalty programs

3. Increasing distribution channels to reach more consumers

4. Reducing marketing expenses to maximize profits

The correct answer is: Increasing distribution channels to reach more consumers

During the growth stage of a product's life cycle, increasing distribution channels to reach more consumers is a pivotal strategy. At this stage, sales are rising, and the objective is to take full advantage of growing demand. Expanding distribution allows a company to make its product more accessible to a wider audience, enhancing market penetration and capitalizing on the momentum generated from earlier awareness and adoption. This approach helps to ensure that the product is available where consumers are likely to purchase it, maximizing potential sales. The other strategies may focus on different aspects of product management. While discount pricing might seem attractive for gaining immediate market share, it can undermine brand value and profitability. Customer retention through loyalty programs is more vital in later stages once the customer base is established. Reducing marketing expenses to maximize profits could result in lost opportunities for growth, as effective marketing is critical to promote the product to new customers during this high-opportunity phase.