Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What characterizes the product maturity phase?

1. The product loses market share

2. The product enters its most profitable stage

3. The costs of producing the product never decline

4. The demand for the product continues to grow rapidly

The correct answer is: The product enters its most profitable stage

During the product maturity phase, the characteristics of the market and the product become quite distinct. This phase is marked by the product entering its most profitable stage, as it often benefits from optimized production processes, brand recognition, and customer loyalty that have been built during previous phases. At this point, sales growth starts to stabilize as most potential customers have already adopted the product. Because of established production systems and economies of scale, companies can typically achieve lower costs, which contributes to higher margins and profitability. While competition may increase as new entrants and substitutes emerge, leading companies often adapt their strategies to maintain profitability, ensuring the product remains financially successful during this period. In contrast, factors such as market share decline, rising production costs, or rapid demand growth are more typical of other stages in a product's life cycle. For instance, losing market share generally reflects challenges faced in the saturation or decline phases rather than maturity. Similarly, if costs were to rise or demand continues to grow rapidly, it might indicate a transition to a growth phase rather than the stability expected during maturity.