Question

Study the product life cycle diagram as given. If A, B, C and D represent different stages of product life cycle, which stage is most expensive stage ? 

 [Note: The diagram displays annual sales volume on the y-axis against time on the x-axis, showing a bell-shaped curve starting at A, rising through B to a peak at C, and declining at D.] 
 

• A. Stage A
• B. Stage B
• C. Stage C
• D. Stage D

Hint:

The "Introduction Stage" (Stage A) of any commercial product has the highest cost-to-sales ratio because of the heavy spending required for launching, distributing, and promoting a new product with low initial sales.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The Product Life Cycle (PLC) is a marketing concept that describes the stages a product goes through from its initial development to its eventual removal from the market.
The PLC consists of four primary stages: Introduction (Stage A), Growth (Stage B), Maturity (Stage C), and Decline (Stage D).

Step 2: Detailed Explanation:
Let us analyze the costs associated with each stage of the Product Life Cycle:
- Stage A (Introduction Stage): In this stage, the product is launched into the market.
This stage is the most expensive for businesses because of several factors:
1. High research, design, and product development costs.
2. Substantial marketing, advertising, and promotional expenses needed to raise consumer awareness and create demand.
3. High distribution costs to establish market channels.
At the same time, sales volume is low, resulting in high unit costs and net financial losses for the business.
- Stage B (Growth Stage): Sales increase rapidly, and economies of scale help reduce production and marketing costs per unit.
- Stage C (Maturity Stage): Sales volume peaks, and the product becomes highly profitable, with marketing expenses stabilizing.
- Stage D (Decline Stage): Sales decline, and promotional expenditures are reduced to cut costs.
Therefore, the introduction stage (Stage A) requires the highest capital investment with the lowest initial returns, making it the most expensive stage.

Step 4: Final Answer:
The introduction stage, represented by Stage A, is the most expensive stage of the Product Life Cycle.