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CMA Final · Strategic Cost Management · Product Life Cycle Costing

In which stage of the product life cycle are marketing costs typically highest relative to sales, because of advertising and distribution build-up, while sales volume is still low and profit is usually negative?

The introduction stage has the highest marketing cost relative to sales. Heavy advertising and distribution set-up are needed while volumes are still small, so the product normally makes a loss. Later stages benefit from higher volumes and established markets.

  1. AMaturity stage
  2. BIntroduction stageCorrect
  3. CDecline stage
  4. DGrowth stage

Explanation

In the introduction stage sales are low, heavy promotion is needed to create awareness and build distribution, so profits are negative. Growth sees rising sales and profits turning positive, and maturity and decline have established markets.

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