Mastering Product Life Cycle, Distribution, and Pricing Strategies

The Product Life Cycle: A Biological Parallel

The product life cycle draws a biological parallelism, suggesting that products, like living organisms, go through stages of birth, maturity, and death. Every product typically experiences four distinct phases:

• Introduction: This is the phase where the product enters the market.
• Growth: Consumers identify with and begin to consume the product, leading to increased sales.
• Maturity: Sales stabilize as the product reaches its peak market penetration.
• Decline: The demand for the company's manufactured product decreases, often as a consequence of strategies used in previous stages or market shifts.

Distribution: Connecting Products to Consumers

Marketing, particularly distribution, is the variable most closely related to consumption and production. Its primary aim is to make the necessary and adequate quantity of product available to the user in the right place and at the right time, effectively covering their needs.

Key Activities in the Distribution Process:

• Collecting orders from customers.
• Transporting products to the point of sale.
• Selling products to customers.

Distribution Channels and Intermediaries

A distribution channel is formed by intermediaries positioned between the producer and the consumer, facilitating the movement of products.

• Short Channel: Involves few intermediaries.
• Long Channel: Involves more middlemen.

Marketing Strategies: Push and Pull

Companies employ distinct strategies to move products through distribution channels:

• Pull Strategy: This consists of undertaking an intensive campaign to promote the product so that consumers themselves request it from distributors and, consequently, from the company.
• Push Strategy: In this case, the company conducts a promotion aimed at the distributor of the product. The distributor, upon acquiring the product, is then incentivized to promote it among consumers.

The Importance of Intermediaries in Distribution

An intermediary is an agent who is neither the producer of goods or services nor the final consumer. Intermediaries exist to fulfill several crucial functions:

• Physical distribution of the product.
• Increasing the variety of products available.
• Facilitating sales to ensure producers achieve their targets.
• Providing valuable information to the final consumer.

Forms of Distribution

Producers can choose from different distribution intensity levels:

• Exclusive Distribution: The producer agrees to sell its product through a single intermediary within a given market.
• Selective Distribution: The producer chooses a small number of distributors to carry its product.
• Intensive Distribution: This strategy is used when the aim is to reach as many possible sales outlets as widely as possible.

The Importance of Price in Marketing

Price is the monetary value determined for a product that the buyer must pay the seller to acquire it.

Pricing Strategies

Companies utilize various strategies to set and adjust prices:

• Promotional Pricing: Aims to facilitate the sale of the product at a given time, often temporarily.
• Penetration Pricing: Low prices are adopted to favor the introduction of a new product into the market, aiming for rapid market share.
• Skimming Pricing: Involves setting a high initial price to obtain maximum benefits from early adopters before gradually lowering it.
• Psychological Pricing: Sometimes consumers are sensitive to the number of digits or the specific numerical value of the price (e.g., $9.99 instead of $10.00).
• Price Discounts: Temporary reductions in price can be offered to stimulate sales.
• Price Discrimination: Different prices can be set for the same product or service based on customer segment, location, or other factors.
• Prestige Pricing: It is recommended to set a high price to convey an image of quality, luxury, or exclusivity.

Methods for Pricing

Companies can determine prices using different methodologies:

• Pricing Based on Profit Margin: The price is determined based on a desired profit margin. The formula provided is: PV = (1 + MB/100) · CTMitjà (where PV = Selling Price, MB = Margin Benefit, CTMitjà = Average Total Cost).
• Pricing for a Given Profit: The company decides the selling price based on the specific quantity of profit it aims to achieve. The formula provided is: Benefit = PV / Q + CTMitjà (where PV = Selling Price, Q = Quantity, CTMitjà = Average Total Cost).