Product Life Cycle, Pricing, and Distribution in Marketing
Branding Strategies
Single Brand vs. Multiple Brands
Companies can choose between a single brand or multiple brands for their products. A single-brand strategy, also known as an umbrella brand, uses the same name for all products. This approach can reduce promotional costs but carries the risk of a single product failure impacting the entire brand. Conversely, a multiple-brand strategy uses different names for each product or product line. This allows for greater flexibility and reduces the risk of cross-contamination in case of product failure. Some companies also use a second-brand strategy, often with a less prestigious brand, to target a wider market segment.
Distributor Brands
Distributor brands, also known as private labels, are products manufactured by a specific industry and sold under the brand name of the distributor or retailer. The distributor handles all promotion and communication activities for these products.
Product Life Cycle
Products have a life cycle with distinct stages: introduction, growth, maturity, and decline. Understanding these stages is crucial for implementing effective marketing strategies.
Introduction Stage
This stage involves the launch of a new product. Sales are typically low and growth is slow as the product gains market recognition. Significant costs are associated with research, development, promotion, and advertising during this phase, often leading to initial losses for the company.
Growth Stage
The product gains popularity and experiences rapid sales growth. This stage generates profits for the company. Competitors may enter the market with similar products.
Maturity Stage
Sales growth stabilizes and remains relatively constant. Advertising efforts focus on attracting new customers and maintaining market share. Profits are stable but may start to decline over time.
Decline Stage
Sales and profits decline as the product reaches saturation or faces obsolescence. The company may consider relaunching the product, finding new applications, focusing on a niche market, or withdrawing it from the market. In the latter case, it’s important to manage the process to avoid harming customer relationships or the company’s image.
Price
Price is the amount of money a buyer pays for a product or service. It’s a crucial marketing variable that significantly influences buyer decisions. Several factors affect pricing, including product cost, market demand, and competition.
Pricing Based on Economic Theory
Economic theory suggests that companies set prices to maximize revenue. Buyers and sellers have opposing interests regarding price. Sellers aim for higher prices, while buyers prefer lower prices. Companies may lower prices to stimulate demand and increase total revenue or raise prices if the decrease in sales is offset by higher profit margins. Price elasticity of demand, which measures the responsiveness of quantity demanded to price changes, plays a key role in these decisions.
Pricing Based on Costs
Cost-plus pricing involves adding a profit margin to the product’s cost. This method is simpler and requires less complex information. The company determines the desired profit margin and adds it to the product cost to calculate the selling price.