Product Life Cycle, Distribution, and Economic Structure of a Company
CMO Variable Product MK-Mix
Product
A product or service is successful when consumer purchases meet their needs. Therefore, the product policy acquires vital significance. The basic utility of a product provides formal and tangible value, as well as added value.
Product ID
Brand recognition identifies and allows the product to be distinguished by a word, name, or symbol. A company may have several brands: individual, family, national, or distributor.
Qualities of a Brand:
- Easy to remember, identify, and pronounce.
- Suggestive of the product’s attributes.
Packaging
Packaging must contain, protect, promote, and differentiate the product. It encourages the purchase decision.
Tag
An identifying element of the product. The tag serves to promote the product and provide information (fabric data, product identification, method of use, etc.).
Product Life Cycle
Introduction or Launch
A new product has few competitors, limited promotion, sales, and distribution. It involves high costs and a high product price. There is a possibility of negative outcomes, especially if the product is not truly new, as the introduction phase is usually shorter.
Growth
As the product becomes better known, efforts are made to differentiate it and attract new market segments. Sales and profits rise, increasing production and reducing unit costs, which may lead to lower prices.
Maturity
Sales growth reduces and stabilizes. Costs and benefits tend to level off. When the product is well-known and has become a competitive brand, consumers tend to exhibit repetitive behavior, requiring further differentiation.
Decline
Sales begin to decline rapidly due to changing consumer desires or the introduction of new substitutes, or both.
Distribution, Objectives, Intermediaries, and Channels
Distribution ensures that the end product reaches the consumer in the right quantity, at the right place, and at the right time. Distribution channels or intermediaries are utilized, representing the path followed by the product from production to final consumption.
Objectives of Distribution Channels
- Allow manufacturers to specialize in manufacturing.
- Act as warehouses, helping manufacturers contribute to product diffusion.
- Concentrate the product offering and provide consumers with purchasing convenience.
- Place the product where the consumer needs it.
Intermediaries
Brokers/Representatives
Contact sellers and buyers, charging a commission. The broker takes purchase orders but does not own the products.
Wholesalers
Sell to retailers and own the goods. They perform storage functions, provide financial assistance to retailers, and offer technical assistance in the wholesale industry.
Retailers
Sell directly to consumers. Their main function is to offer a range and breadth of products sold in small quantities.
Channels
The medium through which products move from producer to final consumer.
Classification by Length
- Direct channel (producer-consumer)
- Short channel (producer-retailer-consumer)
- Long channel (producer-wholesaler-retailer-consumer)
Sales at the Exchange
- Shop sale
- Distribution without a physical store
CM Instruments: Promotion and Price of MK-Mix
Promotion
A marketing tool aimed at promoting a product. Promotional activities include:
- Advertising: Presents a product to encourage consumer purchase.
- Public relations: Propaganda, communication, and building relationships with the public.
- Sales promotion: Direct persuasion of potential customers through offers, sales, and merchandising.
Price
The market value of a product. Influencing factors include:
- Administrative regulations
- Competition
- Demand
- Costs
Marketing utilizes various pricing strategies:
- Differential or price discrimination based on different situations
- Competitive pricing
- Psychological pricing (odd-even pricing)
- Rounding up (prestige pricing associated with quality)
- Product line pricing
- Package pricing
- Penetration pricing for new products
Economic Structure of the Company
Heritage is the set of real, quantifiable rights and obligations belonging to an individual or legal entity.
Heritage Masses
Heritage property is divided into masses, where all assets and liabilities are homogeneous, meaning they have the same economic significance. Clustering can have greater or lesser coverage. There are two main categories:
Assets
The set of elements with a positive sign, including property and rights. Assets represent the economic structure of the company, the destination or use of funds, and the investment of financial funds. Assets are divided into:
- Fixed assets: Heritage elements that ensure the business’s long-term operation. They are less liquid and last for more than one economic cycle (real estate, material assets, and financial investments).
- Current assets: Assets that ensure the normal operation of the company and do not exceed the economic cycle (stocks, receivables, and cash).
Financial Structure of the Company
Similar to assets, the financial structure includes liabilities and net worth.
Liabilities
Represent the company’s obligations and net worth. The financial structure (passive side) indicates the source of financing for these funds. Liabilities can be classified as:
- Fixed liabilities: Finance fixed assets and part of current assets. These are resources that remain in the company for over a year, such as long-term debt or net equity (capital, reserves, and long-term debt due to credit entities).
- Current liabilities: Company obligations that must be met in the short term, such as accounts payable.
This classification of liabilities is used to organize the balance sheet. Net equity represents the company’s own resources, meaning there are no obligations to third parties. Total liabilities include long-term and short-term payables, representing external financing that must be returned to third parties.
Economic Conditions and Balances
Every company should strive for financial balance:
- Financial assets should cover fixed liabilities.
- Financial circulation should cover current liabilities and part of working capital.
From an accounting standpoint:
Assets (Current Assets + Fixed Assets) = Liabilities (Equity + Liabilities)
From an economic point of view:
- Total equity balance (Assets = Net Worth)
- Minimize financial instability (Assets = Existing Assets + Existing Liabilities + Long-term Liabilities)
- Normal equity balance (Current Assets > Current Liabilities -> Working Capital = 0; Net Worth > 0)
- Equity imbalance (Current Assets < Current Liabilities -> Working Capital < 0; Net Worth > 0), which can lead to technical bankruptcy and liquidation of the company (Liabilities > Assets; Net Worth = 0).