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Product and Distribution Strategies

Chapter 13

Explain marketing’s definition of a product and list the components of the product strategy.

Describe the classification system for consumer and business goods and services.

Distinguish between a product mix and a product line.

Briefly describe each of the four stages of the product life cycle.

List the stages of the new-product development process.

Explain how firms identify their products.

Outline and briefly describe each of the major components of an effective distribution strategy.

Identify the various categories of distribution channels and discus the factors that influence channel selection.

Learning

Goals1

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3

4

5

6

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8

• Product - bundle of physical, service, and symbolic attributes.

• Convenience products - items the consumer seeks to purchase frequently, immediately, and with little effort.

• Shopping products - typically purchased only after the buyer has compared competing products in competing stores.

• Specialty products - items that a purchaser is willing to make a special effort to obtain.

Product

Strategy

Product

Classification

• Installations - major capital items, such as new factories, heavy equipment and machinery, and custom-made equipment.

• Accessory equipment - includes less expensive and shorter-lived capital items than installations and involves fewer decision makers.

• Component parts and materials - become part of a final product.

• Raw materials - farm and natural products used in producing other final products.

• Supplies - expense items used in a firm’s daily operation that do not become part of the final product.

Classifying

Business Goods

In B2B, greater emphasis on personal selling for installations and many component parts.

May involve customers in new-product development.

Advertising more commonly used to sell supplies and accessory equipment.

Also a greater emphasis on competitive pricing strategies.

Marketing

Strategy

Implications

Product Lines

and Product Mix

Product line - group of related products that are physically similar or are intended for the

same market.

Product mix – a company’s assortment of product lines and individual offerings.

Product Life

CycleProduct life - four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses.

• Introduction stage – firm promotes demand for its new offering, informs the market about it, gives free samples to entice consumers to make a trial purchase, and explains its features, uses, and benefits.

• Growth stage - sales climb quickly as new customers join early users who are repurchasing the item. Company begins to earn profits on the new product.

• Maturity stage - industry sales eventually reach a saturation level at which further expansion is difficult.

• Decline stage - sales fall and profits decline.

Stages of the

Product Life

Cycle

• Marketer’s objective is to extend the life cycle as long as product is profitable. Marketers’ goals:

– Increasing customers’ frequency of use

– Adding customers

– Finding new uses for product

– Changing package sizes, labels, and product designs

Implications of

the Product Life

Cycle

• Expensive, time-consuming, and risky.

• Only 1/3 of new products become success stories.

• Each step requires a “go or no-go” decision.

Stages in New

Product

Development

Stage 1: Generating ideas for new offerings

Stage 2: Screening

Stage 3: Concept development and business analysis phase

Stage 4: Product development

Stage 5: Test marketing

Stage 6: Commercialization

Product

Development

Stages

Product

Failures

• Brand - name, term, sign, symbol, design, or some combination that identifies the products of one firm and differentiates them from competitors’ offerings.

• Brand name - part of the brand consisting of words or letters included in a name used to identify and distinguish the firm’s offerings from those of competitors.

• Trademark - brand that has been given legal protection granted solely to the brand’s owner.

Product

Identification

• Manufacturer’s brand - brand offered and promoted by a manufacturer. Examples: Tide, Jockey, Gatorade, Swatch, and Reebok.

• Private or store brand - brand that is not linked to the manufacturer but instead carries a wholesaler’s or retailer’s label. Examples: Sears’ DieHard batteries and Wal-Mart’s Ol’Roy dog food & Member’s Mark brand

• Family branding strategy - a single brand name used for several related products. Examples: KitchenAid, Johnson & Johnson, Hewlett-Packard, and Dole

• Individual branding strategy - giving each product within a line a different name. Examples: Procter & Gamble products Tide, Cheer, and Dash.

Brand

Categories

Brand Loyalty

• Brand recognition - consumer is aware of the brand but does not have a preference for it over other brands.

• Brand preference - consumer chooses one firm’s brand over a competitor’s.

• Brand insistence - consumer will seek out preferred brand and accept no substitute for it.

• Brand equity - added value that a respected and successful name gives to a product.

• Brand awareness - product is the first one that comes to mind when a product category is mentioned.

Brand Equity

Valuable

Brands

Important in product identification and play an important role in a firm’s overall product strategy.

Choosing right package is especially important in international marketing.

Must meet legal requirements of all countries in which product is sold.

Universal Product Code - bar code read by optical scanner.

Packages and

Labels

Distribution channel - path through which products—and legal

ownership of them—flow from producer to

consumers or business users.

Distribution

Strategy

Physical distribution -actual movement of

products from producer to consumers or business

users.

Distribution

Channels

Direct Distribution

• Direct contact between producer and customer.• Most common in B2B markets.• Often found in the marketing of relatively expensive, complex

products that may require demonstrations. • Internet is helping companies distribute directly to consumer

market.

Distribution Channels Using Marketing Intermediaries

• Producers distribute products through wholesalers and retailers.• Inexpensive products sold to thousands of consumers in widely

scattered locations.• Lowers costs of goods to consumers by creating market utility.

Distribution Channels

using Marketing

Intermediaries

Marketing

Intermediaries

• Wholesaler - distribution channel member that sells primarily to retailers, other wholesalers, or business users.

• Manufacturer-Owned Wholesaling Intermediaries

– Owned by the manufacturer of the good.

– Sales branch which stocks products and fills orders from inventories.

– Sales office which takes orders but does not stock the product.

Wholesaling

• Retailer - channel member that sells goods and services to individuals for their own use rather than for resale.

• Final link of the distribution channel.

• Two types: store and non-store.

Retailers

Non-Store

Retailing

• Direct response retailing

• Internet retailing

• Automatic merchandising

• Direct selling

Retail Stores

Wheel of

Retailing

1) Identifying a Target Market

2) Selecting a Product Strategy

3) Selecting a Customer Service Strategy

4) Selecting a Pricing Strategy

5) Choosing a Location

6) Building a Promotional Strategy

7) Creating a Store Atmosphere

1) Identifying a Target Market

2) Selecting a Product Strategy

3) Selecting a Customer Service Strategy

4) Selecting a Pricing Strategy

5) Choosing a Location

6) Building a Promotional Strategy

7) Creating a Store Atmosphere

How Retailers

Compete

Retail

Locations

Planned Shopping Center Shopping Mall Regional Mall Lifestyle Mall

• What specific channel will it use?

• What will be the level of distribution intensity?

Selecting Distribution Channels

Complex, expensive, custom-made, or perishable products move through shorter distribution channels involving few—or no—intermediaries.

Standardized products or items with low unit values usually pass through relatively long distribution channels.

Start-up companies often use direct channels because they can’t persuade intermediaries to carry their products.

Distribution

Channel Decisions

and Logistics

• Intensive distribution - firm’s products in nearly every available outlet. Requires cooperation of many intermediaries.

• Selective distribution - limited number of retailers to distribute its product lines.

• Exclusive distribution - limits market coverage in a specific geographical region.

Distribution

Intensity

Logistics and

Physical

Distribution• Supply chain – complete sequence of suppliers that

contribute to creating a good or service and delivering it to business users and final consumers.

• Logistics – the activities involved in controlling the flow of goods, services, and information among members of the supply chain.

• Physical Distribution – the activities aimed at efficiently moving finished goods from the production line to the consumer or business buyer.

Comparison of

Transportation

Modes

• Customer service standards measure the quality of service a firm provides for its customers.

• Warranties are a firm’s promises to repair a defective product, refund money paid, or replace a product if it proves unsatisfactory.

• Internet retailers have worked to humanize their customer interactions and deal with complaints more effectively.

Customer Service