Chapter 13Product and Distribution Strategies

Learning

Goals

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.

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PRODUCT STRATEGY

Product Bundle of physical, service, and symbolic attributes designed to satisfy buyers’ wants.

Classifying Goods and ServicesClassifying Consumer Goods and Services

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

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

• Specialty products are those that a purchaser is willing to make a special effort to obtain.

PRODUCT LIFE CYCLE

Product life Four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses.

Stages of the Product Life Cycle• Introduction stage Firm tries to promote demand for

its new offering, inform the market about it, give free samples to entice consumers to make a trial purchase, and explain its features, uses, and benefits.

• Growth stage Sales climb quickly as new customers join early users who now are repurchasing the item.

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

• Decline stage Sales fall and profits decline.

Marketing Strategy Implications of the Product Life Cycle

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

• Common strategies include

• Increasing customers’ frequency of use

• Adding customers

• Finding new uses for product

• Changing package sizes, labels, and product designs

PRODUCT IDENTIFICATION

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

Selling an Effective Brand Name• Good brands are easy to pronounce, recognize, and

remember.

Brand Categories• Manufacturer’s brand Brand offered and promoted by a

manufacturer • Private or store brand Brand that is not linked to

the manufacturer but instead carries a wholesaler’s or retailer’s label. Member’s Mark – Wal-Mart

DISTRIBUTION STRATEGY

Distribution channel Path through which products—and legal ownership of them—flow from producer to consumers or business users.

Physical distribution Actual movement of products from producer to consumers or business users.

Direct Distribution

• Direct contact between producer and customer.• Often found in the marketing of relatively expensive,

complex products that may require demonstrations.

Distribution Channels Using Marketing Intermediaries

• Producers distribute products through wholesalers and retailers.

• Often used for products that sell inexpensively to thousands of consumers in widely scattered locations.

WHOLESALING

Wholesaler Distribution channel member that sells primarily to retailers, other wholesalers, or business user.

Manufacturer-Owned Wholesaling Intermediaries

• Sales branches and sales offices.

Independent Wholesaling Intermediaries• Merchant wholesalers, agents and brokers, and

manufacturers’ reps.

RETAILING

Retailer Channel member that sells goods and services to individuals for their own use rather than for resale. Two types: Nonstore and store.

Kohl’s – Department Store

Cabela’s – Specialty Store

The Wheel of Retailing

• New retailers enter the market by offering lower prices made possible through reductions in service.

• New entries gradually add services as they grow and ultimately become targets for new retailers.

How Retailers Compete• Retailers must choose merchandising, customer

service, pricing, and location strategies that will attract customers in their target market segments.

• Identifying a Target Market

• Selecting a Product Strategy

• Selecting a Customer Service Strategy

• Selecting a Pricing Strategy

• Choosing a Location

• Building a Promotional Strategy

• Creating a Store Atmosphere

DISTRIBUTION CHANNEL DECISIONS AND LOGISTICS

• Firms face two major decisions about distribution channels:

• What specific channel will it use?

• What will be the level of distribution intensity?

Selecting Distribution Channels• Market factors greatly affect decision. Generally:

• 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.

Selecting Distribution Intensity• Distribution intensity The number of intermediaries

or outlets through which a manufacturer distributes its goods.

• Intensive distribution Firm’s products in nearly every available outlet.

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

• Exclusive distribution Limits market coverage in a specific geographical region.