Product and Distribution Strategies

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Product and DistributionStrategies

Chapter 12


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Explain marketings definition of aproduct; differentiate amongconvenience, shopping, and specialtyproducts; and distinguish between aproduct mix and a product line.

Briefly describe each of the four stages ofthe product life cycle with their marketingimplications.

Explain how firms identify their products.

Outline and briefly describe each of themajor components of an effectivedistribution strategy.

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Learning ObjectivesDistinguish between the differenttypes of wholesaling intermediaries.

Describe the various types ofretailers and identify retail strategies.

Identify the various categories ofdistribution channels, and discussthe factors that influence channelselection.

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Product- a bundle of physical, service, and

symbolic characteristics designed to satisfy

consumer wants

Product Categories: 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 a purchaser is willing to make a

special effort to obtain

Product Strategy


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Product Classification


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Capital versus Expense Items Installations- major capital items such as new factories,

heavy equipment and machinery, and custom-made

equipment

Accessory equipment- includes less expensive andshorter-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 firms daily operations

that do not become part of the final product

Classifying Business Goods


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Different from Goods

Intangible

Perishable

Difficult to standardize

Service provider is the service

Services


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In B2B, there is a greater emphasis on personalselling for installations and many component parts

and a concentration on quality and customer

service.

Producers of installations and component parts mayinvolve customers in new-product development.

Advertising is more commonly used to sell supplies

and accessory equipment.

Producers of supplies and accessory equipment

place a greater emphasis on competitive pricing

strategies.

Marketing Strategy Implications


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Product line a group of related productsmarked by physical similarities or intended for a

similar market

Pepsi

Product mix assortment of product lines and

individual goods and services a firm offers to

consumers and business users

Product Lines and Product Mix
http://www.pepsi.com/http://www.pepsi.com/


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Product life cycle- four basic stagesintroduction, growth, maturity, and decline

through which a successful product progresses

Product Life Cycle


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Introduction stage firm promotes demand for itsnew 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 customersjoin 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


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Marketers objective is to extend the lifecycle as long as product is profitable.

Marketers goals: Increasing customers frequency of use Adding new users

Finding new uses for product

Changing package sizes, labels, and product designs

Implications of the Product Life Cycle


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Expensive, time-

consuming, and risky.

Only 1/3 of newproducts become

success stories.

Each step requires a

go or no-go decision.

Stages in New Product Development


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Stage 1: Generating ideas for newofferings

Stage 2: Screening

Stage 3: Concept development andbusiness analysis phase

Stage 4: Product development

Stage 5: Test marketing

Stage 6: Commercialization

Product Development Stages


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Product Failures


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Brand- name, term, sign, symbol, design, orsome 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 firms offerings from

those of competitors. Trademark- brand that has been given legal

protection granted solely to the brands owner

Product Identification


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Manufacturers brand- brand offered and promoted by amanufacturer. Examples: Tide, Cheerios, Windex, Fossil,

and Nike.

Private or store brand- brand that is not linked to the

manufacturer but instead carries a wholesalers or retailers

label. Examples: Sears DieHard batteries and Walmarts

OlRoy dog food.

Family branding strategy- a single brand name used for

several related products. Examples: KitchenAid, Johnson &

Johnson, Hewlett-Packard, and Arm & Hammer.

Individual branding strategy- giving each product within a

line a different name. Examples: Procter & Gamble

products Tide, Cheer, and Dash.

Brand Categories
http://money.cnn.com/2009/03/16/news/companies/wal-mart_great_value_relaunch.fortune/index.htmhttp://www.pg.com/en_US/index.jhtmlhttp://www.pg.com/en_US/index.jhtmlhttp://money.cnn.com/2009/03/16/news/companies/wal-mart_great_value_relaunch.fortune/index.htm


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Brand recognition- consumer is aware of the brand but

does not have a preference for it over other brands

Brand preference- consumer chooses one firms brand

over a competitors

Brand insistence- consumer will seek out preferred brand

and accept no substitute for it (the ultimate degree of brand

loyalty)

Brand Loyalty


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Brand equity- added value that a respected and

successful name gives to a product

Brand awareness- product is the first one thatcomes to mind when a product category ismentioned

Brand Equity


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Valuable Brands


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Packaging affects the durability, image, andconvenience of an item and is responsible for one of

the biggest costs in many consumer products.

Packing is important in product identification and play

is an important role in a firms overall product strategy. Choosing the right package is especially important in

international marketing.

Packing must meet legal requirements of all countries

in which product is sold.

Universal Product Code- bar code read by optical

scanner

Environmental impact of packagingSun Chips

Packages and Labels
http://www.uc-council.org/http://www.sunchips.com/http://www.sunchips.com/http://www.uc-council.org/


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Distribution channel: path through which

productsand legal ownership of themflow

from producer to consumers or business users

Physical distribution: actual movement of

products from producer to consumers or

business users

Distribution Strategy


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Distribution Channels

Di t ib ti Ch l U i


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Direct Distribution

Direct contact between producer and customer.

Most common in B2B markets.

Often found in the marketing of relatively expensive, complexproducts 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 UsingMarketing Intermediaries


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Marketing Intermediaries


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Wholesaler- distribution channel member that sells

primarily to retailers, other wholesalers, or business

users

Manufacturer-Owned Wholesaling Intermediaries

Owned by the manufacturer of the goods or products to control

distribution or customer service

Sales branch that stocks products and fills orders from

inventories

Sales office that takes orders but does not stock the product

Wholesaling


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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 nonstore

Retailers


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Direct response

retailing

Internet retailing

Automatic

merchandising

Direct selling

Non-Store Retailing


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Retail Stores


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Wheel of Retailing


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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

How Retailers Compete


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Planned Shopping Center

Shopping Mall

Regional Mall Lifestyle Mall

Retail Locations

Distribution Channel Decisions


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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 nointermediaries.

Standardized products or items with low unit values

usually pass through relatively long distribution channels.

Start-up companies often use direct channels becausethey cant persuade intermediaries to carry their products,

or because they want to extend their sales reach.

Distribution Channel Decisionsand Logistics


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Intensive distribution- firms products innearly every available outlet; requires

cooperation of many intermediaries

Selective distribution manufacturerselects limited number of retailers to

distribute its product lines

Exclusive distribution- limits marketcoverage in a specific geographical region

Distribution Intensity


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Supply chain complete sequence of suppliers that contributeto creating a good or service and delivering it to business users

and final consumers

Logistics process of coordinating 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

Logistics and Physical Distribution


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Comparison of Transportation Modes


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Customer service standards measure the qualityof service a firm provides for its customers.

Warranties are a firms promises to repair a

defective product, refund money paid, or replacea product if it proves unsatisfactory.

Internet retailers have worked to humanize their

customer interactions and deal with complaints

more effectively.

Customer Service


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Product and Distribution Strategies

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