Chapter 10Chapter 10

Product Issues in Marketing Channel Management

1010Ch. 10: Major Topics

1. Marketing Mix in Channels2. Meaning of a Product3. Interface between Marketing Channel and Product**

1. New Product Launch (ex: Vitamin Water article)2. Product Life Cycle (ex: Movie marketing channel video)3. Strategic Product Management

- Product Strategies**

1. Marketing Mix in Channels2. Meaning of a Product3. Interface between Marketing Channel and Product**

1. New Product Launch (ex: Vitamin Water article)2. Product Life Cycle (ex: Movie marketing channel video)3. Strategic Product Management

- Product Strategies**

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The Marketing Mix

The means by which product, price, promotion and place variables can be assembled to meet channel needs.

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The Product Ingredient of Marketing Mix

• Product:a unique bundle of Product:a unique bundle of tangible and tangible and intangibleintangible attributes attributes offered offered en masse en masse to to customers.customers.

1.1. Fusion of attributesFusion of attributes

2.2. Value satisfactionValue satisfaction

3.3. Product evolutionProduct evolution

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Fusion of Attributes• Tangible attributes

• Intangible attributes– Often more important

– Marketing Channels (When is this important?)

– Ex) LG vs. Samsung

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Value Satisfaction

• Perception of benefits derived from owning and consuming a product.– Assess customer value

– Provide customer value

– Communicate customer value

– Dividing up the benefit

• Ex) VARs in computer industry

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Product Evolution

• Core Product

Actual Product

Augmented Product*

• Product EvolutionChannel Evolution

Ex) PC industry; Movie industry

Levels of Product

Levels of Product

BrandName

QualityLevel

Packaging

Design

Features

Delivery& Credit

Installation

Warranty

After-Sale

Service

CoreBenefit

orService

CoreBenefit

orService

ActualProduct

ActualProduct

CoreProduct

CoreProduct

AugmentedProduct

AugmentedProduct

1010Product-ChannelProduct-ChannelManagement Interfaces*Management Interfaces*

1. New product planning & development

2. The product life cycle

3. Strategic product management

3 MajorAreas ofProduct-channelmanagement

1010I. New Product Planning*I. New Product Planning*

1. What input, if any, can channel members provide into new product planning?

2. What has been done to assure that new products will be acceptable to the channel members?*

3. Do the new products fit into the present channel members’ assortments?*

4. Will the product cause the channel members any special problems?

1. What input, if any, can channel members provide into new product planning?

2. What has been done to assure that new products will be acceptable to the channel members?*

3. Do the new products fit into the present channel members’ assortments?*

4. Will the product cause the channel members any special problems?

10101. Encouraging Channel Member 1. Encouraging Channel Member InputInput

Solicit ideas fornew products.

Solicit feedbackduring the test-marketing

or commercialization stage.

Gather feedbackon product sizeor on packaging.

10102. Member Acceptance of2. Member Acceptance ofNew ProductsNew Products

Determining Factors

• How the product will sell Turnover• Whether the product is easy to stock &

display• Whether the product will be profitable*

Margin

• How the product will sell Turnover• Whether the product is easy to stock &

display• Whether the product will be profitable*

MarginEx) How to increase reseller acceptance?

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3.Adding Products to 3.Adding Products to the Reseller’s Product the Reseller’s Product

AssortmentAssortment

Will existing channel members view the new product as appropriate to add to their

assortments?

Will existing channel members view the new product as appropriate to add to their

assortments?

Key Considerations:

Will channel members feel competent to handle the new product?

Will channel members feel competent to handle the new product?

Ex) Vitamin Water Case New product category

4. Trouble-Free New Products4. Trouble-Free New Products 1010

New product problems

Care in new product planning

=

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II. Product Life Cycle and II. Product Life Cycle and Marketing Channel*Marketing Channel*

Introduction

Growth

Sales($)

Sales curve

Maturity

Profit curve

TimeDecline

1010Introduction Stage and Introduction Stage and Marketing ChannelMarketing Channel

1. Recruit sufficient number of channelmembers for adequate market coverage

2. Assure adequate supply on channel members’ shelves

Growth Stage and Marketing Growth Stage and Marketing ChannelChannel

1010

1. Assure sufficient number of channel member inventories for adequate market coverage

2. Monitor the effects of competitive productson channel member support

1010Maturity Stage and Marketing Maturity Stage and Marketing ChannelChannel

1. Extra emphasis on motivating channel membersto mitigate competitive impact

2. Investigate possibility for changes in channelstructure to extend maturity stage & possiblyfoster new growth stage

1010Decline Stage and Marketing Decline Stage and Marketing ChannelChannel

1. Phase out marginal channel members

2. Investigate impact of product deletion on channel members

III. Strategic Product III. Strategic Product ManagementManagement

1010

• Product quality, innovativeness, or technological sophistication

• Capabilities of managers overseeing product line

• Firm’s financial capacity & willingness to provide promotional support

• Channel members’ role in implementing product strategies*

• Product quality, innovativeness, or technological sophistication

• Capabilities of managers overseeing product line

• Firm’s financial capacity & willingness to provide promotional support

• Channel members’ role in implementing product strategies*

Successful product strategies depend on:

1010Product Strategy Issues*Product Strategy Issues*

1. Product differentiation

2. Product positioning

3. Product line expansion & contraction

4. Trading up & trading down

5. Product brand strategy*

Product Differentiation*Product Differentiation* 1010

Implications for channel management:

• Select & help develop members who fit the product image when product differentiation strategy is affected by who will be selling the product.

• Provide retailers with the kind of support needed to properly present the product when this strategy is influenced by how the product is sold at retail.

Ex) Fashion Apparel industry in Japan; Nike

Creating a differential product involves gettingconsumers to perceive a difference.

Product PositioningProduct Positioning 1010

The manufacturer’s attempt to have consumers perceive the product in a particular way relative to

competitive products

Implications for channel management:•Consider interfaces between the product positioning strategy and where the product will be displayed and sold before the strategy is implemented.

• Elicit retailer support before attempting to implement strategy.

• ex) Vitaminwater positioning; NES positioning

1010Product Line Expansion & Product Line Expansion & ContractionContraction

Manufacturers often engage in both expansion and contraction simultaneously.

Implications for channel management:

• Difficult to balance between channel members’ Satisfaction with current product line & channel member support for reshaped product lines

• Channel members are making increasing demands on Manufacturers to have the right mix of products Retailer Power & Category Management

1010Trading Down, Trading UpTrading Down, Trading Up

Adding lower-priced products or product lines,or higher-priced products or product lines,

to a product mix

Implications for channel management:

• Can existing channel members provide adequatecoverage of high-end or low-end market segments?Ex) Lexus of Toyota; Apple Stores

• Do channel members have confidence in the manufacturer’s ability to successfully market thetrade-up or trade-down product?

1010

When manufacturers sell under both national andprivate brands, direct competition with channel membersmay result

Implications for channel management:• Do not sell both national & private brand versions of products to the same channel members.

• Sell national and private brand versions in different geographical territories or physically vary products.

•Dealing with Private Brand issue*

Product Brand StrategyProduct Brand Strategy

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ObjectivObjectivee Product Service StrategyProduct Service Strategy

It is the role of the marketing channel to provide necessary service along with

the product to the final user

Manufacturers should provide after-sale service:

•by offering it directly at the factory

•through their own network of service centers

•through channel members

•through authorized independent service centers

•by some combination of the above

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