Chapter Two

Product and Distribution Strategies

Overview

• In the last chapter we learned about marketing, its concept, and the marketing mix of processes. In this chapter we will learn about product design, product strategies and distribution.

• As your book suggests, we will examine ways in which organizations design and implement marketing strategies that address customer’s needs and wants and focus on the first two elements of the marketing mix: product and distribution

Vocabulary and expressions• Product• Product strategy• Product line• Product mix• Convenience product• Shopping products• Specialty product• Distribution Channel• Retail outlet• Design• Implement• Market offering

Learning objective one: Product strategy and distribution

• The first question we must ask ourselves is: What is a product? Most people would probably answer by listing its physical features.

• Marketers take a broader view. According to your book the broader view is that a product is a bundle of physical, service, and symbolic attributes designed to satisfy customer wants.

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• As usual, I always give a second definition. This time from the other book.

• Definition: A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or a need. Products include more than just tangible objects, such as cell phones, computers, and cars. Broadly defined “products” also include services, events, persons, places, organizations, ideas or mixes of these entities. Therefore a car is a product but a visit to Beijing Imperial Palace is also a product ― a “service product”.

Continue• So then, What is a service?• Definition: A service is any activity or benefit that one can

offer to another that is essentially intangible and does not result in the ownership of anything. A service can be also defined as a performance, an experience or a solution to a problem.

• As I mentioned to you before, in a customer- driven marketing, rarely a product is offered without some elements of service attached to it.

• However, some products are pure tangible product, such as toothpaste or salt. On the other hand, some products are pure services, such as Doctor’ examinations. Most products, these days, are a combination of both, such as Starbuck.

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• Product is a key element in the overall market offering. Marketing-mix planning begins with building an offering that brings value to target customers. This offering becomes the basis upon which the company builds profitable customers relationships.

Continue• As we start to understand, a product does not come along as

just a product for just the purpose of being a product. Buyers are making their decision to buy a product only if they think that the product has the special attribute or attributes that can satisfy their needs, wants and desires.

• Therefore, product strategy involves considerably more than just producing a good or a service and focuses on benefits.

• Your book is telling us that it involves decisions about package, design, brand name, trademarks, warranties, product image, new product development and customer service.

• Consumers think subjectively when they decide to buy one product instead of another.

• A producer of goods or a provider of service must think objectively. To do so, they must classify goods and services by categories and characteristics, in order to satisfy consumers’ needs and wants.

Classifying goods and services• Do you remember that marketers had found easier to

classify goods and services as either B2C or B2B depending on the purchasers of the particular item.

• In your book they tell us that these classifications can be subdivided further, and each type requires a different competitive strategy.

• The classification used for ultimate consumers who purchase products for their own enjoyment and not for resale is based on consumer buying habits.

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These classifications are:

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

• 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.

Classifying Business Goods

• Typically business products are goods and services like cell phones and personal computers used in operating an organization. According to your book they also include machinery, tools, raw material, and buildings used to manufacture other products for resale.

• While consumer products are classified by buying habits, business products are classified based on how they are used and by their basic characteristics.

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• Products that are long-lived and relatively expensive are called capital items.

Less costly products that are consumed within a year are called expense items.

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• Five basic categories of B2B products exist. They are:

InstallationsAccessory equipmentsComponent partsRaw materialsSupplies

Read the book for details

Classifying services• Services can be classified either as B2C or B2B.• For example one needs a new car because the old one is not

working well. • The car is the core product that one company offers to

consumers. However, consumers have different needs, wants, and purchase power according to their specific use of the car.

• Therefore, to satisfy the needs and wants of consumers, the company will add supplementary services: some enhancing and other facilitating.

• However, service product and manufactured goods have different marketing strategies

Marketing strategy implication

• As I told you previously, the name of the game is:• To separately analyze the producers of

goods/providers of services’ objectives, and then analyze consumers’ subjective behaviors in their target market.

Chinese consumer market for hair products: Male and female

• As I have explained to you, there are definite relationships between the product, the provider of service/producer of goods, and potential buyers in a specific consumer market.

• The marketing strategy is contained in the value proposition and perceived benefits from consumers.

• To better understand watch the next images

Chinese Men Target

Shelve display

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• It is obvious from this observation that producer of goods (hair products) have objectives or goals to attract potential buyers in their target market through suggestions and value propositions. Consumers react subjectively through their perceptions of benefits.

• Let think about this in a critical way? Take notes and listen to my explanations.

Producers of goods and providers of services; marketing strategies• Let’s refresh our memory with our road

maps.• First we need to review the marketing

concept for a better understanding of marketing management and decision-making.

• Then, I have designed a basic diagram that you can improve for your homework. Let’s have a new competition for the best design!

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• As you can observe, the objectives of an organization producing goods or services or both are first to develop a product or a service that will not only satisfy but also add value and equity to customers in their target market.

• Organizations spend a lot of time, resources, and energy developing new products and services.

• In a Customer-driven market services are a key element of customers’ satisfaction.

• Now, you start to understand the complexity of researching (internally and externally) and developing effective marketing strategies.

Analysis of customer behavior from a marketing point of view

• The next two diagrams explains in detail the cognitive processes from previous learning.

• Marketers when they design a product or a service product, they need to be aware of such a cognitive process if they want to create real value for customers.

• This specific knowledge is probably one of the most important factors when marketers research customers’ buying habits.

Continue• To start with, how do we define a consumer market?• The easiest way to explain is to consider what the market

includes. • A consumer market consists of all individuals and

households who buy and acquire goods and services for personal consumption.

• The simplest model of consumer buyer behavior is the stimulus-response model: marketing stimuli (the four Ps) and of their major forces (cultural, economic, political, technological) entering the consumers’ black box and producing certain responses.

Continue• Consumer buyer behavior is influenced by four key sets of buyer

characteristics.• Cultural• Social• Personal• And Psychological• Although many of these factors cannot be influenced by the marketers,

they can however help to identify potential buyers.• By now you should be able to understand the process of first being a

consumer, then a buyer, to finish as a customer.

• Marketers don’t create needs, though in some instances they make consumers more keenly aware of their unfelt needs

Regarding new products diffusion• With regards to a new product diffusion,

consumers respond at different rates, depending on consumer’s characteristics and the product Characteristics.

• Consumers may be innovators• Early adopters• Early majority• Late majority

Continue• Innovator: are venturesome they try new ideas and ‒

take risks.

• Early adopters: are guided by respect they are ‒opinion leaders whom take decisions to buy very carefully.

• Early majority: are deliberate even though rarely as ‒leaders.

• Later majority: are skeptical they adopt an innovation ‒only after the majority of people have tried it.

• Others are tradition bounds and will buy only if the innovation becomes a tradition itself.

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• As you can observe, many levels of factors affect our buying behavior from broad ‒cultural and social influence to motivations, beliefs, and attitudes lying deep within us. For example, why do you buy Samsung cell phones instead of apple’s.

LO2 Product life cycle

• Read your book page 46-47-48.• Definition of product line: group of related products

that are physically similar or are intended for the same target market.

• Further explanations: product line is also a group of products that are related in:

• function• Customer-purchase needs• Distribution channels

Continue• Product mix: Company’s assortment of product

lines and individual offerings.• The mix can be described by four dimensions:• Width.• Length• Depth• And consistency• These dimensions are tools for developing the

company’s product strategy, such as branding strategy

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• As you have learned so far: the duration of a product depends on many factors, such as product innovation, service innovation. And the different stage of the life cycle (p.47).

• However, attention to a product brand is probably the most important strategy a company must develop for a company’s long-run success. For example, McDonalds, Boeing, Haier in China, and etc…

Branding Strategy

• Some eminent researchers consider brands as the major enduring asset of a company.

• Brands are more than just names and symbols; they embody everything that the product or the service means to consumers.

• Brand equity is the differential effect that knowing the brand name has on customers’ response to the product or service. A brand with strong brand equity is a very valuable asset.

Slogans and meanings

• #1. Toyota• The three ellipses seen in the logo for Toyota represent three

hearts: the heart of the customer, the heart of the product, and the heart of progress in the field of technology

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• 4. “I Love NY” by Wells Rich Greene

• In 1977, William S. Doyle, Deputy Commissioner of the New York State Department of Commerce hired advertising agency Wells Rich Greene to develop a marketing campaign for New York State. Doyle also recruited Milton Glaser, a productive graphic designer to work on the campaign, and created the design based on Wells Rich Greene’s advertising campaign. Strange as it may seem, Glaser expected the campaign to last only a couple months and did the work pro bono. Yet, the innovative pop-style icon became a major success and has continued to be sold for years.

• 10. “Think Different” Apple by TBWA\Chiat\Day

• The world famous slogan was created for Apple Computer (Apple Inc. as of 2007) in 1997, structured and rolled out by Peter Economides at the Los Angeles office of advertising agency TBWA\Chiat\Day. It was used in a television commercial, several print advertisements and a number of TV promos for Apple products. Apple’s use of the slogan was discontinued with the start of the Apple Switch ad campaign in 2002.

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• In Building brands, companies need to make decisions about:

• Brand positioning• Brand name selection• Brand sponsorship• And brand development

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• The most powerful brand positioning builds around strong consumer beliefs and values.

• Brand name selection involves finding the best brand name based on careful review of product benefits, the target market, and proposed marketing strategies.

• It boils down to this conclusion: universally consumers want quality and improvement in their life- styles. Understanding these factors is the key to a long-run success.

Service marketing and product strategies

• Services are characterized by four key characteristics:

• Intangible• Inseparable• Variable• And perishable• Each characteristic poses problems and

marketing requirements.

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• Marketers work to find out ways to make: The service more tangible To increase the productivity of providers whom are

inseparable from their products To standardize the quality in the face of variability And to improve demand movements and supply

capacities in the face of service perishability

Marketing strategy implication of the product life cycle

• In your book page 49 read the details of my explanations.

• A company’s product are born, grow, mature, and then decline, just like living things do. To remain vital, a company must continually develop new products and manage them effectively through their life-cycle.

• Next figure explains very well the life-cycle of products

Continue• Product development begins when the company finds and develops a

new product idea. During product development, sales are Zero and the company costs mount.

• Introduction is a period of slow sales growth as the product is introduced. Profits are nonexistent in this stage because of the heavy expenses of product introduction.

• Growth is a period of rapid market acceptance and increasing profits.• Maturity is a period of slowdown in sales growth because the product has

achieved acceptance by most potential buyers. Profits levels off or decline due to increase cost in defending the product against competition.

• Decline is the period when the sales fall off and profits drop. Not all products follow the product life cycle: Some products are

introduced and die quickly; others stay in the mature stage a long time; some others decline rapidly and are recycle

LO3 Distribution Strategy

• In your book page 55 to 59.• Points to retain: As your book summarize, a firm must consider whether

to move the products through direct or indirect distribution. Once the decision is made the firm must identify the types of marketing intermediaries, if any, through which it will distribute its good and services.

• The internet has made direct distribution an attractive option for many retail companies.

• Another component is distribution intensity. The business must decide on the amount of market coverage ‒ intensive, selective or exclusive.

• Finally, attention must be paid to managing the distribution channel.• It is vital to minimize conflicts between channel members.• To understand this strategy I will give you a case study.

Distribution Channel

• A distribution channel is the chain of individuals and organizations involved in getting a product or service from the producer to the consumer. Distribution channels are also known as marketing channels or marketing distribution channels.

• Distribution channels in marketing are one of the classic “4 Ps” (product, promotion, price, placement a.k.a. “distribution”). They’re a key element in your entire marketing strategy — they help you expand your reach and grow revenue.

• B2B and B2C companies can sell through a single distribution channel or through multiple channels that may include:

• Wholesaler/Distributor• Direct/Internet• Direct/Catalog• Direct/Sales Team• Value-Added Reseller (VAR)• Consultant• Dealer• Retail

• I hope that you have appreciated the augmented aspect of my Service Product― that is my teaching program.

• I gave you the very beginning of studying “product strategy and distribution”; you need now to put the effort and research for deeper knowledge.

• To this effect, I have given to you the opportunity to do so, by writing a project, as well as a quiz.

1. Define the term product. Give some details. What is a service product? Give some examples.

2. Describe the objectives of a firm when developing a new product or a new service product?

3. How would you define the relationships between the provider/producer, the product and the consumer in a consumer market? Give some details

4. When managers are working on a strategic planning, what kind of research is required for effective planning?

5. We know that marketers categorize products by their characteristics and functions; then how do they analyze the process of consumers becoming buyers and then a loyal customer? How do marketers divide this process into stages and steps?

6. At the pre-purchase stage, what is the most important step that will trigger the others?

7. Describe the need awareness and the cognitive process of previous learning. You can draw a diagram of this process.

8. When you hear the term brand, what springs to your mind? What is a logo? What is a slogan? Give examples.

9. Give the definition of marketing distribution channels 10. Explain direct distribution and indirect distribution.

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