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PRODUCT AND DISTRIBUTION
Module 6
PRODUCT CONCEPTS
OUTLINE
• Positioning
• Branding
• New Product Development
• Product Elimination
THE KEY TO PRODUCT SUCCESS……POSITIONING
POSITIONING
• …placing your product in that part of the market where it will receive a favorable reception compared to competing products (Jain, 1996).
BRANDING
BRAND
• ...a term, symbol, or design that identifies a seller’s products and differentiates them from the competitor’s products.
OBJECTIVES OF BRANDING
• Identification
• Differentiation
• Repeat Sales
• New Product Sales
BRANDING STRATEGIES
• Individual branding
• Private labels
• Corporate or manufacturer’s brands
• Generic brands
• Family brands
INDIVIDUAL BRANDING
• Provide each product with a distinctive name
• Reduces a company’s risk that a failure is not associated with its other products
PRIVATE LABELS
• It creates store loyalty
• They are profitable
• Middlemen can sometimes be avoided
MANUFACTURERS’ BRANDS
• Advertising expenditures are reduced
• Well-known brands can attract new customers to the store
GENERIC BRANDS
• “No-name” products
• Decline in popularity
FAMILY BRANDING
• The same name is used to cover a group of products
• Reduced costs
• Transfer of customer satisfaction
PLANNING FOR NEW PRODUCTS
NEW PRODUCT STRATEGIES
• ...firms are better able to sustain competitive pressures on their existing products and make headway.
THE ROLE OF TOP MANAGEMENT
• Establish policies and broad strategic directions
• Create the organizational climate needed to stimulate innovation
• Get involved!
NEW PRODUCT DEVELOPMENT
• Product improvement/modification
• Product imitation
• Product innovation
PRODUCT IMPROVEMENT / MODIFICATION
• Typically in the maturity phase of the product life cycle.
• Improvements are achieved through redesigning , remodeling, or reformulating the product to satisfy customer needs more fully.
PRODUCT IMITATION
• Imitators design and produce products not very different from an innovator’s product.
• This strategy reduces risk
PRODUCT INNOVATION
• An innovation strategy sees the introduction of a new product to replace an existing product in order to provide a new approach to satisfying an existing need.
ENCOURAGING INNOVATION
• Keep divisions small
• Tolerate failure
• Motivate champions
• Maintain liaison with customers
• Share technology throughout firm
• Sustain projects despite initial discouraging results
THE PRODUCT INNOVATION PROCESS
• Idea generation
• Screening and evaluation
• Business analysis
• Development and testing
• Test marketing
• Commercialization
IDEA GENERATION
• Search
• Marketing Research
• Internal and External Development
• Suggestion Systems
BUSINESS ANALYSIS
• Preliminary market plan
• Revenue forecasting
• Cost estimation
• Profit projections
DEVELOPMENT AND TESTING
• Development of a prototype
TEST MARKETING
• Simulated test marketing
• Conventional test marketing
COMMERCIALIZATION
• Continuous monitoring
PRODUCT ELIMINATION
ALTERNATIVES
• Divestment
• Harvesting (Controlled Divesting)
• Line Simplification
PRODUCT LINE STRATEGY
ADD NEWPRODUCTS
PRODUCTIMPROVEMENTS
ELIMINATEPRODUCTS
PRODUCT LINE STRATEGY
DISTRIBUTIONDISTRIBUTION
OUTLINEOUTLINE
• Introduction
• Distribution Scope Strategies
• Channel Strategies
• Power and Conflict
• Introduction
• Distribution Scope Strategies
• Channel Strategies
• Power and Conflict
CHANNELS OF DISTRIBUTIONCHANNELS OF DISTRIBUTION
• “What is a channel?”
• “A channel is an organized structure of buyers and sellers that bridge the gap of time and space between the manufacturer and the customer.”
• “What is a channel?”
• “A channel is an organized structure of buyers and sellers that bridge the gap of time and space between the manufacturer and the customer.”
MARKETING IS AN EXCHANGE PROCESS
MARKETING IS AN EXCHANGE PROCESS
• Concentration
• Dispersion
• Concentration
• Dispersion
WHOLESALING TRENDSWHOLESALING TRENDS
• Low margins
• Producers bypass wholesalers
• Acquisitions and mergers
• Increase of value added services
• Low margins
• Producers bypass wholesalers
• Acquisitions and mergers
• Increase of value added services
RETAILING TRENDSRETAILING TRENDS
• Innovation
• Growth of large chains
• Increase in scrambled merchandising
• Internet
• Innovation
• Growth of large chains
• Increase in scrambled merchandising
• Internet
DISTRIBUTION SCOPE STRATEGIES
DISTRIBUTION SCOPE STRATEGIES
• Exclusive
• Intensive
• Selective
• Exclusive
• Intensive
• Selective
EXCLUSIVE DISTRIBUTIONEXCLUSIVE DISTRIBUTION
• One retailer serving an area is granted sole rights to carry a product
• Relevant for products that individuals seek out.
• One retailer serving an area is granted sole rights to carry a product
• Relevant for products that individuals seek out.
ADVANTAGES OF EXCLUSIVE DISTRIBUTION
ADVANTAGES OF EXCLUSIVE DISTRIBUTION
• Dealer loyalty and sales support
• Retailer control
• Forecasting and inventory control
• Dealer loyalty and sales support
• Retailer control
• Forecasting and inventory control
DISADVANTAGES OF EXCLUSIVE DISTRIBUTION
DISADVANTAGES OF EXCLUSIVE DISTRIBUTION
• Lost volume
• “Eggs in one basket”
• Lost volume
• “Eggs in one basket”
INTENSIVE DISTRIBUTIONINTENSIVE DISTRIBUTION
• Product is available to all possible retail outlets
• Convenience goods
• Product is available to all possible retail outlets
• Convenience goods
ADVANTAGES OF INTENSIVE DISTRIBUTION
ADVANTAGES OF INTENSIVE DISTRIBUTION
• Increased sales
• Wider customer recognition
• Impulse buying
• Increased sales
• Wider customer recognition
• Impulse buying
DISADVANTAGES OF INTENSIVE DISTRIBUTION
DISADVANTAGES OF INTENSIVE DISTRIBUTION
• Quick turnaround required
• Control is difficult to maintain
• Quick turnaround required
• Control is difficult to maintain
SELECTIVE DISTRIBUTIONSELECTIVE DISTRIBUTION
• Several outlets in a given area distribute a product
• Shopping goods
• Several outlets in a given area distribute a product
• Shopping goods
DISADVANTAGES OF SELECTIVE DISTRIBUTION
DISADVANTAGES OF SELECTIVE DISTRIBUTION
• Not adequately covering the market• Not adequately covering the market
CHANNEL ALTERNATIVESCHANNEL ALTERNATIVES
• Conventional
• Vertical marketing system (VMS)– (channel is managed as a coordinated
or programmed system)
• Conventional
• Vertical marketing system (VMS)– (channel is managed as a coordinated
or programmed system)
VMS CHARACTERISTICSVMS CHARACTERISTICS
• Channel captain
• Three types– Ownership– Contractual– Administered
• Channel captain
• Three types– Ownership– Contractual– Administered
POWERPOWER
• Power reflects the degree to which one firm can influence the actions and decisions of another firm
• Power reflects the degree to which one firm can influence the actions and decisions of another firm
SOURCES OF POWERSOURCES OF POWER
• Reward power
• Coercive power
• Expertise power
• Referent power
• Legitimate power
• Reward power
• Coercive power
• Expertise power
• Referent power
• Legitimate power
CONFLICTCONFLICT
• A situation in which one channel member perceives another channel member to be engaged in behavior that is preventing or impeding it from achieving its goals.
• A situation in which one channel member perceives another channel member to be engaged in behavior that is preventing or impeding it from achieving its goals.
RESOLVING CONFLICTRESOLVING CONFLICT
• Bargaining
• Diplomacy
• Interpenetration Strategy
• Conciliation
• Bargaining
• Diplomacy
• Interpenetration Strategy
• Conciliation