Product and Distribution Strategies
Chapter
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Learning Objectives
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Explain production strategy.
Briefly describe the four stages of the product life cycle.
Discuss production identification.
Outline the major components of an effective production strategy.
Explain wholesaling.
Describe retailing.
Identify distribution channel decisions and logistics.
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
Product Classification
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 and shorter-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 firm’s daily operations that do not become part of the final product
Classifying Business Goods
Different from Goods Intangible Perishable Difficult to standardize Service provider is the service
Services
In B2B, there is a greater emphasis on personal selling for installations and many component parts and a concentration on quality and customer service.
Producers of installations and component parts may involve 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
Product line– a group of related products marked 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
Product life cycle- four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses
Product Life Cycle
Introduction stage– firm promotes demand for its new 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 customers join 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
Marketer’s objective is to extend the life cycle 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
Expensive, time-consuming, and risky.
Only 1/3 of new products become success stories.
Each step requires a “go or no-go” decision.
Stages in New Product Development
Stage 1: Generating ideas for new offerings
Stage 2: Screening Stage 3: Concept development and
business analysis phase Stage 4: Product development Stage 5: Test marketing Stage 6: Commercialization
Product Development Stages
Product Failures
Brand- name, term, sign, symbol, design, or some 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 firm’s offerings from those of competitors.
Trademark- brand that has been given legal protection granted solely to the brand’s owner
Product Identification
Manufacturer’s brand- brand offered and promoted by a manufacturer. Examples: Tide, Cheerios, Windex, Fossil, and Nike.
Private or store brand- brand that is not linked to the manufacturer but instead carries a wholesaler’s or retailer’s label. Examples: Sears’ DieHard batteries and Walmart’s Ol’Roy 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
Brand recognition- consumer is aware of the brand but does not have a preference for it over other brands
Brand preference- consumer chooses one firm’s brand over a competitor’s
Brand insistence- consumer will seek out preferred brand and accept no substitute for it (the ultimate degree of brand loyalty)
Brand Loyalty
Brand equity- added value that a respected and successful name gives to a product
Brand awareness- product is the first one that comes to mind when a product category is mentioned
Brand Equity
Valuable Brands
Packaging affects the durability, image, and convenience 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 firm’s 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 packaging– Sun Chips
Packages and Labels
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
Distribution Strategy
Distribution Channels
Direct Distribution Direct contact between producer and customer. Most common in B2B markets. Often found in the marketing of relatively expensive, complex
products 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 Using Marketing Intermediaries
Marketing Intermediaries
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
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
Direct response retailing
Internet retailing
Automatic merchandising
Direct selling
Non-Store Retailing
Retail Stores
Wheel of Retailing
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
Planned Shopping Center Shopping Mall Regional Mall Lifestyle Mall
Retail Locations
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 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, or because they want to extend their sales reach.
Distribution Channel Decisions and Logistics
Intensive distribution- firm’s products in nearly every available outlet; requires cooperation of many intermediaries
Selective distribution– manufacturer selects limited number of retailers to distribute its product lines
Exclusive distribution- limits market coverage in a specific geographical region
Distribution Intensity
Supply chain– complete sequence of suppliers that contribute to 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
Comparison of Transportation Modes
Customer service standards measure the quality of service a firm provides for its customers.
Warranties are a firm’s promises to repair a defective product, refund money paid, or replace a product if it proves unsatisfactory.
Internet retailers have worked to humanize their customer interactions and deal with complaints more effectively.
Customer Service