Product and Distribution Strategies 12 Chapter Product and Distribution Strategies

Learning Objectives Explain marketing’s definition of a product; differentiate among convenience, shopping, and specialty products; and distinguish between a product mix and a product line. Briefly describe each of the four stages of the product life cycle with their marketing implications. Explain how firms identify their products. Outline and briefly describe each of the major components of an effective distribution strategy. Distinguish between the different types of wholesaling intermediaries. Describe the various types of retailers and identify retail strategies. Identify the various categories of distribution channels, and discuss the factors that influence channel selection. 1 5 6 2 7 3 4

Product Strategy 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 Classification

Classifying Business Goods 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

Services Different from Goods Intangible Perishable Difficult to standardize Service provider is the service

Marketing Strategy Implications 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.

Product Lines and Product Mix 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 Life Cycle Product life cycle- four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses

Stages of the 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.

Implications 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

Stages in New Product Development Expensive, time-consuming, and risky. Only 1/3 of new products become success stories. Each step requires a “go or no-go” decision.

Product Development Stages 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 Failures

Product Identification 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

Brand Categories 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 Loyalty 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 Equity 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

Valuable Brands

Packages and Labels 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

Distribution Strategy 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 Channels

Distribution Channels Using Marketing Intermediaries 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.

Marketing Intermediaries

Wholesaling 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

Retailers 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

Non-Store Retailing Direct response retailing Internet retailing Automatic merchandising Direct selling

Retail Stores

Wheel of Retailing

How Retailers Compete 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

Retail Locations Planned Shopping Center Shopping Mall Regional Mall Lifestyle Mall

Distribution Channel Decisions and Logistics 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 Intensity 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

Logistics and Physical Distribution 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

Comparison of Transportation Modes

Customer Service 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.