Product and Distribution Strategies

Learning Goals 1 Explain marketing’s definition of a product and list the components of the product strategy. Describe the classification system for consumer and business goods and services. Distinguish between a product mix and a product line. Briefly describe each of the four stages of the product life cycle. List the stages of the new-product development process. Explain how firms identify their products. Outline and briefly describe each of the major components of an effective distribution strategy. Identify the various categories of distribution channels and discus the factors that influence channel selection. 5 6 2 7 3 8 4

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 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. Indirect Distribution 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.

Wholesaling Wholesaler - distribution channel member that sells primarily to retailers, other wholesalers, or business users.

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 non-store.

Non-Store Retailing Internet retailing Automatic merchandising

Retail Stores Distribution

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

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.

Distribution Intensity Intensive distribution - firm’s products in nearly every available outlet. Requires cooperation of many intermediaries. Selective distribution - 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 – the activities involved in controlling 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

Product Life Cycle Product life - 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 customers 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, Jockey, Gatorade, Swatch, and Reebok. 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 Wal-Mart’s Ol’Roy dog food & Member’s Mark brand Family branding strategy - a single brand name used for several related products. Examples: KitchenAid, Johnson & Johnson, Hewlett-Packard, and Dole 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.

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 Important in product identification and play an important role in a firm’s overall product strategy. Choosing right package is especially important in international marketing. Must meet legal requirements of all countries in which product is sold. Universal Product Code - bar code read by optical scanner.