Product and Distribution Strategies Chapter 13 Product and Distribution Strategies

Product Strategy What is a product? Product - bundle of physical, service, and symbolic attributes intended and designed to satisfy customer needs. Moreover, it also includes decisions about package design, brand name, trademarks, warranties, product image, new-product development, and customer service.

Product Strategy Classifying consumer goods Convenience products - items that consumer seeks to purchase frequently, immediately, and with little effort e.g. newspapers, snacks, candy, etc. Shopping products - typically purchased only after the buyer has compared competing products in competing stores e.g. furniture. Specialty products - items that a purchaser is willing to make a special effort to obtain e.g. car.

Product Classification

Classifying Business Goods Capital items: products that are long-lived and relatively expensive. Any tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery.  Expense items: relatively less costly products that are consumed within a year.

Classifying Services Services can also be classified as either B2C or B2B. Like tangible goods, services can also be convenience, shopping or speciality depending on the buying patterns of customers. However, there exists distinction between goods and services. Services, unlike goods, are intangible. They are perishable since firms cannot stockpile them. They are difficult to standardize because they must meet individual customer needs.

Product Lines and Product Mix Few firms operate with a single product. If their initial entry is successful, they tend to increase their profit and growth chances by adding new items to offer their customers. Product line - group of related products that are physically similar or are intended for the same market. Product mix – a company’s assortment of product lines and individual offerings.

Product Lines and Product Mix

Product Life Cycle Once a product is in the market, it usually goes through a series of four stages of progression —introduction, growth, maturity, and decline.

Product Life Cycle Not all products follow this pattern precisely, and different products may spend different periods of time in each stage. The concept, however, helps the marketing planner to anticipate developments throughout the various stages of a product. 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.

Distribution Strategy Distribution strategy: deals with the marketing activities and institutions involved in getting the right goods or services to the firm’s customers. Distribution decisions involve modes of transportation, warehousing, inventory control, order processing and selection of marketing channels. 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 No one distribution channel fits every product. Marketers must select which channel will best fit the firm and the product’s needs along with their customers’ needs. Consumer goods, business goods, and services may move through a direct channel from the producer to the consumer or a channel with multiple intermediaries.

Distribution Channels using 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 Marketing intermediary – (also called middleman) is a business firm that moves goods between producers and consumers or business users. Producers distribute products through wholesalers and retailers. Inexpensive products sold to thousands of consumers in widely scattered locations. They also create marketing utility by ensuring that products are available for sale when and where customers want to purchase them. E.g. when you want a cup of Nescafe coffee you do not call up NESTLE, rather you go to your nearest grocery store to buy it.

Wholesalers and Retailers Wholesaler - distribution channel member that sells primarily to retailers, other wholesalers, or business users. Retailer - channel member that sells goods and services to individuals for their own use rather than for resale. Difference between wholesalers and retailers [1] Wholesalers buy in bulk and sell in bulk. Unlike retailers.  [2] Wholesalers do not usually sell to the end-consumer unlike retailers. They (wholesalers) sell to institutional customers (including retailers), while the retailers usually sell their stuff to the end-customer, like you and me.  [3] Wholesalers are the intermediaries in the value-chain between the manufacturer and the customer. Unlike the retailers which are the last link before the product/service reaches the end-user. [4] The buying price and selling price of goods at the stage of a wholesaler is significantly lesser to the price points at that of a retailer.