Chapter 10 Product Issues in Channel Management

10 By understanding how the other marketing mix variables interface with the channel variable, and the implications of such, the channel manager could coordinate all strategic components to create the synergy needed to meet customers’ needs.

Why Do Some Products Fail While Others Succeed? Degree of innovativeness Price/Quality Relationship Customer Demand Competition Timing CHANNEL MEMBER SUPPORT

How Can We Get Channel Member Support for Our Products? Consider how the decisions about our product strategy affect our channel members

10 Product Strategy-Channel Strategy Interactions New product planning & development The product life cycle Strategic product management 3 Major areas of product management

10 New Product Planning: Encouraging Member Input Solicit ideas for new products. Solicit feedback during the test-marketing or commercialization stage. Gather feedback on product size or on packaging.

10 New Product Planning: Member Acceptance of New Products Determining Factors How the product will sell Whether the product is easy to stock & display Whether the product will be profitable

10 New Product Planning: Adding Products to the Assortment Will existing channel members view the new product as appropriate to add to their assortments? K ey C onsiderations: Will channel members feel competent to handle the new product?

10 New Product Planning: Educating Channel Members Manufacturer goal: To sell new products successfully Method: Educate or train channel members in the product’s use and the special features to emphasize in sales presentations

New Product Planning: Trouble-Free New Products 10 New product problems Care in new product planning =

10 Product Life Cycle Introduction Growth Sales ($) Sales curve Maturity Profit curve Time Decline

10 Product Life Cycle: Introduction 1. Assure sufficient number of channel members for adequate market coverage 2. Assure adequate supply on channel members’ shelves

Product Life Cycle: Growth Assure sufficient number of channel member inventories for adequate market coverage 2. Monitor the effects of competitive products on channel member support

10 Product Life Cycle: Maturity 1. Extra emphasis on motivating channel members to mitigate competitive impact 2. Investigate possibility for changes in channel structure to extend maturity stage & possibly foster new growth stage

10 Product Life Cycle: Decline 1. Phase out marginal channel members 2. Investigate impact of product deletion on channel members

Strategic Product Management 10 Product quality, innovativeness, or technological sophistication Managerial expertise Firm’s financial capacity & willingness to provide promotional support Channel members’ role in implementing product strategies S uccessful product strategies depend on:

10 Product Strategies Product differentiation Product positioning Product line expansion & contraction Trading up & trading down Product brand strategy

Product Differentiation 10 Implications for channel management: Channel managers should try to select & help develop members who fit the product image when product differentiation strategy is affected by who will be selling the product. Channel managers should provide retailers with the kind of support needed to properly present the product when this strategy is influenced by how the product is sold at retail. Creating a differential product involves getting consumers to perceive a difference.

Product Positioning 10 The manufacturer’s attempt to have consumers perceive the product in a particular way relative to competitive products Implications for channel management: Possible interfaces between the product positioning strategy and where the product will be displayed and sold to consumers should be considered before the strategy is implemented. Elicit retailer support before attempting to implement strategy.

10 Product Line Expansion & Contraction Manufacturers often engage in both expansion and contraction simultaneously. Implications for channel management: Channel members may not be in favor of redesign of product lines Channel members are making increasing demands on Manufacturers to have the right mix of products

10 Trading Down, Trading Up Adding lower-priced products or product lines, or higher-priced products or product lines, to a product mix Implications for channel management: Do existing channel members provide adequate coverage of high-end or low-end market segments? Do current channel members have confidence in the manufacturer’s ability to successfully market the trade-up or trade-down product?

10 When manufacturers produce and sell under both national and private brands, direct competition with channel members may result Implications for channel management: Do not sell both national & private brand versions of products to the same channel members. Sell national and private brand versions in different geographical territories. Physically vary products enough to minimize direct competition. Product Brand Strategy

Private Labels Guess what famous cosmetic company makes this brand for Kohl’s

10 Product Service Strategy It is the role of the marketing channel to provide necessary service along with the product to the final user Manufacturers should provide after-sale service by offering it directly at the factory through their own network of service centers through channel members through authorized independent service centers by some combination of the above