PRODUCT AND DISTRIBUTION Module 6

PRODUCT CONCEPTS

OUTLINE Positioning Branding New Product Development Product Elimination

THE KEY TO PRODUCT SUCCESS……POSITIONING

POSITIONING …placing your product in that part of the market where it will receive a favorable reception compared to competing products (Jain, 1996).

BRANDING

BRAND...a term, symbol, or design that identifies a seller’s products and differentiates them from the competitor’s products.

OBJECTIVES OF BRANDING Identification Differentiation Repeat Sales New Product Sales

BRANDING STRATEGIES Individual branding Private labels Corporate or manufacturer’s brands Generic brands Family brands

INDIVIDUAL BRANDING Provide each product with a distinctive name Reduces a company’s risk that a failure is not associated with its other products

PRIVATE LABELS It creates store loyalty They are profitable Middlemen can sometimes be avoided

MANUFACTURERS’ BRANDS Advertising expenditures are reduced Well-known brands can attract new customers to the store

GENERIC BRANDS “No-name” products Decline in popularity

FAMILY BRANDING The same name is used to cover a group of products Reduced costs Transfer of customer satisfaction

PLANNING FOR NEW PRODUCTS

NEW PRODUCT STRATEGIES...firms are better able to sustain competitive pressures on their existing products and make headway.

THE ROLE OF TOP MANAGEMENT Establish policies and broad strategic directions Create the organizational climate needed to stimulate innovation Get involved!

NEW PRODUCT DEVELOPMENT Product improvement/modification Product imitation Product innovation

PRODUCT IMPROVEMENT / MODIFICATION Typically in the maturity phase of the product life cycle. Improvements are achieved through redesigning, remodeling, or reformulating the product to satisfy customer needs more fully.

PRODUCT IMITATION Imitators design and produce products not very different from an innovator’s product. This strategy reduces risk

PRODUCT INNOVATION An innovation strategy sees the introduction of a new product to replace an existing product in order to provide a new approach to satisfying an existing need.

ENCOURAGING INNOVATION Keep divisions small Tolerate failure Motivate champions Maintain liaison with customers Share technology throughout firm Sustain projects despite initial discouraging results

THE PRODUCT INNOVATION PROCESS Idea generation Screening and evaluation Business analysis Development and testing Test marketing Commercialization

IDEA GENERATION Search Marketing Research Internal and External Development Suggestion Systems

BUSINESS ANALYSIS Preliminary market plan Revenue forecasting Cost estimation Profit projections

DEVELOPMENT AND TESTING Development of a prototype

TEST MARKETING Simulated test marketing Conventional test marketing

COMMERCIALIZATION Continuous monitoring

PRODUCT ELIMINATION

ALTERNATIVES Divestment Harvesting (Controlled Divesting) Line Simplification

PRODUCT LINE STRATEGY

DISTRIBUTION

OUTLINE Introduction Distribution Scope Strategies Channel Strategies Power and Conflict Introduction Distribution Scope Strategies Channel Strategies Power and Conflict

CHANNELS OF DISTRIBUTION “What is a channel?” “A channel is an organized structure of buyers and sellers that bridge the gap of time and space between the manufacturer and the customer.” “What is a channel?” “A channel is an organized structure of buyers and sellers that bridge the gap of time and space between the manufacturer and the customer.”

MARKETING IS AN EXCHANGE PROCESS Concentration Dispersion Concentration Dispersion

WHOLESALING TRENDS Low margins Producers bypass wholesalers Acquisitions and mergers Increase of value added services Low margins Producers bypass wholesalers Acquisitions and mergers Increase of value added services

RETAILING TRENDS Innovation Growth of large chains Increase in scrambled merchandising Internet Innovation Growth of large chains Increase in scrambled merchandising Internet

DISTRIBUTION SCOPE STRATEGIES Exclusive Intensive Selective Exclusive Intensive Selective

EXCLUSIVE DISTRIBUTION One retailer serving an area is granted sole rights to carry a product Relevant for products that individuals seek out. One retailer serving an area is granted sole rights to carry a product Relevant for products that individuals seek out.

ADVANTAGES OF EXCLUSIVE DISTRIBUTION Dealer loyalty and sales support Retailer control Forecasting and inventory control Dealer loyalty and sales support Retailer control Forecasting and inventory control

DISADVANTAGES OF EXCLUSIVE DISTRIBUTION Lost volume “Eggs in one basket” Lost volume “Eggs in one basket”

INTENSIVE DISTRIBUTION Product is available to all possible retail outlets Convenience goods Product is available to all possible retail outlets Convenience goods

ADVANTAGES OF INTENSIVE DISTRIBUTION Increased sales Wider customer recognition Impulse buying Increased sales Wider customer recognition Impulse buying

DISADVANTAGES OF INTENSIVE DISTRIBUTION Quick turnaround required Control is difficult to maintain Quick turnaround required Control is difficult to maintain

SELECTIVE DISTRIBUTION Several outlets in a given area distribute a product Shopping goods Several outlets in a given area distribute a product Shopping goods

DISADVANTAGES OF SELECTIVE DISTRIBUTION Not adequately covering the market

CHANNEL ALTERNATIVES Conventional Vertical marketing system (VMS) –(channel is managed as a coordinated or programmed system) Conventional Vertical marketing system (VMS) –(channel is managed as a coordinated or programmed system)

VMS CHARACTERISTICS Channel captain Three types –Ownership –Contractual –Administered Channel captain Three types –Ownership –Contractual –Administered

POWER Power reflects the degree to which one firm can influence the actions and decisions of another firm

SOURCES OF POWER Reward power Coercive power Expertise power Referent power Legitimate power Reward power Coercive power Expertise power Referent power Legitimate power

CONFLICT A situation in which one channel member perceives another channel member to be engaged in behavior that is preventing or impeding it from achieving its goals.

RESOLVING CONFLICT Bargaining Diplomacy Interpenetration Strategy Conciliation Bargaining Diplomacy Interpenetration Strategy Conciliation