1 Topic 8 Product Issues in Channel Management By Dr. Songporn Hansanti

2 Marketing Mix Resources 10 Objective 1: 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.

3 10 Product-Channel Management Interfaces Objective 2: New product planning & development The product life cycle Strategic product management 3 Major areas of product management

4 10 New Product Planning Objective 3: 1.What input, if any, can channel members provide into new product planning? 2.What has been done to assure that new products will be acceptable to the channel members? 3.Do the new products fit into the present channel members’ assortments? 4.Will any special education or training be necessary to prepare the channel members to sell the new products effectively? 5.Will the product cause the channel members any special problems?

5 10 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.

6 10 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

7 10 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?

8 Categories of New Products New-To-The-World New Product Lines Product Line Additions Improvements/Revisions Repositioned Products Lower-Priced Products

9 The New-Product Development Process New Product Success Factors Long-Term Commitment New Product Strategy Capitalize on Experience Establish an Environment

10 New-Product Development Process New-Product Strategy Idea Generation Idea Screening Business Analysis Development Test Marketing Commercialization New Product

11 Idea Generation Customers Employees Distributors Competitors R & D Consultants Creative Thinking Sources of New-Product Ideas

12 Brainstorming Brainstorming The process of getting a group to think of unlimited ways to vary a product or solve a problem. 2

13 Idea Screening Screening The first filter in the product development process, which eliminates ideas that are inconsistent with the organization’s new-product strategy or are inappropriate for some other reason.

14 Concept Test A test to evaluate a new-product idea, usually before any prototype has been created. 2

15 Business Analysis Considerations in Business Analysis Stage Demand Cost Sales Profitability

16 Development  Creation of prototype  Marketing strategy  Packaging, branding, labeling  Manufacturing feasibility  Final government approvals if needed

17 Simultaneous Product Development A new team-oriented approach to new- product development where all relevant functional areas and outside suppliers participate in the development process.

18 Introductory Stage High failure rates Little competition Frequent product modification Limited distribution High advertising and production costs Negative profits Promotion focuses on awareness and information Intensive personal selling to channels

19 Test Marketing The limited introduction of a product and a marketing program to determine the reactions of potential customers in a market situation.

20 Alternatives to Test Marketing Single-source research using supermarket scanner data Simulated (laboratory) market testing Online test marketing

21 Commercialization Production Inventory Buildup Distribution Shipments Sales Training Trade Announcements Customer Advertising Steps in Marketing a New Product Steps in Marketing a New Product

22 10 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

23 Trouble-Free New Products 10 New product problems Care in new product planning =

24 Product Life Cycle Time Dollars Profits SalesIntroductoryStageGrowthStageMaturityStageDeclineStage 0

25 Growth Stage Increasing rate of sales Entrance of competitors Market consolidation Initial healthy profits Aggressive advertising of the differences between brands Wider distribution Prices normally fall

26 Maturity Stage Sales increase at a decreasing rate Saturated markets Annual models appear Lengthened product lines Service and repair assume important roles Heavy promotions to dealers and consumers Marginal competitors drop out Prices and profits fall Niche marketers emerge

27 Decline Stage Long-run drop in sales Large inventories of unsold items Elimination of all nonessential marketing expenses “Organized abandonment”

28 10 Product Life Cycle Objective 4: Introduction Growth Sales ($) Sales curve Maturity Profit curve Time Decline

29 10 Introduction 1. Assure sufficient number of channel members for adequate market coverage 2. Assure adequate supply on channel members’ shelves

30Growth10 1. Assure sufficient number of channel member inventories for adequate market coverage 2. Monitor the effects of competitive products on channel member support

31 10Maturity 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

32 10Decline 1. Phase out marginal channel members 2. Investigate impact of product deletion on channel members

33 Strategic Product Management 10 Product quality, innovativeness, or technological sophistication Capabilities of managers overseeing product line Firm’s financial capacity & willingness to provide promotional support Channel members’ role in implementing product strategies S uccessful product strategies depend on: Objective 5:

34 Objective 6:10 Product Strategies Product differentiation Product positioning Product line expansion & contraction Trading up & trading down Product brand strategy

35 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.

36 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. Maintain backup supply of retailer incentives

37 10 Product Line Expansion & Contraction Manufacturers often engage in both expansion and contraction simultaneously. Implications for channel management: Difficult to balance channel member satisfaction & Support for reshaped product lines Channel members are making increasing demands on Manufacturers to have the right mix of products

38 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: Whether existing channel members provide adequate coverage of high-end or low-end market segments to which trade-up or trade-down product is aimed Whether the channel members have confidence in the manufacturer’s ability to successfully market the trade-up or trade-down product

39 10 When manufacturers 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

40 10 Product Service Strategy Objective 6: 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