CHAPTER OBJECTIVES PRODUCT DEVELOPMENT AND DISTRIBUTION nIdentify why product development decisions are important to consumers as well as businesses. nDescribe the three levels of product development and the types of product selection. nDiscuss how packaging and branding improve product sales and customer satisfaction. nDiscuss the important factors to be considered when selecting channels of distribution. nDescribe the characteristics of major forms of transportation used to distribute products. nGive examples of product-handling procedures that improve product distribution. 2222

nCompanies must carefully coordinate each of the mix elements nProd. development decisions must be made carefully nProduce the wrong products in wrong quantities w/o features and services customers need results in a great deal of time and money with no chance to sell the prod. for profit nBusinesses cannot ignore the needs/ wishes of consumers

Product Development nProduct design (1st step) - 3 levels nBasic - physical prod. in its simplest form; meets important consumer need nEx: basic computer nEnhanced - offers different features and options; nEx: computer with different screen or hard drive size, etc. nExtended - additional features that are NOT part of the physical prod. but are still part of the product nEx: customer service, guarantees, rebates

Product Development nProduct selection - 2nd step nProduct line - group of similar products with variations in design/quality to meet the needs of distinct groups nSUVs -- small (Toyota RV4); mid (Blazer); large (Escalade) nAppliance - low-, mid-, and high priced based on construction, quality of materials and available features nProduct assortment - complete set of all products nEx: Bath and Body Works -- deep product assortment ; large # of choices for each product

MANY PRODUCTS WITH LIMITED VARIETY LIMITED PRODUCT CHOICES AND VARIETY LARGE VARIETY IN FEW PRODUCT CHOICES BROAD VARIETY OF MANY PRODUCTS PRODUCT BREADTH MoreLess PRODUCT DEPTH More Less PRODUCT ASSORTMENT

Product Development nPackaging - 3rd step nBranding - 4th step nNeither are related to the actual physical prod, but are an important influence on purchase decisions nPackaging - 4 different purposes nProtects nProvide important info nEasier to use - pop in plastic bottle nPromotional tool - attractive package

Product Development nBranding - 4th step nName, symbol, word or design that IDs a prod., service, or co. nPlays a major role in buying decisions

LEVELS OF CONSUMER BRAND AWARENESS nConsumers are unable to identify the brand. nConsumers can identify the brand but it has limited influence on their purchase decision. nConsumers can identify the brand but will not purchase it because of the brand. nConsumers easily recognize the brand and will choose it if it is available. nConsumers view the brand as the most satisfying; will not purchase a different brand.

Purpose of Distribution nEconomic system relies on successful exchange of prod. and services between businesses and consumers nNot easy nMost problems occur during the exchange process--distribution nEconomic discrepancies - pg 575 nDifferences between business’s offerings and consumer’s requirements nType, quantity, location, time

Channels of Distribution nRoutes products follow while moving from the producer to the consumer, including all related activities and participating organizations nBusinesses that participate in activities that transfer goods/services from the producer to the user are called channel members nUsually retailers/wholesalers nThe larger the channel, the more complex and difficult to control, more cost too

CHANNELS OF DISTRIBUTION nDirect distribution - producers sell directly to the ultimate consumer nIndirect distribution - when distribution takes place through channel members nMajor difference is the the types of channel members involved nOnce channels are chosen, they can be changed--reassessed to address changes in economy.

Channels of Distribution nDirect distribution - AKA direct marketing nLess channels, less cost nFrom producer to consumer nSales rep to call on users in person nUse of mail--brochures; catalogs nTelemarketing nInternet nEthical Issues - pg 578 nThink critically - 1 to 4

Direct Distribution Producer Consumer

Channels of Distribution nIndirect distribution nCan simplify marketing operations by selling to retailers nRetailers - direct sales; advertising; storage; located near consumers; offer more than one product--do all shopping in one place nRetailers can range from large dept. stores to small retailers specializing in limited variety nNon-store retailers--vending machines; in- home parties; shopping channel; catalog

Indirect Distribution Producer Retailer Producer Wholesaler Retailer Consumer

CHANNELS OF DISTRIBUTION nIntegrated marketing channels nCooperation is difficult among businesses that operate at different levels of a channel and have different responsibilities nSome large business attempt to solve this through channel integration--when one business owns the organizations at other levels of the channel nA manufacturer may purchase the bus. That provides wholesaling or retailing

DECIDING ON A CHANNEL OF DISTRIBUTION nPerishability of the product -- direct distrib. nGeographic distance between producer and consumer nNeed for special handling of the product nNumber of users nNumber of types of products manufactured nFinancial strength and interests of the producer

TRANSPORTATION DECISIONS nCommon transportation methods nRailway - cheap but slow nTrucks (truck tailers to train--piggyback) nAirplanes - fast but expensive nOther transportation methods nWaterways -- sloooooow nPipelines nContainerization - less handling and damage

Product Handling nTracking products -- bar codes nProduct storage nWarehouse - simple storage nDistribution center nLarge bldg. designed to accumulate and redistribute products from many manufacturers efficiently nReplacing traditional warehouses nOrder processing

nBusinesspeople (producers) do not have identical perceptions of a product--nor should they nProducers think of their products as what they have to offer nConsumers think of products as a way to satisfy their needs

Chpt. Questions nDiscussion - pg 588 n2,3,4,9,10 nAnalyze - pg 589 n#1 - need groups of 3 nQuestionnaire of 5 products due Thurs. nWill be used over the break