Product and Distribution Strategies Chapter 12

1 Learning Objectives Explain production strategy. Briefly describe the four stages of the product life cycle. Discuss production identification. Outline the major components of an effective production strategy. Explain wholesaling. Describe retailing. Identify distribution channel decisions and logistics.

Product- a bundle of physical, service, and symbolic characteristics designed to satisfy consumer wants Product Categories: Convenience products- items the consumer seeks to purchase frequently, immediately, and with little effort Shopping products- typically purchased only after the buyer has compared competing products in competing stores Specialty products- items a purchaser is willing to make a special effort to obtain Product Strategy

Product Classification

Capital versus Expense Items Installations- major capital items such as new factories, heavy equipment and machinery, and custom-made equipment Accessory equipment- includes less expensive and shorter-lived capital items than installations and involves fewer decision makers Component parts and materials- become part of a final product Raw materials- farm and natural products used in producing other final products Supplies- expense items used in a firm’s daily operations that do not become part of the final product Classifying Business Goods

Different from Goods Intangible Perishable Difficult to standardize Service provider is the service Services

In B2B, there is a greater emphasis on personal selling for installations and many component parts and a concentration on quality and customer service. Producers of installations and component parts may involve customers in new-product development. Advertising is more commonly used to sell supplies and accessory equipment. Producers of supplies and accessory equipment place a greater emphasis on competitive pricing strategies. Marketing Strategy Implications

Product line– a group of related products marked by physical similarities or intended for a similar market Pepsi Product mix– assortment of product lines and individual goods and services a firm offers to consumers and business users Product Lines and Product Mix

Product life cycle- four basic stages— introduction, growth, maturity, and decline— through which a successful product progresses Product Life Cycle

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. Stages of the Product Life Cycle

Marketer’s objective is to extend the life cycle as long as product is profitable. Marketers’ goals: Increasing customers’ frequency of use Adding new users Finding new uses for product Changing package sizes, labels, and product designs Implications of the Product Life Cycle

Expensive, time- consuming, and risky. Only 1/3 of new products become success stories. Each step requires a “go or no-go” decision. Stages in New Product Development

Stage 1: Generating ideas for new offerings Stage 2: Screening Stage 3: Concept development and business analysis phase Stage 4: Product development Stage 5: Test marketing Stage 6: Commercialization Product Development Stages

Product Failures

Brand- name, term, sign, symbol, design, or some combination that identifies the products of one firm and differentiates them from competitors’ offerings Brand name- part of the brand consisting of words or letters included in a name used to identify and distinguish the firm’s offerings from those of competitors. Trademark- brand that has been given legal protection granted solely to the brand’s owner Product Identification

Manufacturer’s brand- brand offered and promoted by a manufacturer. Examples: Tide, Cheerios, Windex, Fossil, and Nike. Private or store brand- brand that is not linked to the manufacturer but instead carries a wholesaler’s or retailer’s label. Examples: Sears’ DieHard batteries and Walmart’s Ol’Roy dog food.Walmart’s Family branding strategy- a single brand name used for several related products. Examples: KitchenAid, Johnson & Johnson, Hewlett-Packard, and Arm & Hammer. Individual branding strategy- giving each product within a line a different name. Examples: Procter & Gamble products Tide, Cheer, and Dash.Procter & Gamble Brand Categories

Brand recognition- consumer is aware of the brand but does not have a preference for it over other brands Brand preference- consumer chooses one firm’s brand over a competitor’s Brand insistence- consumer will seek out preferred brand and accept no substitute for it (the ultimate degree of brand loyalty) Brand Loyalty

Brand equity- added value that a respected and successful name gives to a product Brand awareness- product is the first one that comes to mind when a product category is mentioned Brand Equity

Valuable Brands

Packaging affects the durability, image, and convenience of an item and is responsible for one of the biggest costs in many consumer products. Packing is important in product identification and play is an important role in a firm’s overall product strategy. Choosing the right package is especially important in international marketing. Packing must meet legal requirements of all countries in which product is sold. Universal Product Code- bar code read by optical scanner Universal Product Code Environmental impact of packaging– Sun ChipsSun Chips Packages and Labels

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 Strategy

Distribution Channels

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 Producers distribute products through wholesalers and retailers. Inexpensive products sold to thousands of consumers in widely scattered locations. Lowers costs of goods to consumers by creating market utility. Distribution Channels Using Marketing Intermediaries

Marketing Intermediaries

Wholesaler- distribution channel member that sells primarily to retailers, other wholesalers, or business users Manufacturer-Owned Wholesaling Intermediaries Owned by the manufacturer of the goods or products to control distribution or customer service Sales branch that stocks products and fills orders from inventories Sales office that takes orders but does not stock the product Wholesaling

Retailer- channel member that sells goods and services to individuals for their own use rather than for resale Final link of the distribution channel Two types: store and nonstore Retailers

Direct response retailing Internet retailing Automatic merchandising Direct selling Non-Store Retailing

Retail Stores

Wheel of Retailing

Identifying a Target Market Selecting a Product Strategy Selecting a Customer Service Strategy Selecting a Pricing Strategy Choosing a Location Building a Promotional Strategy Creating a Store Atmosphere How Retailers Compete

Planned Shopping Center Shopping Mall Regional Mall Lifestyle Mall Retail Locations

What specific channel will it use? What will be the level of distribution intensity? Selecting Distribution Channels Complex, expensive, custom-made, or perishable products move through shorter distribution channels involving few— or no—intermediaries. Standardized products or items with low unit values usually pass through relatively long distribution channels. Start-up companies often use direct channels because they can’t persuade intermediaries to carry their products, or because they want to extend their sales reach. Distribution Channel Decisions and Logistics

Intensive distribution- firm’s products in nearly every available outlet; requires cooperation of many intermediaries Selective distribution– manufacturer selects limited number of retailers to distribute its product lines Exclusive distribution- limits market coverage in a specific geographical region Distribution Intensity

Supply chain– complete sequence of suppliers that contribute to creating a good or service and delivering it to business users and final consumers Logistics– process of coordinating the flow of goods, services, and information among members of the supply chain Physical distribution– the activities aimed at efficiently moving finished goods from the production line to the consumer or business buyer Logistics and Physical Distribution

Comparison of Transportation Modes

Customer service standards measure the quality of service a firm provides for its customers. Warranties are a firm’s promises to repair a defective product, refund money paid, or replace a product if it proves unsatisfactory. Internet retailers have worked to humanize their customer interactions and deal with complaints more effectively. Customer Service