© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. PowerPoint Presentation by Charlie Cook, The University of West Alabama Product and Supply Chain Management PART 4 Focusing on the Customer: Marketing Growth Strategies

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–2 1.Understand the challenges associated with the growth of a small business. 2.Explain the role of innovation in a company’s growth. 3.Identify stages in the product life cycle and the new product development process. 4.Describe the building of a firm’s total product. 5.Discuss product strategy and the alternatives available to small businesses. 6.Describe the legal environment affecting product decisions. 7.Explain the importance of supply chain management. 8.Specify the major considerations in structuring a distribution channel. Looking Ahead After studying this chapter, you should be able to:

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–3 To Grow or Not to Grow Growth sufficient to maintain the status quo is a goal of some entrepreneurs.Growth sufficient to maintain the status quo is a goal of some entrepreneurs. Growing a business too quickly can be stressful for the small firm.Growing a business too quickly can be stressful for the small firm. A “growth trap” may occur when a firm’s growth soaks up cash faster than it can be generated.A “growth trap” may occur when a firm’s growth soaks up cash faster than it can be generated. Growth also puts pressure on a small firm’s personnel.Growth also puts pressure on a small firm’s personnel.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–4 Innovation: A Path to Growth Competitive Advantage and InnovationCompetitive Advantage and Innovation  Innovation and entrepreneurship often go hand-in-hand.  Coming up with and perfecting new products or services is often not easy.  The risk of failure increases when innovation is the goal.  Innovation is a means by which a firm can sustain its competitive advantage.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–5 Reducing the Risk of Failure While Innovating Base innovative efforts on your experience.Base innovative efforts on your experience. Focus on overlooked products or services.Focus on overlooked products or services. Be sure there is a market for the product or service you are hoping to create.Be sure there is a market for the product or service you are hoping to create. Pursue innovation that customers will perceive as adding value to their lives.Pursue innovation that customers will perceive as adding value to their lives. Focus on ideas leading to more than one product or service.Focus on ideas leading to more than one product or service. Raise sufficient capital to launch the product or service.Raise sufficient capital to launch the product or service.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–6 Sustainability and Innovation Sustainable Competitive AdvantageSustainable Competitive Advantage  A value-creating position likely to endure over time  Is difficult to imitate  Creates high barriers to market entry  Can be patented or copyrighted  Is renewable at higher performance capabilities Stages in the Competitive Advantage Life CycleStages in the Competitive Advantage Life Cycle  Develop: invest resources  Deploy: boost performance  Decline: competitors overcome advantage

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–7 Exhibit 15.1 The Competitive Advantage Life Cycle

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–8 Exhibit 15.2 Sustaining Competitive Advantages

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–9 The Product Life Cycle and New Product Development Product Life CycleProduct Life Cycle  A detailed picture of what happens to a specific product’s sales and profits over time  Promotion, pricing, and distribution policies must be adjusted to the product’s position on the curve.  It is important to rejuvenate product lines before they die.  The life cycle of a product follows the classic sigmoid curve—innovation is necessary for a firm’s survival.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–10 Exhibit 15.3 The Product Life Cycle

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–11 New Product Development Process Idea Accumulation Business Analysis New Product Development Product Testing

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–12 New Product Development Process Idea AccumulationIdea Accumulation  Increasing the number of ideas under consideration  Sources for ideas: –Sales, engineering, or other personnel within the firm –Government-owned patents –Privately owned patents listed by the U.S. Patent Office –Small companies available for acquisition or merger –Competitors’ products and advertising –Requests and suggestions from customers

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–13 New Product Development Process (cont’d) Business AnalysisBusiness Analysis  Testing to determine if an idea can be profitable.  Key factors to consider: 1.Product’s relationship to the existing product line 2.Cost of development and introduction 3.Available personnel and facilities 4.Competition and market acceptance

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–14 New Product Development Process (cont’d) Development of the Physical ProductDevelopment of the Physical Product  Branding, packaging, pricing, and promotion Product TestingProduct Testing  Proving the product design through consumer reaction to the product.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–15 Building the Total Product BrandingBranding  A verbal and/or symbolic means of identifying a product. Brand NameBrand Name  A brand that can be spoken (tangible) Brand MarkBrand Mark  A brand that cannot be spoken (tangible) Brand ImageBrand Image  Symbolic (Intangible)

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–16 Exhibit 15.4 Components of a Brand Identity

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–17 Building the Total Product (cont’d) Rules for Naming a Product:Rules for Naming a Product: 1. Select a name that is easy to pronounce and remember. 2. Choose a descriptive name. 3. Use a name that can have legal protection. 4. Select a name with promotional properties. 5. Select a name that can be used on several product lines of a similar nature.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–18 Building the Total Product (cont’d) Designing a Logo:Designing a Logo: 1. Be simple. 2. Design for visibility 3. Leave it open to interpretation. 4. Be relentlessly consistent. 5. Recognize the importance of logo design. 6. Get good advice. 7. Don’t expect miracles.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–19 Protecting the Product Offering TrademarkTrademark  An identifying feature used to distinguish a manufacturer’s product Service MarkService Mark  A legal term indicating the exclusive right to use a brand to identify a service. Vinnie’s Villa ™

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–20 Building the Total Product (cont’d) PackagingPackaging  Color, design, and protection for the product. LabelingLabeling  Shows the brand and informs the consumer about product features, correct use, and care. WarrantiesWarranties  A promise that the product will perform at a certain level or meet certain standards.  Implied and written warranties  Policy considerations: Cost, service capability, competitive practices, customer perceptions, legal implications

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–21 Product Strategy Product StrategyProduct Strategy  The way the product component of the marketing mix is used to achieve a firm’s objectives.  Product item –The lowest common denominator in the product mix—the individual item  Product line –The sum of the related individual product items  Product mix –A firm’s total product lines  Product mix consistency –The similarity of product lines in a product mix

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–22 Exhibit 15.5 Product Lines and Product Mix for 180s LLC Source: accessed February 20, 2009.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–23 Product Strategy (cont’d) ProductProduct  A total bundle of satisfaction—a service, a good, or both—offered to consumers in an exchange transaction.  Includes both the main element (physical product or core service) and complementary components (features).

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–24 Exhibit 15.6 Services Marketing versus Goods Marketing

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–25 Product Strategy Options AlternativesAlternatives 1. One product/one market 2. One product/multiple markets 3. Modified product/one market 4. Modified product/multiple markets 5. Multiple products/one market 6. Multiple products/multiple markets OptionsOptions  Convince nonusers in the targeted market to become customers  Persuade current customers to use more of the product  Alert current customers to new uses for the product

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–26 Product Marketing Strategy Key to Strategy Alternatives (1) One product/one market(3) Modified product/one market(5) Multiple products/one market (2) One product/multiple markets(4) Modified product/multiple markets(6) Multiple products/multiple markets One Market Multiple Markets One Product Modified Product Multiple Products (1) (2) (3) (4) (5) (6) Product MixStrategy AlternativesTarget Market(s)

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–27 The Legal Environment Consumer ProtectionConsumer Protection  Labeling  Nutrition Labeling and Education Act of 1990 –Listing of contents –Proper care and use  Product safety  Consumer Product Safety Act of 1972 –Consumer Product Safety Commission  Nutrition Labeling and Education Act of 1990 –Packaging –Use instructions –Disposal

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–28 Exhibit 15.7 Protecting Marketing Assets

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–29 The Legal Environment (cont’d) Trademark ProtectionTrademark Protection  The Lanham Trademark Act grants exclusive rights of use of a registered non-generic name, symbol or other mark to identify a product or service.  Trademarks are researched and then registered with the U.S. Patent and Trademark Office (PTO).  Loss of rights  If the mark enters into use as a generic term.  If the mark is not labeled with the symbols tm or® or the phrase “Registered in the U.S. Patent and Trademark Office.”

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–30 The Legal Environment (cont’d) Patent ProtectionPatent Protection  The registered, exclusive right of an inventor to make, use, or sell and invention.  Utility patent  Registered protection for a new process or product’s function  Design patent  Registered protection for the appearance of a product and its inseparable parts  Plant patent  Registered protection for any distinct and new variety of plant

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–31 Protecting a Product Offering (cont’d) CopyrightCopyright  The exclusive right of a creator to reproduce, publish, perform, display, or sell his or her works.  Copyright notice –Copyright symbol © –Year the work was published –Copyright owner’s name Trade DressTrade Dress  Elements of a firm’s distinctive image (“look”)  Can be protected under trademark law

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–32 Supply Chain Management Supply Chain ManagementSupply Chain Management  Integrates and coordinates the means by which a firm creates or develops a product or service and delivers it to customers. DistributionDistribution  Physically moving products and establishing intermediary relationships to support such movement.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–33 Supply Chain Management (cont’d) Physical Distribution (Logistics)Physical Distribution (Logistics)  The activities of distribution involved in the physical relocation of products. Channel of DistributionChannel of Distribution  The system of relationships established to guide the movement of a product.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–34 Supply Chain Management (cont’d) Functions of IntermediariesFunctions of Intermediaries  Perform the marketing function better.  Provide efficient distribution of the product. Types of IntermediariesTypes of Intermediaries  Merchant middlemen  Take title to the goods they distribute.  Agents/brokers  Do not take title to the goods they distribute.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–35 Exhibit 15.8 Alternative Channels of Distribution

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–36 The Scope of Physical Distribution Transportation—Which Mode to Use? Common Carriers Private Carriers Contract Carriers

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–37 Scope of Physical Distribution (cont’d) StorageStorage  Lack of storage space is a common problem. Materials HandlingMaterials Handling  Protecting the firm’s output during warehousing. Specifying Responsibility for Delivery TermsSpecifying Responsibility for Delivery Terms  Paying freight costs—F.O.B. origin, freight collect.  Selecting the carriers.  Bearing the risk of damage.  Selecting the modes of transport.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–38 Scope of Physical Distribution (cont’d) Logistics CompaniesLogistics Companies  Firms which specialize in providing cost-effective transportation, storage, and distribution services to small companies.  Trucking  Packaging  Warehousing

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–39 Types of Logistics Companies Third-Party Logistics Firm (3PL)Third-Party Logistics Firm (3PL)  A firm that provides transportation and distribution services to companies that prefer to focus their efforts on other facets of their business. Fourth-Party Logistics Firm (4PL)Fourth-Party Logistics Firm (4PL)  A firm that coordinates every aspect of a manufacturer’s or distributor’s supply chain and acts as the sole point of contact between that company and all of its logistics and information service providers.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–40 Key Terms sustainable competitive advantage sustainable competitive advantage product life cycle product life cycle brand brand brand image brand image brand name brand name brand mark brand mark trademark trademark service mark service mark warranty warranty product strategy product strategy product item product item product line product line product mix product mix product mix consistency product mix consistency product product patent patent utility patent utility patent design patent design patent plant patent plant patent copyright copyright trade dress trade dress supply chain management supply chain management distribution distribution channel of distribution channel of distribution physical distribution (logistics) physical distribution (logistics) merchant middlemen merchant middlemen

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 15–41 Key Terms (cont’d) agents/brokers agents/brokers direct channel direct channel indirect channel indirect channel dual distribution dual distribution common carriers common carriers contract carriers contract carriers private carriers private carriers third-party logistics firm (3PL) third-party logistics firm (3PL) fourth-party logistics firm (4PL) fourth-party logistics firm (4PL)