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PRODUCT AND DISTRIBUTION Module 6
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PRODUCT CONCEPTS
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OUTLINE Positioning Branding New Product Development Product Elimination
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THE KEY TO PRODUCT SUCCESS……POSITIONING
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POSITIONING …placing your product in that part of the market where it will receive a favorable reception compared to competing products (Jain, 1996).
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BRANDING
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BRAND...a term, symbol, or design that identifies a seller’s products and differentiates them from the competitor’s products.
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OBJECTIVES OF BRANDING Identification Differentiation Repeat Sales New Product Sales
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BRANDING STRATEGIES Individual branding Private labels Corporate or manufacturer’s brands Generic brands Family brands
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INDIVIDUAL BRANDING Provide each product with a distinctive name Reduces a company’s risk that a failure is not associated with its other products
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PRIVATE LABELS It creates store loyalty They are profitable Middlemen can sometimes be avoided
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MANUFACTURERS’ BRANDS Advertising expenditures are reduced Well-known brands can attract new customers to the store
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GENERIC BRANDS “No-name” products Decline in popularity
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FAMILY BRANDING The same name is used to cover a group of products Reduced costs Transfer of customer satisfaction
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PLANNING FOR NEW PRODUCTS
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NEW PRODUCT STRATEGIES...firms are better able to sustain competitive pressures on their existing products and make headway.
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THE ROLE OF TOP MANAGEMENT Establish policies and broad strategic directions Create the organizational climate needed to stimulate innovation Get involved!
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NEW PRODUCT DEVELOPMENT Product improvement/modification Product imitation Product innovation
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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.
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PRODUCT IMITATION Imitators design and produce products not very different from an innovator’s product. This strategy reduces risk
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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.
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ENCOURAGING INNOVATION Keep divisions small Tolerate failure Motivate champions Maintain liaison with customers Share technology throughout firm Sustain projects despite initial discouraging results
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THE PRODUCT INNOVATION PROCESS Idea generation Screening and evaluation Business analysis Development and testing Test marketing Commercialization
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IDEA GENERATION Search Marketing Research Internal and External Development Suggestion Systems
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BUSINESS ANALYSIS Preliminary market plan Revenue forecasting Cost estimation Profit projections
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DEVELOPMENT AND TESTING Development of a prototype
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TEST MARKETING Simulated test marketing Conventional test marketing
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COMMERCIALIZATION Continuous monitoring
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PRODUCT ELIMINATION
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ALTERNATIVES Divestment Harvesting (Controlled Divesting) Line Simplification
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PRODUCT LINE STRATEGY
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DISTRIBUTION
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OUTLINE Introduction Distribution Scope Strategies Channel Strategies Power and Conflict Introduction Distribution Scope Strategies Channel Strategies Power and Conflict
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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.”
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MARKETING IS AN EXCHANGE PROCESS Concentration Dispersion Concentration Dispersion
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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
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RETAILING TRENDS Innovation Growth of large chains Increase in scrambled merchandising Internet Innovation Growth of large chains Increase in scrambled merchandising Internet
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DISTRIBUTION SCOPE STRATEGIES Exclusive Intensive Selective Exclusive Intensive Selective
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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.
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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
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DISADVANTAGES OF EXCLUSIVE DISTRIBUTION Lost volume “Eggs in one basket” Lost volume “Eggs in one basket”
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INTENSIVE DISTRIBUTION Product is available to all possible retail outlets Convenience goods Product is available to all possible retail outlets Convenience goods
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ADVANTAGES OF INTENSIVE DISTRIBUTION Increased sales Wider customer recognition Impulse buying Increased sales Wider customer recognition Impulse buying
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DISADVANTAGES OF INTENSIVE DISTRIBUTION Quick turnaround required Control is difficult to maintain Quick turnaround required Control is difficult to maintain
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SELECTIVE DISTRIBUTION Several outlets in a given area distribute a product Shopping goods Several outlets in a given area distribute a product Shopping goods
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DISADVANTAGES OF SELECTIVE DISTRIBUTION Not adequately covering the market
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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)
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VMS CHARACTERISTICS Channel captain Three types –Ownership –Contractual –Administered Channel captain Three types –Ownership –Contractual –Administered
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POWER Power reflects the degree to which one firm can influence the actions and decisions of another firm
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SOURCES OF POWER Reward power Coercive power Expertise power Referent power Legitimate power Reward power Coercive power Expertise power Referent power Legitimate power
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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.
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RESOLVING CONFLICT Bargaining Diplomacy Interpenetration Strategy Conciliation Bargaining Diplomacy Interpenetration Strategy Conciliation
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