Chapter 13Product and Distribution Strategies

Learning Goals

Explain marketing’s definition of a product and list the components of the product strategy.

Describe the classification system for consumer and business goods and services.

Distinguish between a product mix and a product line.

Briefly describe each of the four stages of the product life cycle.

List the stages of the new-product development process.

Explain how firms identify their products.

Outline and briefly describe each of the major components of an effective distribution strategy.

Identify the various categories of distribution channels and discus the factors that influence channel selection.

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PRODUCT STRATEGY

Product Bundle of physical, service, and symbolic attributes designed to satisfy buyers’ wants.

Classifying Goods and ServicesClassifying Consumer Goods and Services

• Convenience products are items the consumer seeks to purchase frequently, immediately, and with little effort.

• Shopping products are those typically purchased only after the buyer has compared competing products in competing stores.

• Specialty products are those that a purchaser is willing to make a special effort to obtain.

Classifying Business Goods

• Goods: Five basic categories

• Installations Major capital items.

• Accessory equipment Includes less expensive and shorter-lived capital items than installations and involve 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 operation that do not become part of the final product.

• Services: Unlike goods, they are intangible, perishable, difficult to standardize.

• From buyer’s perspective, the service provider is the service.

Marketing Strategy Implications• In B2B, greater emphasis on personal selling for installations and many

component parts.

• May also involve customers in new-product development.

• Advertising more commonly used to sell supplies and accessory equipment.

• Also a greater emphasis on competitive pricing strategies.

Product Lines and Product MixProduct line Group of related products that are physically similar or are intended

for the same market.

Product mix A company’s assortment of product lines and individual offerings.• Ongoing assessment to ensure company growth, to satisfy

changing consumer needs and wants, and to adjust to competitors’ offerings.

PRODUCT LIFE CYCLE

Product life Four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses.

Stages of the Product Life Cycle• Introduction stage Firm tries to promote demand for its new offering, inform the market about it, give free samples to entice consumers to make a trial purchase, and explain its features, uses, and benefits.

• Growth stage Sales climb quickly as new customers join early users who now are repurchasing the item.

• Maturity stage Industry sales eventually reach a saturation level at which further expansion is difficult.

• Decline stage Sales fall and profits decline.

Marketing Strategy Implications of the Product Life Cycle

• Marketer’s objective is to extend the life cycle as long as product is profitable.

• Common strategies include

• Increasing customers’ frequency of use

• Adding customers

• Finding new uses for product

• Changing package sizes, labels, and product designs

Stages in New-Product Development• Expensive, time-consuming, and risky.

• Only about one-third of new products become success stories.

• Each step requires a “go or no-go” decision.

PRODUCT IDENTIFICATION

Brand Name, term, sign, symbol, design, or some combination that identifies the products of one firm and differentiates them from competitors’ offerings.

Selling an Effective Brand Name• Good brands are easy to pronounce, recognize, and remember.

Brand Categories• Manufacturer’s brand Brand offered and promoted by a manufacturer

• Private or store brand Brand that is not linked to the manufacturer but instead carries a wholesaler’s or retailer’s label. Member’s Mark – Wal-Mart

• Family branding strategy A single brand name used for several related products.

• Individual branding strategy Giving each product within a line a different name.

Brand Loyalty and Brand EquityBrand Loyalty

• Measured in three stages: Brand recognition, brand preference, and brand insistence

Brand Equity

Brand equity Added value that a respected and successful name gives to a product.

Category advisor Vendor that is designated by the business customer as the major supplier to deal with all other suppliers for a special purchase and to present the entire pack- age to the business buyer.

Packages and Labels• Important in product identification and play an important role in

a firm’s overall product strategy.

• Labeling plays an important role and must meet legal requirements of all countries in which product is sold.

DISTRIBUTION STRATEGY

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.

Direct Distribution

• Direct contact between producer and customer.

• Often found in the marketing of relatively expensive, complex products that may require demonstrations.

Distribution Channels Using Marketing Intermediaries

• Producers distribute products through wholesalers and retailers.

• Often used for products that sell inexpensively to thousands of consumers in widely scattered locations.

WHOLESALING

Wholesaler Distribution channel member that sells primarily to retailers, other wholesalers, or business user.

Manufacturer-Owned Wholesaling Intermediaries

• Sales branches and sales offices.

Independent Wholesaling Intermediaries• Merchant wholesalers, agents and brokers, and manufacturers’ reps.

Retailer-Owned Cooperatives and Buying Offices

•  Buying groups and cooperatives.

RETAILING

Retailer Channel member that sells goods and services to individuals for their own use rather than for resale. Two types: Nonstore and store.

Kohl’s – Department Store

Cabela’s – Specialty Store

The Wheel of Retailing

• New retailers enter the market by offering lower prices made possible through reductions in service.

• New entries gradually add services as they grow and ultimately become targets for new retailers.

How Retailers Compete• Retailers must choose merchandising, customer service, pricing, and location

strategies that will attract customers in their target market segments.

• 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

DISTRIBUTION CHANNEL DECISIONS AND LOGISTICS

• Firms face two major decisions about distribution channels:

• What specific channel will it use?

• What will be the level of distribution intensity?

Selecting Distribution Channels• Market factors greatly affect decision. Generally:

• 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.

Selecting Distribution Intensity• Distribution intensity The number of intermediaries or outlets through which a

manufacturer distributes its goods.

• Intensive distribution Firm’s products in nearly every available outlet.

• Selective distribution Limited number of retailers to distribute its product lines.

• Exclusive distribution Limits market coverage in a specific geographical region.

Logistics and Physical DistributionSupply chain Complete sequence of suppliers that contribute to creating a good or service and delivering it to

business users and final consumers.

Logistics Activities involved in controlling the flow of goods, services, and information among members of the supply chain.

Physical Distribution

• Activities aimed at efficiently moving finished goods from the production line to the consumer or business buyer.

Customer Service

• Customer service standards Measure the quality of service a firm provides for its customers.

• Warranties Firms’ promises to repair a defective product, refund money paid, or replace a product if it proves unsatisfactory.