Product and Distribution Strategies

Chapter 12

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Learning Objectives

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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.

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.

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

Environmental impact of packaging– Sun 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