PRODUCT AND DISTRIBUTION

Module 6

PRODUCT CONCEPTS

OUTLINE

• Positioning• Branding• New Product Development• Product Elimination

THE KEY TO PRODUCT SUCCESS……POSITIONING

POSITIONING

• …placing your product in that part of the market where it will receive a favorable reception compared to competing products (Jain, 1996).

BRANDING

BRAND

• ...a term, symbol, or design that identifies a seller’s products and differentiates them from the competitor’s products.

OBJECTIVES OF BRANDING

• Identification• Differentiation• Repeat Sales• New Product Sales

BRANDING STRATEGIES

• Individual branding• Private labels• Corporate or manufacturer’s brands• Generic brands• Family brands

INDIVIDUAL BRANDING

• Provide each product with a distinctive name

• Reduces a company’s risk that a failure is not associated with its other products

PRIVATE LABELS

• It creates store loyalty• They are profitable• Middlemen can sometimes be avoided

MANUFACTURERS’ BRANDS

• Advertising expenditures are reduced• Well-known brands can attract new

customers to the store

GENERIC BRANDS

• “No-name” products• Decline in popularity

FAMILY BRANDING

• The same name is used to cover a group of products

• Reduced costs• Transfer of customer satisfaction

PLANNING FOR NEW PRODUCTS

NEW PRODUCT STRATEGIES

• ...firms are better able to sustain competitive pressures on their existing products and make headway.

THE ROLE OF TOP MANAGEMENT

• Establish policies and broad strategic directions

• Create the organizational climate needed to stimulate innovation

• Get involved!

NEW PRODUCT DEVELOPMENT

• Product improvement/modification• Product imitation• Product innovation

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.

PRODUCT IMITATION

• Imitators design and produce products not very different from an innovator’s product.

• This strategy reduces risk

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.

ENCOURAGING INNOVATION

• Keep divisions small• Tolerate failure• Motivate champions• Maintain liaison with customers• Share technology throughout firm• Sustain projects despite initial

discouraging results

THE PRODUCT INNOVATION PROCESS

• Idea generation• Screening and evaluation• Business analysis• Development and testing• Test marketing• Commercialization

IDEA GENERATION

• Search• Marketing Research• Internal and External Development• Suggestion Systems

BUSINESS ANALYSIS

• Preliminary market plan• Revenue forecasting• Cost estimation• Profit projections

DEVELOPMENT AND TESTING

• Development of a prototype

TEST MARKETING

• Simulated test marketing• Conventional test marketing

COMMERCIALIZATION

• Continuous monitoring

PRODUCT ELIMINATION

ALTERNATIVES

• Divestment• Harvesting (Controlled Divesting)• Line Simplification

PRODUCT LINE STRATEGY

ADD NEWPRODUCTS

PRODUCTIMPROVEMENTS

ELIMINATEPRODUCTS

PRODUCT LINE STRATEGY

DISTRIBUTION

OUTLINE• Introduction• Distribution Scope Strategies• Channel Strategies• Power and Conflict

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.”

MARKETING IS AN EXCHANGE PROCESS

• Concentration• Dispersion

WHOLESALING TRENDS• Low margins• Producers bypass wholesalers• Acquisitions and mergers• Increase of value added services

RETAILING TRENDS• Innovation• Growth of large chains• Increase in scrambled

merchandising• Internet

DISTRIBUTION SCOPE STRATEGIES

• Exclusive• Intensive• Selective

EXCLUSIVE DISTRIBUTION• One retailer serving an area is

granted sole rights to carry a product• Relevant for products that

individuals seek out.

ADVANTAGES OF EXCLUSIVE DISTRIBUTION• Dealer loyalty and sales support• Retailer control• Forecasting and inventory control

DISADVANTAGES OF EXCLUSIVE DISTRIBUTION• Lost volume• “Eggs in one basket”

INTENSIVE DISTRIBUTION• Product is available to all possible

retail outlets• Convenience goods

ADVANTAGES OF INTENSIVE DISTRIBUTION• Increased sales• Wider customer recognition• Impulse buying

DISADVANTAGES OF INTENSIVE DISTRIBUTION• Quick turnaround required• Control is difficult to maintain

SELECTIVE DISTRIBUTION• Several outlets in a given area

distribute a product• Shopping goods

DISADVANTAGES OF SELECTIVE DISTRIBUTION• Not adequately covering the market

CHANNEL ALTERNATIVES• Conventional• Vertical marketing system (VMS)– (channel is managed as a coordinated

or programmed system)

VMS CHARACTERISTICS• Channel captain• Three types– Ownership– Contractual– Administered

POWER• Power reflects the degree to which

one firm can influence the actions and decisions of another firm

SOURCES OF POWER• Reward power• Coercive power• Expertise power• Referent power• Legitimate power

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.

RESOLVING CONFLICT• Bargaining• Diplomacy• Interpenetration Strategy• Conciliation