Chapter 10Chapter 10

Product Issues inChannel Management

• Channel System Synergy– Critical for the channel manager to understand

how all marketing mix variables are independent, yet interdependent in order to create the synergy necessary for meeting the customers’ needs & wants.

1010Marketing Mix ResourcesMarketing Mix Resources

Objective 1:

• 3 Major Areas of Product Management:

1. New product planning & development (NPD)

2. The product life cycle (PLC)

3. Strategic product management (SPM)

1010The Product/ChannelThe Product/Channel

Management InterfaceManagement Interface

Objective 2:

• 5 Questions Channel Managers Must Ask:1. What input, if any, can channel members provide in

new product planning?

2. What has been done to ensure that the new products will be acceptable to channel members?

3. Do the new products fit into the present channel members’ assortments?

4. Will any special education/training be needed for members to sell the new products effectively?

5. Will the product cause the channel members any special problems?

1010New ProductNew Product

Planning & DevelopmentPlanning & Development

Objective 3:

• Channel members can provide valuable feedback during the product planning & development stage.

• Members can…– Offer explicit new ideas for development– Explain the value in offering particular sizes, colors,

or the use of packaging– Assist in gathering customer feedback during test-

marketing or early commercialization

1010Member InputMember Input

• Likely key considerations for channel members’ acceptance of new product…

1. How will the product sell?

2. Is the product easy to stock and display?

3. Will the product be profitable to sell?

4. Does the product fit with one’s existing positioning efforts and/or merchandise mix?

1010Member Acceptance ofMember Acceptance of

New ProductsNew Products

• The channel manager’s goal is to sell the new product(s) as successfully as possible

Thus,

• One must educate & train members in the product’s use, special features to emphasize during sales, and how it fits in with the members’ existing merchandise mixes.*

1010Educating Channel MembersEducating Channel Members

• An increase in the care taken during the planning & development stages of the new product (including which members would likely desire the product and the necessary features for their handling of the product) will always decrease the number of potential problems associated with a new product offering.

1010Trouble-Free New ProductsTrouble-Free New Products

1010The Product Life CycleThe Product Life Cycle

Objective 4:

Introduction Growth

Sales($)

Sales

Maturity

Profits

Decline

Time

• Channel Managers must…– Ensure there’s a sufficient number of channel

members to gain market coverage– Ensure there’s an adequate supply of product on

channel members’ shelves

• Remember profits are negative in this phase due to negative economies of scale, so immediate sales growth is critical*

1010The Introduction PhaseThe Introduction Phase

• Channel managers must…– Ensure sufficient number of channel members’

inventories are adequate to cover sales growth

– Monitor the entry and effects of competitive products on channel members

• Remember that sales growth is extremely rapid here & increasing profits will drive competitors to enter the market, so member support is critical for profit longevity.*

1010The Growth PhaseThe Growth Phase

• Channel managers must…– Provide extra emphasis on motivating channel

members to curtail competitive attacks– Investigate the possibility for changes in the

channel’s structure to extend maturity or possibly create a new PLC

• Remember market-share peaks here & profits fall as competitive attacks ensue. Members are critical here to slow pace.*

1010The Maturity PhaseThe Maturity Phase

• Channel managers must…– Phase out marginal channel members and streamline

their overall channel

– Investigate the impact of product deletion on channel members’ needs & problems (Ch. 9)

• Remember that although a product may begin to appear a “dog”, members may need to maintain the product to ensure their image & merchandise mix are complete.*

1010The Decline PhaseThe Decline Phase

• Successful product strategies depend on…• The product’s

– Quality (or value proposition*), innovativeness, or technological sophistication

• The manager’s– Ability to oversee the product line & future needs

• The firm’s– Financial capacity & willingness to provide promotional support

• The other member’s– Willingness to implement the channel manager’s strategies (i.e.,

motivation ~ Ch. 9)

1010Strategic Product ManagementStrategic Product Management

Objective 5:

• Possible product strategies include…

– Product differentiation

– Product positioning

– Product line expansion or contraction

– Trading up or down

– Branding strategies

1010Product StrategiesProduct Strategies

Objective 6:

• Differentiation revolves around perception of its ability to solve a problem

• Implications for channel management…

– Select & support members who “fit” the image• Particularly when image is affected by who is selling

– Provide support/training to retailers to sell “properly”• Particularly when either a “search” or “experience” good

that requires personal selling

1010Product DifferentiationProduct Differentiation

• Positioning focuses on perception in relation to competitive products

• Implications for channel management…

– “Match” between positioning efforts & possible seller must be considered before implementation

– Must have retailer “buy-in” to maintain positioning & understand the attractiveness of certain incentives (Ch. 9) to different retailers.

1010Product PositioningProduct Positioning

• Refers to the overall breadth (or assortment) of a product line

• Implications for channel management…

– Expansion & contraction can occur simultaneously (e.g., in a line’s depth*), but not in the same line

– Difficult to balance member satisfaction & support as each wants their “right” merchandise mix

1010Product Line Expansion or Product Line Expansion or

ContractionContraction

• Refers to the adding higher- (or lower-) priced lines of product to one’s mix

• Implications for channel management…

– Retailers must provide adequate coverage of either high- and/or low-end market segments for which the trade-up or trade-down is targeted

– Retailers must provide appropriate salesmanship to trade-up or -down customers based upon manufacturer’s promotional support

1010Trading Up or DownTrading Up or Down

• Refers to the choice of selling both under a national, as well as a private, brand name

• Implications for channel management…

– Direct competition with channel members may result– Sell national & private brand versions in different

geographical markets– Physically vary the products enough to minimize

direct competition

1010Branding StrategiesBranding Strategies

• Remember that we no longer simply focus on the transaction because we’re not just selling products…we’re making value propositions.

• Service is part of the “problem solution” sold.– Manufacturers must ensure that service is provided after

the sale…• By offering it directly (at factory or own service center)• Offering it through its channel members (e.g., retailers)• Endorsing authorized, independent service centers, or• Some combination of the above

1010Product Service StrategyProduct Service Strategy

Objective 7: