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
PRODUCT LINE STRATEGY
ADD NEW
PRODUCTS
PRODUCT
IMPROVEMENTS
ELIMINATE
PRODUCTS

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