Chapter 10
Product Issues in
Channel Management
Objective 1:
Marketing Mix Resources
• 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.
10
Objective 2:
The Product/Channel
Management Interface
• 3 Major Areas of Product Management:
1. New product planning & development (NPD)
2. The product life cycle (PLC)
3. Strategic product management (SPM)
10
Objective 3:
New Product
Planning & Development
• 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?
10
Member Input
• 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
10
Member Acceptance of
New Products
• 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?
10
Educating Channel Members
• 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.*
10
Trouble-Free New Products
• 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.
10
Objective 4:
10
The Product Life Cycle
Sales
($)
Sales
Profits
Time
Introduction
Growth
Maturity
Decline
The Introduction Phase
• 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*
10
The Growth 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.*
10
The Maturity 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.*
10
The Decline 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.*
10
Objective 5:
Strategic Product Management
• 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)
10
Objective 6:
Product Strategies
• Possible product strategies include…
– Product differentiation
– Product positioning
– Product line expansion or contraction
– Trading up or down
– Branding strategies
10
Product Differentiation
• 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
10
Product Positioning
• 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.
10
Product Line Expansion or Contraction
• 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
10
Trading Up or Down
• 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
10
Branding Strategies
• 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
10
Objective 7:
Product Service Strategy
• 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
10