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©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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Presentation on theme: "©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part."— Presentation transcript:

1 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 10 Product Issues in Channel Management Part 3: Managing the Marketing Channel

2 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. With the widespread use of e-books, such as Amazon.com’s Kindle, book publishers are faced with a tough channel decision: should they introduce the conventional hardcover and the ebook versions simultaneously or delay release to the e-book channel until after the hardcover has had a chance to generate sales through the conventional channels? HarperCollins, the publisher of former vice presidential candidate Sarah Palin’s book, Going Rogue: An American Life, opted for the delay strategy. The publisher chose to wait over a month after the release of the hardcover before making the book available via e-book. The publisher had produced 1.5 million copies of the hardcover version, which were available for sale in book stores and online in mid-November. But the e-book version was not made available until December 26, the day after Christmas. Apparently HarperCollins was worried about the ebook cannibalizing sales from the hardcover version. Do you think HarperCollins made the right channel decision? Why or why not? Discussion Question #1

3 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Product-Channel Management Connections 3 Major areas of product Management New product planning & development New product planning & development Strategic Product Management Strategic Product Management The Product Life Cycle 2

4 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective New Product Planning Questions 1. What input can channel members provide into new product planning? 2. What should be been done to assure that new products will be acceptable to the channel members? 3. How can we assure our new products fit into the present channel members’ assortments? 4. How can we identify any special education/training necessary to prepare the channel members to effectively sell the new products? 5. How can we anticipate any special problems our new product might cause the channel members? 3

5 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Member Acceptance of New Products Factors that pre-determine acceptance of new products by channel partners: How the product will sell – “Turnover” Whether the product is easy to stock & display Whether the product will be profitable – “Margins” Will existing channel members view the new product as appropriate to add to their assortments? Will channel members feel competent to handle the new product?

6 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Trouble-Free New Products New product problems Care in new product planning = Greater channel member education by the manufacturer helps the product sell throughout the channel – everyone wins.

7 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Product Life Cycle Introduction Growth Sales ($) Sales curve Maturity Profit curve Time Decline 4

8 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Life Cycle Channel Implications Introduction 1.Sufficient number of channel members for market coverage 2.Adequate supply on channel members’ shelves Growth 1.Sufficient number of channel member inventories for market coverage 2.Effects of competitive products on channel members Maturity 1.Motivating channel members to mitigate competitive impact 2.Possibility for changes in channel structure to excite market Decline 1.Phase out marginal channel members 2.Impact of product deletion on channel members

9 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. RadioShack, with over 6,500 locations worldwide, has been struggling for a number of years with an image of being “old- fashioned” or “out of touch” with new technologies. RadioShack was viewed by tech-savvy consumers as a place to buy odds-and- ends electrical items, such as adaptors and cables, but not the place to buy smartphones. But by the latter part of the first decade of the twenty-first century, RadioShack, which started to refer to itself in advertisements as “The Shack,” began selling what is arguably the most iconic example of high-tech, cool products— the Apple iPhone. Apple Inc., which is known for being very selective about who qualifies to sell its products, nevertheless decided to let RadioShack sell the iPhone. Why do you think Apple decided to use RadioShack as a channel member for selling iPhones? Do you think the product life cycle played a role in Apple’s decision? Discussion Question #2

10 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Product Strategies 6 Product differentiation Product positioning Product line expansion & contraction Trading up & trading down Product brand strategy Product differentiation Product positioning Product line expansion & contraction Trading up & trading down Product brand strategy

11 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Role of Channel Management in Product Strategies 6 What is the role of effective channel management for product differentiation or product positioning strategies? How can manufacturers secure channel cooperation in product line expansion/ contraction or trading up/down strategies? How can manufacturers effectively manage their product’s brand strategy through intermediary channels? What is the role of effective channel management for product differentiation or product positioning strategies? How can manufacturers secure channel cooperation in product line expansion/ contraction or trading up/down strategies? How can manufacturers effectively manage their product’s brand strategy through intermediary channels?

12 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Differentiation Creating a differential product involves getting consumers to perceive a difference. Implications for channel management: Channel managers should try to select & help develop members who fit the product image when product differentiation strategy is affected by who will be selling the product. Channel managers should provide retailers with the kind of support needed to properly present the product when this strategy is influenced by how the product is sold at retail. Implications for channel management: Channel managers should try to select & help develop members who fit the product image when product differentiation strategy is affected by who will be selling the product. Channel managers should provide retailers with the kind of support needed to properly present the product when this strategy is influenced by how the product is sold at retail.

13 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Positioning The manufacturer’s attempt to have consumers perceive the product in a particular way relative to competitive products Implications for channel management: Possible interfaces between the product positioning strategy and where the product will be displayed and sold to consumers should be considered before the strategy is implemented. Elicit retailer support before attempting to implement strategy. Maintain backup supply of retailer incentives Implications for channel management: Possible interfaces between the product positioning strategy and where the product will be displayed and sold to consumers should be considered before the strategy is implemented. Elicit retailer support before attempting to implement strategy. Maintain backup supply of retailer incentives

14 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Line Expansion & Contraction Manufacturers often engage in both expansion and contraction simultaneously. Implications for channel management: Difficult to balance channel member satisfaction & support for reshaped product lines Channel members are making increasing demands on manufacturers to have the right mix of products Implications for channel management: Difficult to balance channel member satisfaction & support for reshaped product lines Channel members are making increasing demands on manufacturers to have the right mix of products

15 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Trading Down, Trading Up Adding lower-priced products or product lines, or higher-priced products or product lines, to a product mix Implications for channel management: Whether existing channel members provide adequate coverage of high-end or low-end market segments to which trade-up or trade-down product is aimed Whether the channel members have confidence in the manufacturer’s ability to successfully market the trade-up or trade-down product. Implications for channel management: Whether existing channel members provide adequate coverage of high-end or low-end market segments to which trade-up or trade-down product is aimed Whether the channel members have confidence in the manufacturer’s ability to successfully market the trade-up or trade-down product.

16 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. When manufacturers sell under both national and private brands, direct competition with channel members may result Product Brand Strategy Implications for channel management: Do not sell both national & private brand versions of products to the same channel members. Sell national and private brand versions in different geographical territories. Physically vary products enough to minimize direct competition Implications for channel management: Do not sell both national & private brand versions of products to the same channel members. Sell national and private brand versions in different geographical territories. Physically vary products enough to minimize direct competition

17 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Product Service Strategy It is the role of the marketing channel to provide needed service along with the product to the final user Manufacturers should provide after-sale service: by offering it directly at the factory through their own network of service centers through channel members through authorized independent service centers by some combination of the above 7 How can manufacturers incentivize their intermediary channels to provide the needed services?

18 ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Toddler University Inc. is the name of a shoe company that makes children’s footwear. The company grew from almost nothing to sales exceeding $25 million. The secret of Toddler University’s success, according to some industry observers, is a unique product design that can drastically reduce retailers’ inventory requirements. In regular children’s shoes, there are 11 sizes and 5 widths—so, to have a complete selection, retailers would have to stock 55 pairs of shoes for each particular model. But Toddler University has patented a shoe that allows the use of a one-width shoe with five shoe inserts of varying widths, thus drastically reducing the retailer’s inventory requirements. Comment on this development in light of what you believe to be the relevant product strategy and channel management strategy interface. Discussion Question #3


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