1. Product and Distribution Strategies12
Chapter
Product and Distribution Strategies

2. Learning Objectives
Explain marketing’s definition of a product; differentiate among convenience, shopping, and specialty products; and distinguish between a product mix and a product line.
Briefly describe each of the four stages of the product life cycle with their marketing implications.
Explain how firms identify their products.
Outline and briefly describe each of the major components of an effective distribution strategy.
Distinguish between the different types of wholesaling intermediaries.
Describe the various types of retailers and identify retail strategies.
Identify the various categories of distribution channels, and discuss the factors that influence channel selection. 1 5 6 2 7 3 4

3. Product Strategy
Product- a bundle of physical, service, and symbolic characteristics designed to satisfy consumer wants
Product Categories:
Convenience products- items the consumer seeks to purchase frequently, immediately, and with little effort
Shopping products- typically purchased only after the buyer has compared competing products in competing stores
Specialty products- items a purchaser is willing to make a special effort to obtain

4. Product Classification

5. Classifying Business Goods
Capital versus Expense Items
Installations- major capital items such as new factories, heavy equipment and machinery, and custom-made equipment
Accessory equipment- includes less expensive and shorter-lived capital items than installations and involves fewer decision makers
Component parts and materials- become part of a final product
Raw materials- farm and natural products used in producing other final products
Supplies- expense items used in a firm’s daily operations that do not become part of the final product

6. Services Different from Goods Intangible Perishable
Difficult to standardize
Service provider is the service

7. Marketing Strategy Implications
In B2B, there is a greater emphasis on personal selling for installations and many component parts and a concentration on quality and customer service.
Producers of installations and component parts may involve customers in new-product development.
Advertising is more commonly used to sell supplies and accessory equipment.
Producers of supplies and accessory equipment place a greater emphasis on competitive pricing strategies.

8. Product Lines and Product Mix
Product line– a group of related products marked by physical similarities or intended for a similar market
Pepsi
Product mix– assortment of product lines and individual goods and services a firm offers to consumers and business users

9. Product Life Cycle
Product life cycle- four basic stages—introduction, growth, maturity, and decline—through which a successful product progresses

10. Stages of the Product Life Cycle
Introduction stage– firm promotes demand for its new offering; informs the market about it; gives free samples to entice consumers to make a trial purchase; and explains its features, uses, and benefits.
Growth stage- sales climb quickly as new customers join early users who are repurchasing the item. company begins to earn profits on the new product.
Maturity stage- industry sales eventually reach a saturation level at which further expansion is difficult.
Decline stage- sales fall and profits decline.

11. Implications of the Product Life Cycle
Marketer’s objective is to extend the life cycle as long as product is profitable.
Marketers’ goals:
Increasing customers’ frequency of use
Adding new users
Finding new uses for product
Changing package sizes, labels, and product designs

12. Stages in New Product Development
Expensive, time-consuming, and risky.
Only 1/3 of new products become success stories.
Each step requires a “go or no-go” decision.

13. Product Development Stages
Stage 1: Generating ideas for new offerings
Stage 2: Screening
Stage 3: Concept development and business analysis phase
Stage 4: Product development
Stage 5: Test marketing
Stage 6: Commercialization

14. Product Failures

15. Product Identification
Brand- name, term, sign, symbol, design, or some combination that identifies the products of one firm and differentiates them from competitors’ offerings
Brand name- part of the brand consisting of words or letters included in a name used to identify and distinguish the firm’s offerings from those of competitors.
Trademark- brand that has been given legal protection granted solely to the brand’s owner

16. Brand Categories
Manufacturer’s brand- brand offered and promoted by a manufacturer. Examples: Tide, Cheerios, Windex, Fossil, and Nike.
Private or store brand- brand that is not linked to the manufacturer but instead carries a wholesaler’s or retailer’s label. Examples: Sears’ DieHard batteries and Walmart’s Ol’Roy dog food.
Family branding strategy- a single brand name used for several related products. Examples: KitchenAid, Johnson & Johnson, Hewlett-Packard, and Arm & Hammer.
Individual branding strategy- giving each product within a line a different name. Examples: Procter & Gamble products Tide, Cheer, and Dash.

17. Brand Loyalty
Brand recognition- consumer is aware of the brand but does not have a preference for it over other brands
Brand preference- consumer chooses one firm’s brand over a competitor’s
Brand insistence- consumer will seek out preferred brand and accept no substitute for it (the ultimate degree of brand loyalty)

18. Brand Equity
Brand equity- added value that a respected and successful name gives to a product
Brand awareness- product is the first one that comes to mind when a product category is mentioned

19. Valuable Brands

20. Packages and Labels
Packaging affects the durability, image, and convenience of an item and is responsible for one of the biggest costs in many consumer products.
Packing is important in product identification and play is an important role in a firm’s overall product strategy.
Choosing the right package is especially important in international marketing.
Packing must meet legal requirements of all countries in which product is sold.
Universal Product Code- bar code read by optical scanner
Environmental impact of packaging– Sun Chips

21. Distribution Strategy
Distribution channel: path through which products—and legal ownership of them—flow from producer to consumers or business users
Physical distribution: actual movement of products from producer to consumers or business users

22. Distribution Channels

23. Distribution Channels Using Marketing Intermediaries
Direct Distribution
Direct contact between producer and customer.
Most common in B2B markets.
Often found in the marketing of relatively expensive, complex products that may require demonstrations.
Internet is helping companies distribute directly to consumer market.
Distribution Channels Using Marketing Intermediaries
Producers distribute products through wholesalers and retailers.
Inexpensive products sold to thousands of consumers in widely scattered locations.
Lowers costs of goods to consumers by creating market utility.

24. Marketing Intermediaries

25. Wholesaling
Wholesaler- distribution channel member that sells primarily to retailers, other wholesalers, or business users
Manufacturer-Owned Wholesaling Intermediaries
Owned by the manufacturer of the goods or products to control distribution or customer service
Sales branch that stocks products and fills orders from inventories
Sales office that takes orders but does not stock the product

26. Retailers
Retailer- channel member that sells goods and services to individuals for their own use rather than for resale
Final link of the distribution channel
Two types: store and nonstore

27. Non-Store Retailing Direct response retailing Internet retailing
Automatic merchandising
Direct selling

28. Retail Stores

29. Wheel of Retailing

30. How Retailers Compete Identifying a Target Market
Selecting a Product Strategy
Selecting a Customer Service Strategy
Selecting a Pricing Strategy
Choosing a Location
Building a Promotional Strategy
Creating a Store Atmosphere

31. Retail Locations Planned Shopping Center Shopping Mall Regional Mall
Lifestyle Mall

32. Distribution Channel Decisions and Logistics
What specific channel will it use?
What will be the level of distribution intensity?
Selecting Distribution Channels
Complex, expensive, custom-made, or perishable products move through shorter distribution channels involving few—or no—intermediaries.
Standardized products or items with low unit values usually pass through relatively long distribution channels.
Start-up companies often use direct channels because they can’t persuade intermediaries to carry their products, or because they want to extend their sales reach.

33. Distribution Intensity
Intensive distribution- firm’s products in nearly every available outlet; requires cooperation of many intermediaries
Selective distribution– manufacturer selects limited number of retailers to distribute its product lines
Exclusive distribution- limits market coverage in a specific geographical region

34. Logistics and Physical Distribution
Supply chain– complete sequence of suppliers that contribute to creating a good or service and delivering it to business users and final consumers
Logistics– process of coordinating the flow of goods, services, and information among members of the supply chain
Physical distribution– the activities aimed at efficiently moving finished goods from the production line to the consumer or business buyer

35. Comparison of Transportation Modes

36. Customer Service
Customer service standards measure the quality of service a firm provides for its customers.
Warranties are a firm’s promises to repair a defective product, refund money paid, or replace a product if it proves unsatisfactory.
Internet retailers have worked to humanize their customer interactions and deal with complaints more effectively.