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PRODUCT AND DISTRIBUTION

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  1. PRODUCT AND DISTRIBUTION Module 6

  2. PRODUCT CONCEPTS

  3. OUTLINE • Positioning • Branding • New Product Development • Product Elimination

  4. THE KEY TO PRODUCT SUCCESS……POSITIONING

  5. POSITIONING • …placing your product in that part of the market where it will receive a favorable reception compared to competing products (Jain, 1996).

  6. BRANDING

  7. BRAND • ...a term, symbol, or design that identifies a seller’s products and differentiates them from the competitor’s products.

  8. OBJECTIVES OF BRANDING • Identification • Differentiation • Repeat Sales • New Product Sales

  9. BRANDING STRATEGIES • Individual branding • Private labels • Corporate or manufacturer’s brands • Generic brands • Family brands

  10. INDIVIDUAL BRANDING • Provide each product with a distinctive name • Reduces a company’s risk that a failure is not associated with its other products

  11. PRIVATE LABELS • It creates store loyalty • They are profitable • Middlemen can sometimes be avoided

  12. MANUFACTURERS’ BRANDS • Advertising expenditures are reduced • Well-known brands can attract new customers to the store

  13. GENERIC BRANDS • “No-name” products • Decline in popularity

  14. FAMILY BRANDING • The same name is used to cover a group of products • Reduced costs • Transfer of customer satisfaction

  15. PLANNING FOR NEW PRODUCTS

  16. NEW PRODUCT STRATEGIES • ...firms are better able to sustain competitive pressures on their existing products and make headway.

  17. THE ROLE OF TOP MANAGEMENT • Establish policies and broad strategic directions • Create the organizational climate needed to stimulate innovation • Get involved!

  18. NEW PRODUCT DEVELOPMENT • Product improvement/modification • Product imitation • Product innovation

  19. 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.

  20. PRODUCT IMITATION • Imitators design and produce products not very different from an innovator’s product. • This strategy reduces risk

  21. 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.

  22. ENCOURAGING INNOVATION • Keep divisions small • Tolerate failure • Motivate champions • Maintain liaison with customers • Share technology throughout firm • Sustain projects despite initial discouraging results

  23. THE PRODUCT INNOVATION PROCESS • Idea generation • Screening and evaluation • Business analysis • Development and testing • Test marketing • Commercialization

  24. IDEA GENERATION • Search • Marketing Research • Internal and External Development • Suggestion Systems

  25. BUSINESS ANALYSIS • Preliminary market plan • Revenue forecasting • Cost estimation • Profit projections

  26. DEVELOPMENT AND TESTING • Development of a prototype

  27. TEST MARKETING • Simulated test marketing • Conventional test marketing

  28. COMMERCIALIZATION • Continuous monitoring

  29. PRODUCT ELIMINATION

  30. ALTERNATIVES • Divestment • Harvesting (Controlled Divesting) • Line Simplification

  31. PRODUCT LINE STRATEGY

  32. DISTRIBUTION

  33. OUTLINE • Introduction • Distribution Scope Strategies • Channel Strategies • Power and Conflict

  34. 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.”

  35. MARKETING IS AN EXCHANGE PROCESS • Concentration • Dispersion

  36. WHOLESALING TRENDS • Low margins • Producers bypass wholesalers • Acquisitions and mergers • Increase of value added services

  37. RETAILING TRENDS • Innovation • Growth of large chains • Increase in scrambled merchandising • Internet

  38. DISTRIBUTION SCOPE STRATEGIES • Exclusive • Intensive • Selective

  39. EXCLUSIVE DISTRIBUTION • One retailer serving an area is granted sole rights to carry a product • Relevant for products that individuals seek out.

  40. ADVANTAGES OF EXCLUSIVE DISTRIBUTION • Dealer loyalty and sales support • Retailer control • Forecasting and inventory control

  41. DISADVANTAGES OF EXCLUSIVE DISTRIBUTION • Lost volume • “Eggs in one basket”

  42. INTENSIVE DISTRIBUTION • Product is available to all possible retail outlets • Convenience goods

  43. ADVANTAGES OF INTENSIVE DISTRIBUTION • Increased sales • Wider customer recognition • Impulse buying

  44. DISADVANTAGES OF INTENSIVE DISTRIBUTION • Quick turnaround required • Control is difficult to maintain

  45. SELECTIVE DISTRIBUTION • Several outlets in a given area distribute a product • Shopping goods

  46. DISADVANTAGES OF SELECTIVE DISTRIBUTION • Not adequately covering the market

  47. CHANNEL ALTERNATIVES • Conventional • Vertical marketing system (VMS) • (channel is managed as a coordinated or programmed system)

  48. VMS CHARACTERISTICS • Channel captain • Three types • Ownership • Contractual • Administered

  49. POWER • Power reflects the degree to which one firm can influence the actions and decisions of another firm

  50. SOURCES OF POWER • Reward power • Coercive power • Expertise power • Referent power • Legitimate power