PRODUCT AND DISTRIBUTION Module 6
OUTLINE • Positioning • Branding • New Product Development • Product Elimination
POSITIONING • …placing your product in that part of the market where it will receive a favorable reception compared to competing products (Jain, 1996).
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
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
ALTERNATIVES • Divestment • Harvesting (Controlled Divesting) • Line Simplification
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