Chapter 13

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Chapter 13 Product and Distribution Strategies
Learning Goals
List the stages of the new-product development
process. Explain how firms identify their
products. Outline and briefly describe each of
the major components of an effective distribution
strategy. Identify the various categories of
distribution channels and discus the factors
that influence channel selection.
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Explain marketings definition of a product and
list the components of the product
strategy. Describe the classification system for
consumer and business goods and
services. Distinguish between a product mix and a
product line. Briefly describe each of the four
stages of the product life cycle.
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PRODUCT STRATEGY Product Bundle of physical,
service, and symbolic attributes designed to
satisfy buyers wants. Classifying Goods and
Services Classifying Consumer Goods and Services
Convenience products are items the consumer
seeks to purchase frequently, immediately, and
with little effort. Shopping products are
those typically purchased only after the buyer
has compared competing products in competing
stores. Specialty products are those that a
purchaser is willing to make a special effort to
obtain.
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Classifying Business Goods  Goods Five basic
categories  Installations Major capital items.
Accessory equipment Includes less expensive
and shorter-lived capital items than
installations and involve 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
firms daily operation that do not become part of
the final product.  Services Unlike goods, they
are intangible, perishable, difficult to
standardize. From buyers perspective, the
service provider is the service.
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Marketing Strategy Implications In B2B, greater
emphasis on personal selling for installations
and many component parts.  May also involve
customers in new-product development.  Advertisin
g more commonly used to sell supplies and
accessory equipment.  Also a greater emphasis on
competitive pricing strategies. Product Lines
and Product Mix Product line Group of related
products that are physically similar or are
intended for the same market. Product mix A
companys assortment of product lines and
individual offerings. Ongoing assessment to
ensure company growth, to satisfy changing
consumer needs and wants, and to adjust to
competitors offerings.
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PRODUCT LIFE CYCLE Product life Four basic
stagesintroduction, growth, maturity, and
declinethrough which a successful product
progresses. Stages of the Product Life
Cycle  Introduction stage Firm tries to promote
demand for its new offering, inform the market
about it, give free samples to entice consumers
to make a trial purchase, and explain its
features, uses, and benefits.  Growth stage
Sales climb quickly as new customers join early
users who now are repurchasing the item.
Maturity stage Industry sales eventually reach a
saturation level at which further expansion is
difficult. Decline stage Sales fall and
profits decline.
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Marketing Strategy Implications of the Product
Life Cycle  Marketers objective is to extend
the life cycle as long as product is
profitable. Common strategies include
 Increasing customers frequency of
use  Adding customers  Finding new uses for
product Changing package sizes, labels, and
product designs
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Stages in New-Product Development  Expensive,
time-consuming, and risky.  Only about one-third
of new products become success stories.  Each
step requires a go or no-go decision.
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PRODUCT IDENTIFICATION Brand Name, term, sign,
symbol, design, or some combination that
identifies the products of one firm and
differentiates them from competitors
offerings. Selling an Effective Brand Name Good
brands are easy to pronounce, recognize, and
remember. Brand Categories Manufacturers brand
Brand offered and promoted by a manufacturer
 Private or store brand Brand that is not
linked to the manufacturer but instead carries a
wholesalers or retailers label. Members Mark
Wal-Mart  Family branding strategy A single
brand name used for several related
products.  Individual branding strategy Giving
each product within a line a different name.
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Brand Loyalty and Brand Equity Brand Loyalty
Measured in three stages Brand recognition,
brand preference, and brand insistence Brand
Equity Brand equity Added value that a respected
and successful name gives to a product. Category
advisor Vendor that is designated by the business
customer as the major supplier to deal with all
other suppliers for a special purchase and to
present the entire pack- age to the business
buyer. Packages and Labels Important in product
identification and play an important role in a
firms overall product strategy.  Labeling plays
an important role and must meet legal
requirements of all countries in which product
is sold.
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DISTRIBUTION STRATEGY Distribution channel Path
through which productsand legal ownership of
themflow from producer to consumers or business
users. Physical distribution Actual movement of
products from producer to consumers or business
users. Direct Distribution  Direct contact
between producer and customer.  Often found in
the marketing of relatively expensive, complex
products that may require demonstrations.
Distribution Channels Using Marketing
Intermediaries  Producers distribute products
through wholesalers and retailers. Often used
for products that sell inexpensively to thousands
of consumers in widely scattered locations.
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WHOLESALING Wholesaler Distribution channel
member that sells primarily to retailers, other
wholesalers, or business user. Manufacturer-Owned
Wholesaling Intermediaries Sales branches and
sales offices. Independent Wholesaling
Intermediaries Merchant wholesalers, agents and
brokers, and manufacturers reps. Retailer-Owned
Cooperatives and Buying Offices   Buying groups
and cooperatives.
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RETAILING Retailer Channel member that sells
goods and services to individuals for their own
use rather than for resale. Two types Nonstore
and store.
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Kohls Department Store Cabelas Specialty
Store
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The Wheel of Retailing  New retailers enter the
market by offering lower prices made possible
through reductions in service.  New entries
gradually add services as they grow and
ultimately become targets for new retailers.
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How Retailers Compete  Retailers must choose
merchandising, customer service, pricing, and
location strategies that will attract customers
in their target market segments.  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
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DISTRIBUTION CHANNEL DECISIONS AND
LOGISTICS  Firms face two major decisions about
distribution channels  What specific channel
will it use?  What will be the level of
distribution intensity? Selecting Distribution
Channels Market factors greatly affect
decision. Generally  Complex, expensive,
custom-made, or perishable products move through
shorter distribution channels involving fewor
nointermediaries.  Standardized products or
items with low unit values usually pass through
relatively long distribution channels.  Start-up
companies often use direct channels because they
cant persuade intermediaries to carry their
products.
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Selecting Distribution Intensity  Distribution
intensity The number of intermediaries or outlets
through which a manufacturer distributes its
goods.  Intensive distribution Firms products
in nearly every available outlet.  Selective
distribution Limited number of retailers to
distribute its product lines. Exclusive
distribution Limits market coverage in a specific
geographical region.
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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
Activities involved in controlling the flow of
goods, services, and information among members of
the supply chain. Physical Distribution
Activities aimed at efficiently moving finished
goods from the production line to the consumer or
business buyer. Customer Service  Customer
service standards Measure the quality of service
a firm provides for its customers.  Warranties
Firms promises to repair a defective product,
refund money paid, or replace a product if it
proves unsatisfactory.