Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter 13Chapter 13
Product and Distribution Strategies
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-2
Product StrategyProduct Strategy
Product—bundle of physical, service, and symbolic attributes designed to enhance buyers’ want satisfaction.package designPackagingbrand namesWarrantiesproduct image
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-3
Product StrategyProduct Strategy
Classifying Goods and ServicesConsumerBusiness
Depends who purchases them for what reasons
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-4
Marketing Impacts of Consumer Product Classifications
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-5
Product StrategyProduct Strategy
Classifying Business GoodsThey are classified based upon how
customers use them as well as their basic characteristics
Capital or Expense ItemsInstallationsAccessory equipmentComponent parts and materialsRaw materialsSupplies
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-6
Product StrategyProduct Strategy
Marketing Strategy ImplicationsClassifying products is a useful tool in
developing marketing strategies
After classifying an item as a shopping product, marketers gain an immediate idea of its promotion, pricing, and distribution needs
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-7
Product StrategyProduct Strategy
Product Lines and Product MixProduct Line—group of related products
that are physically similar or are intended for the same market.
Product Mix—company’s assortment of product lines and individual offerings.
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-8
Stages in the Product Life Cycle
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-9
Product Life CycleProduct Life Cycle
Stages of the Product Life CycleIntroduction
Firm attempts to build demand for its new offering
Promotional campaigns concentrate on features, uses, and benefits
Financial losses are common due to low initial sales and heavy promotional costs
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-10
Product Life CycleProduct Life Cycle Stages of the Product Life Cycle
GrowthSales climb quicklyFirm usually begins to realize profits due to
higher sales volumeMarketing efforts continue to focus on
establishing the product in the market and building brand awareness
Later in the growth stage, the strategy shifts to building loyalty
Additional spending on product adaptation, promotion and distribution, along with lower prices may be necessary
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-11
Product Life CycleProduct Life Cycle
Stages of the Product Life CycleMaturity
Industry sales continue to grow, but eventually reach a plateau
Companies emphasize market segmentation – often resulting in an oversupply of the product
Competition intensifies, and profits begin to decline
Some firms reduce prices and/or spend heavily on promotion
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-12
Product Life CycleProduct Life Cycle
Stages of the Product Life CycleDecline
Innovations or shifts in consumer preferences cause an absolute decline in industry sales
Industry as a whole does not generate profits, though some firms can prosper
Prices tend to hold steady if a loyal market segment continues to buy the product
If the firm is selling to consumers who are loyal, they can skip most of the usual advertising
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-13
Marketing Strategy Implications of the Product Life Cycle
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-14
Product Life CycleProduct Life Cycle
Stages in New-Product DevelopmentNew products are
the lifeblood of any organization
New product ideas come from many sources: customers, employees, market researchers
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-15
Product IdentificationProduct Identification
Brand—name, term sign, symbol, design, or some combination that identifies the products of a firm and distinguishes them from competitive offerings.
Brand name—the part of a brand consisting of words or letters that form a name that identifies and distinguishes an offering from those of competitors
Trademark—brand with legal protection against another company’s use (can include pictorial designs, slogans, packaging elements, and product features)
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-16
Product IdentificationProduct Identification
Selecting an Effective Brand NameShould communicate appropriate product
imagesMust be easy to pronounce, recognize, and
rememberBest if ShortShould Attract Attention
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-17
Product IdentificationProduct Identification
Brand CategoriesManufacturer’s (or national) brands—
brand offered and promoted by a manufacturer or producerTide
Private (or store) brand—identifies a product that is not linked to the manufacturer, but instead carries the label of a retailer or wholesalerShopRite wheat bread
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-18
Product IdentificationProduct Identification
Brand CategoriesFamily Brand—single brand name that
identifies several related productsJohnson & Johnson
Individual Brands—giving a different brand name to each product within a product lineTide, Cheer
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-19
Brand Loyalty—measured in three stages– recognition, preference, and insistenceBrand Recognition—brand acceptance strong
enough that the consumer is aware of a brand, but not enough to cause a preference over competing brands
Brand Preference—occurs when a consumer chooses one firm’s brand, when it is available, over a competitors
Brand Insistence—when the consumer will accept no substitute for a preferred brand
Brand Equity—added value that a certain brand name gives to a product
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-20
Packaging achieves several goals:Protects against damage, spoilage, and pilferageAssists in marketing the productCost-effectiveness
Label—descriptive part of a product’s package Attracts buyer’s attentionDescribes package contentsConveys product benefitsProvides information on warranties, warnings, and other consumer mattersGives and indication of price, value, and uses
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-21
Distribution StrategyDistribution Strategy
Distribution ChannelsDistribution 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 consumer or business users.
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-22
Alternative Distribution Channels
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-23
Distribution ChannelsDistribution Channels Direct Distribution
Shortest and simplest means of connecting producers and customers
Advantageous when marketing relatively expensive, complex goods that require demonstration
Distribution Using Marketing IntermediariesRetailer - sells goods and services to individuals for
their own use rather than for resale.Wholesaling Intermediary - sells goods primarily
to retailers, other wholesalers, or business users.
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-24
Reducing Transactions through Marketing Intermediaries
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-25
Types of Nonstore Retailers
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-26
Types of Retail Stores
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-27
Distribution Channel Decisions and Distribution Channel Decisions and Physical DistributionPhysical Distribution
Selecting Distribution ChannelsDistribution Intensity—the number of
intermediaries or outlets through which a manufacturer distributes its goods
Levels of intensity include:Intensive distributionSelective distributionExclusive distribution
Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved.13-28
Logistics and Physical DistributionComparison of Transportation Modes