PRODUCT AND DISTRIBUTION Module 6 PRODUCT CONCEPTS OUTLINE
PRODUCT AND DISTRIBUTION Module 6
PRODUCT CONCEPTS
OUTLINE • • Positioning Branding New Product Development Product Elimination
THE KEY TO PRODUCT SUCCESS……POSITIONING
POSITIONING • …placing your product in that part of the market where it will receive a favorable reception compared to competing products (Jain, 1996).
BRANDING
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
PLANNING FOR NEW PRODUCTS
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
PRODUCT ELIMINATION
ALTERNATIVES • Divestment • Harvesting (Controlled Divesting) • Line Simplification
PRODUCT LINE STRATEGY
DISTRIBUTION
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
CONFLICT • A situation in which one channel member perceives another channel member to be engaged in behavior that is preventing or impeding it from achieving its goals.
RESOLVING CONFLICT • • Bargaining Diplomacy Interpenetration Strategy Conciliation
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