Chapter 10

1. Chapter 10 Product Issues in Marketing Channel Management

2. 10 Ch. 10: Major Topics • Marketing Mix in Channels • Meaning of a Product • Interface between Marketing Channel and Product** • New Product Launch (ex: Vitamin Water article) • Product Life Cycle (ex: Movie marketing channel video) • Strategic Product Management - Product Strategies**

3. The Marketing Mix The means by which product, price, promotion and place variables can be assembled to meet channel needs.

4. The Product Ingredient of Marketing Mix • Product:a unique bundle of tangible and intangible attributes offered en masse to customers. • Fusion of attributes • Value satisfaction • Product evolution

5. Fusion of Attributes • Tangible attributes • Intangible attributes • Often more important • Marketing Channels (When is this important?) • Ex) LG vs. Samsung

6. Value Satisfaction • Perception of benefits derived from owning and consuming a product. • Assess customer value • Provide customer value • Communicate customer value • Dividing up the benefit • Ex) VARs in computer industry

7. Product Evolution • Core Product  Actual Product  Augmented Product* • Product Evolution • Channel Evolution Ex) PC industry; Movie industry

8. Augmented Product Installation Levels of Product Packaging Features Brand Name Delivery & Credit After- Sale Service Core Benefit or Service Quality Level Design Warranty Core Product Actual Product

9. Product-ChannelManagement Interfaces* 10 1. New product planning & development 2. The product life cycle 3 Major Areas of Product-channel management 3. Strategic product management

10. 10 I. New Product Planning* • What input, if any, can channel members provide into new product planning? • What has been done to assure that new products will be acceptable to thechannel members?* • Do the new products fit into the present channel members’ assortments?* • Will the product cause the channel members any special problems?

11. 1. Encouraging Channel Member Input 10 Solicit ideas for new products. Gather feedback on product size or on packaging. Solicit feedback during the test-marketing or commercialization stage.

12. 10 2. Member Acceptance ofNew Products Determining Factors • How the product will sell  Turnover • Whether the product is easy to stock & display • Whether the product will be profitable*  Margin Ex) How to increase reseller acceptance?

13. 3.Adding Products to the Reseller’s Product Assortment 10 Key Considerations: Will existing channel members view the new product as appropriate to add to their assortments? Will channel members feel competent to handle the new product? Ex) Vitamin Water Case  New product category

14. 4. Trouble-Free New Products 10 Care in new product planning = New product problems

15. II. Product Life Cycle and Marketing Channel* 10 Sales ($) Sales curve Profit curve Introduction Time Growth Maturity Decline

16. Introduction Stage and Marketing Channel 10 Recruit sufficient number of channel members for adequate market coverage Assure adequate supply on channel members’ shelves

17. Growth Stage and Marketing Channel 10 Assure sufficient number of channel member inventories for adequate market coverage Monitor the effects of competitive products on channel member support

18. Maturity Stage and Marketing Channel 10 Extra emphasis on motivating channel members to mitigate competitive impact Investigate possibility for changes in channel structure to extend maturity stage & possibly foster new growth stage

19. Decline Stage and Marketing Channel 10 Phase out marginal channel members Investigate impact of product deletion on channel members

20. 10 III. Strategic Product Management Successful product strategies depend on: • Product quality, innovativeness, or technological sophistication • Capabilities of managers overseeing product line • Firm’s financial capacity & willingness to provide promotional support • Channel members’ role in implementing product strategies*

21. Product Strategy Issues* 10 1. Product differentiation 2. Product positioning 3. Product line expansion & contraction 4. Trading up & trading down 5. Product brand strategy*

22. Product Differentiation* 10 Creating a differential product involves getting consumers to perceive a difference. Implications for channel management: • Select & help develop members who fit the product image when product differentiation strategy is affected by who will be selling the product. • Provide retailers with the kind of support needed to properly present the product when this strategy is influenced by how the product is sold at retail. Ex) Fashion Apparel industry in Japan; Nike

23. Product Positioning 10 The manufacturer’s attempt to have consumers perceive the product in a particular way relative to competitive products Implications for channel management: •Consider interfaces between the product positioning strategy and where the product will be displayed and soldbefore the strategy is implemented. • Elicit retailer support before attempting to implement strategy. • ex) Vitaminwater positioning; NES positioning

24. Product Line Expansion & Contraction 10 Manufacturers often engage in both expansion and contraction simultaneously. Implications for channel management: • Difficult to balance between channel members’ Satisfaction with current product line & channel member support for reshaped product lines • Channel members are making increasing demands on Manufacturers to have the right mix of products  Retailer Power & Category Management

25. Trading Down, Trading Up 10 Adding lower-priced products or product lines, or higher-priced products or product lines, to a product mix Implications for channel management: • Can existing channel members provide adequate coverage of high-end or low-end market segments? Ex) Lexus of Toyota; Apple Stores • Do channel members have confidence in the manufacturer’s ability to successfully market the trade-up or trade-down product?

26. Product Brand Strategy 10 When manufacturers sell under both national and private brands, direct competition with channel members may result • Implications for channel management: • • Do not sell both national & private brand versions of products to the same channel members. • • Sell national and private brand versions in different geographical territories or physically vary products. • Dealing with Private Brand issue*

27. Product Service Strategy 7 It is the role of the marketing channel to provide necessary service along with the product to the final user • Manufacturers should provide after-sale service: • by offering it directly at the factory • through their own network of service centers • through channel members • through authorized independent service centers • by some combination of the above