Product Issues in Channel Management

1. Part 3: Managing the Marketing Channel Product Issues in Channel Management

2. The growing importance of marketing channels • The definition of marketing channels • How marketing channels relate to strategic variables in the marketing mix • The flows in the marketing channels and their relationship to channel management • The principles of specialization, division of labor, and contactual efficiency • The difference between the concepts of channel structure and of ancillary structure

3. Marketing Mix Resources 1 By understanding how the other marketing mix variables interface with the channel variable, and the implications of such, the channel manager could coordinate all strategic components to create the synergy needed to meet customers’ needs.

4. Product-ChannelManagement Interfaces 2 New product planning & development 3 Major areas of product Management The Product Life Cycle Strategic Product Management

5. New Product Planning 3 • 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 the channel members? • Do the new products fit into the present channel members’ assortments? • Will any special education or training be necessary to prepare the channel members to sell the new products effectively? • Will the product cause the channel members any special problems?

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

7. Member Acceptance ofNew Products Factors that pre-determine acceptance of new products by channel partners: • How the product will sell – “Turnover” • Whether the product is easy to stock & display • Whether the product will be profitable – “Margins”

8. Adding Products to the Assortment 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?

9. Educating Channel Members To sell new products successfully Manufacturer goal: Educate or train channel members in the product’s use and the special features to emphasize in sales presentations Method:

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

11. Product Life Cycle 4 Sales ($) Sales curve Profit curve Introduction Time Growth Maturity Decline

12. Introduction Assure sufficient number of channel members for adequate market coverage Assure adequate supply on channel members’ shelves

13. Growth Assure sufficient number of channel member inventories for adequate market coverage Monitor the effects of competitive products on channel member support

14. Maturity 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

15. Decline Phase out marginal channel members Investigate impact of product deletion on channel members

16. Strategic Product Management 5 Successful Product Strategies: • 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

17. Product Strategies 6 Product differentiation Product positioning Product line expansion & contraction Trading up & trading down Product brand strategy

18. Product Differentiation Creating a differential product involves getting consumers to perceive a difference. • Implications for channel management: • Channel managers should try to select & help develop members who fit the product image when product differentiation strategy is affected by who will be selling the product. • Channel managers should 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.

19. Product Positioning The manufacturer’s attempt to have consumers perceive the product in a particular way relative to competitive products • Implications for channel management: • Possible interfaces between the product positioning strategy and where the product will be displayed and sold to consumers should be considered before the strategy is implemented. • Elicit retailer support before attempting to implement strategy. • Maintain backup supply of retailer incentives

20. Product Line Expansion & Contraction Manufacturers often engage in both expansion and contraction simultaneously. • Implications for channel management: • Difficult to balance channel member satisfaction & support for reshaped product lines • Channel members are making increasing demands on manufacturers to have the right mix of products

21. Trading Down, Trading Up Adding lower-priced products or product lines, or higher-priced products or product lines, to a product mix • Implications for channel management: • Whether existing channel members provide adequate coverage of high-end or low-end market segments to which trade-up or trade-down product is aimed • Whether the channel members have confidence in the manufacturer’s ability to successfully market the trade-up or trade-down product.

22. Product Brand Strategy 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. • Physically vary products enough to minimize direct competition

23. 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

24. Discussion Question #1 With the widespread use of e-books, such as Amazon.com’sKindle, book publishers are faced with a tough channel decision: should they introduce the conventional hardcover and the ebook versions simultaneously or delay release to the e-book channel until after the hardcover has had a chance to generate sales through the conventional channels? HarperCollins, the publisher of former vice presidential candidate Sarah Palin’s book, Going Rogue: An American Life, opted for the delay strategy. The publisher chose to wait over a month after the release of the hardcover before making the book available via e-book. The publisher had produced 1.5 million copies of the hardcover version, which were available for sale in book stores and online in mid-November. But the e-book version was not made available until December 26, the day after Christmas. Apparently HarperCollins was worried about the ebook cannibalizing sales from the hardcover version. Do you think HarperCollins made the right channel decision? Why or why not?

25. Discussion Question #2 RadioShack, with over 6,500 locations worldwide, has been struggling for a number of years with an image of being “old-fashioned” or “out of touch” with new technologies. RadioShack was viewed by tech-savvy consumers as a place to buy odds-and-ends electrical items, such as adaptors and cables, but not the place to buy smartphones. But by the latter part of the first decade of the twenty-first century, RadioShack, which started to refer to itself in advertisements as “The Shack,” began selling what is arguably the most iconic example of high-tech, cool products—the Apple iPhone. Apple Inc., which is known for being very selective about who qualifies to sell its products, nevertheless decided to let RadioShack sell the iPhone. Why do you think Apple decided to use RadioShack as a channel member for selling iPhones? Do you think the product life cycle played a role in Apple’s decision?

26. Discussion Question #3 Toddler University Inc. is the name of a shoe company that makes children’s footwear. The company grew from almost nothing to sales exceeding $25 million. The secret of Toddler University’s success, according to some industry observers, is a unique product design that can drastically reduce retailers’ inventory requirements. In regular children’s shoes, there are 11 sizes and 5 widths—so, to have a complete selection, retailers would have to stock 55 pairs of shoes for each particular model. But Toddler University has patented a shoe that allows the use of a one-width shoe with five shoe inserts of varying widths, thus drastically reducing the retailer’s inventory requirements. Comment on this development in light of what you believe to be the relevant product strategy and channel management strategy interface.