1 topic 8 product issues in channel management by dr. songporn hansanti

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Topic 8Topic 8

Product Issues in Channel Management

By

Dr. Songporn Hansanti

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Marketing Mix ResourcesMarketing Mix Resources 1100

Objective 1:

By understanding how the other marketingmix variables interface with the channelvariable, and the implications of such,

the channel manager could coordinate allstrategic components to create the synergy

needed to meet customers’ needs.

By understanding how the other marketingmix variables interface with the channelvariable, and the implications of such,

the channel manager could coordinate allstrategic components to create the synergy

needed to meet customers’ needs.

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1010Product-ChannelProduct-ChannelManagement InterfacesManagement Interfaces

Objective 2:

New product planning & development

The product life cycle

Strategic product management

3 Majorareas ofproductmanagement

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1010New Product PlanningNew Product Planning

Objective 3:

1. What input, if any, can channel members provide into new product planning?

2. What has been done to assure that new products will be acceptable to the channel members?

3. Do the new products fit into the present channel members’ assortments?

4. Will any special education or training be necessary to prepare the channel members to sell the new products effectively?

5. Will the product cause the channel members any special problems?

1. What input, if any, can channel members provide into new product planning?

2. What has been done to assure that new products will be acceptable to the channel members?

3. Do the new products fit into the present channel members’ assortments?

4. Will any special education or training be necessary to prepare the channel members to sell the new products effectively?

5. Will the product cause the channel members any special problems?

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1010Encouraging Member InputEncouraging Member Input

Solicit ideas fornew products.

Solicit feedbackduring the test-marketing

or commercialization stage.

Gather feedbackon product sizeor on packaging.

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1010Member Acceptance ofMember Acceptance ofNew ProductsNew Products

Determining Factors

• How the product will sell• Whether the product is easy to stock & display• Whether the product will be profitable

• How the product will sell• Whether the product is easy to stock & display• Whether the product will be profitable

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Adding Products to the Adding Products to the AssortmentAssortment

Will existing channel members view the new product as appropriate to add to their

assortments?

Will existing channel members view the new product as appropriate to add to their

assortments?

Key Considerations:

Will channel members feel competent to handle the new product?

Will channel members feel competent to handle the new product?

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Categories of New Products

New-To-The-WorldNew-To-The-World

New Product LinesNew Product Lines

Product Line AdditionsProduct Line Additions

Improvements/RevisionsImprovements/Revisions

Repositioned ProductsRepositioned Products

Lower-Priced ProductsLower-Priced Products

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The New-Product Development Process

New ProductNew ProductSuccessSuccessFactorsFactors

New ProductNew ProductSuccessSuccessFactorsFactors

Long-Term CommitmentLong-Term Commitment

New Product StrategyNew Product Strategy

Capitalize on ExperienceCapitalize on Experience

Establish an EnvironmentEstablish an Environment

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New-Product Development Process

New-Product StrategyNew-Product Strategy

Idea GenerationIdea Generation

Idea ScreeningIdea Screening

Business AnalysisBusiness Analysis

DevelopmentDevelopment

Test MarketingTest Marketing

CommercializationCommercialization

New ProductNew Product

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Idea GenerationCustomersCustomers

EmployeesEmployees

DistributorsDistributors

CompetitorsCompetitors

R & DR & D

ConsultantsConsultants

Creative ThinkingCreative Thinking

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

Sources ofSources ofNew-ProductNew-Product

IdeasIdeas

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Brainstorming

BrainstormingBrainstorming

The process of getting a group to think of unlimited ways to

vary a product or solve a problem.

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Idea Screening

ScreeningScreening

The first filter in the product

development process, which eliminates ideas that are inconsistent with

the organization’s new-product strategy or are inappropriate for some

other reason.

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Concept Test

Concept TestConcept Test

A test to evaluate a

new-product idea, usually before any prototype has been created.

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Business Analysis

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Considerations Considerations in in

Business Business Analysis StageAnalysis Stage

Demand

Cost

Sales

Profitability

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Development

Creation of prototype

Marketing strategy

Packaging, branding, labeling

Manufacturing feasibility

Final government approvals if needed

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Simultaneous Product Development

Simultaneous Product DevelopmentSimultaneous Product Development

A new team-oriented approach to new-product

development where all relevant functional areas and

outside suppliers participate in the development process.

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Introductory Stage

• High failure rates

• Little competition

• Frequent product modification

• Limited distribution

• High advertising and production costs

• Negative profits

• Promotion focuses on awareness and information

• Intensive personal selling to channels

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Test Marketing

Test MarketingTest Marketing

The limited introduction of a product

and a marketing program to determine

the reactions of potential customers in a

market situation.

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Alternatives to Test Marketing

• Single-source research using supermarket scanner data

• Simulated (laboratory) market testing

• Online test marketing

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CommercializationProductionProduction

Inventory BuildupInventory Buildup

Distribution ShipmentsDistribution Shipments

Sales TrainingSales Training

Trade AnnouncementsTrade Announcements

Customer AdvertisingCustomer Advertising

Steps in Steps in Marketing a Marketing a New Product New Product

Steps in Steps in Marketing a Marketing a New Product New Product

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1010Educating Channel MembersEducating Channel Members

Manufacturer goal:

To sell new productssuccessfully

Method:Educate or train

channel members in theproduct’s use and the

special features to emphasize in sales

presentations

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Trouble-Free New ProductsTrouble-Free New Products 1010

New product problems

Care in new product planning

=

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Product Life Cycle

Time

Do

llar

s

Profits

SalesSales

IntroductoryIntroductoryStageStage

GrowthGrowthStageStage

MaturityMaturityStageStage

DeclineDeclineStageStage

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Growth Stage

• Increasing rate of sales

• Entrance of competitors

• Market consolidation

• Initial healthy profits

• Aggressive advertising of the differences between brands

• Wider distribution

• Prices normally fall

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Maturity Stage

• Sales increase at a decreasing rate

• Saturated markets

• Annual models appear

• Lengthened product lines

• Service and repair assume important roles

• Heavy promotions to dealers and consumers

• Marginal competitors drop out

• Prices and profits fall

• Niche marketers emerge

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Decline Stage

• Long-run drop in sales

• Large inventories of unsold items

• Elimination of all nonessential marketing expenses

• “Organized abandonment”

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1100Product Life CycleProduct Life Cycle

Objective 4:

Introduction

Growth

Sales($)

Sales curve

Maturity

Profit curve

TimeDecline

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1010IntroductionIntroduction

1. Assure sufficient number of channelmembers for adequate market coverage

2. Assure adequate supply on channel members’ shelves

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GrowthGrowth 1010

1. Assure sufficient number of channel member inventories for adequate market coverage

2. Monitor the effects of competitive productson channel member support

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1010MaturityMaturity

1. Extra emphasis on motivating channel membersto mitigate competitive impact

2. Investigate possibility for changes in channelstructure to extend maturity stage & possiblyfoster new growth stage

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1010DeclineDecline

1. Phase out marginal channel members

2. Investigate impact of product deletion on channel members

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Strategic Product ManagementStrategic Product Management1010

• 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

• 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

Successful product strategies depend on:

Objective 5:

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Objective 6: 1010Product StrategiesProduct Strategies

Product differentiation

Product positioning

Product line expansion & contraction

Trading up & trading down

Product brand strategy

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Product DifferentiationProduct Differentiation 1010

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.

Creating a differential product involves gettingconsumers to perceive a difference.

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Product PositioningProduct Positioning 1010

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

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1010Product Line Expansion & Product Line Expansion & ContractionContraction

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

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1010Trading Down, Trading UpTrading 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 adequatecoverage 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 thetrade-up or trade-down product

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1010

When manufacturers sell under both national andprivate 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.

Product Brand StrategyProduct Brand Strategy

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1010Product Service StrategyProduct Service Strategy

Objective 6:

It is the role of the marketing channel to providenecessary 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