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Contemporary Business 12th ed.
Chapter 13 Summary
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PRODUCT AND DISTRIBUTION STRATEGIES
1301 – Product Strategy
A product is more than just the physical features of an object offered for sale. To
marketers, a product is a bundle of physical, service, and symbolic attributes designed to
satisfy consumer wants. Product strategy focuses on the product’s benefits and includes
decisions about package design, brand name, warranties, and many other issues.
Marketers classify goods as either B2B or B2C, depending on the customer base.
Business-to-consumer goods and services are further classified according to customers’
buying habits. Convenience items are purchased frequently and immediately with little
effort. Buyers typically choose shopping products after comparing competing prices in
competing stores. Customers will make a special effort to obtain specialty products.
Business products are goods and services used in the operation of organizations. They are
usually classified in one of five main categories: major capital items called installations,
accessory equipment such as hand tools and fax machines, component parts and materials
that become part of a firm’s final products, raw materials used to produce finished
products, and supplies used in daily operations that do not become part of the firm’s final
products. Services are classified similarly to goods, but an important distinction between
them is that services are intangible, cannot be stockpiled in inventory, and are difficult to
standardize. The classification of a good or service helps marketers determine an
effective marketing strategy for it. Companies often create groups of related products,
collectively called a product line, and a mix of product lines and individual items,
collectively called a product mix.
1302 – Product Life Cycle
Most products go through a life cycle with four stages: introduction, growth, maturity,
and decline. In the introduction stage, firms try to promote demand for a new product
through information for consumers, product samples, and other enticements to try the
new product. Sales climb quickly through the growth stage, encouraging competitors to
enter the market with similar products. During the maturity stage, sales reach a saturation
level and firms focus on capturing competitors’ customers. Sales fall during the decline
phase as new product innovations take over or customer preferences change.
A marketer’s objective is to increase the life span of a product. Common strategies
include increasing customers’ frequency of product use, adding new users, finding new
uses for products, and changing packaging or product design. New-product development
is expensive, time-consuming, and risky. It occurs in six stages: generating new product
ideas, screening to ensure new products align with company goals and capabilities,
concept development and business analysis, product development, test marketing, and
commercialization that makes the product generally available.
1303 – Product Identification
Contemporary Business 12th ed.
Chapter 13 Summary
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To help its new products succeed, a firm creates a product brand, a means of identifying
its products and differentiating them from competitors’ products. Brands include an
identifiable brand name and a legally protected trademark. Effective brand names must
be not only easy to pronounce, recognize, and remember but also convey the right image
and be legally protectable. Brands can be linked to the manufacturers that make them or
the outlets that distribute or sell them. Firms sometimes use a family brand, a single
brand name used for a group of related products. Consumer loyalty increases a brand’s
value. Marketers describe a continuum of brand loyalty that begins with brand
recognition, advances to brand preference, and for fortunate brands results in brand
insistence. A respected and successful brand name provides added value, or brand equity,
to a product. A product that benefits from high brand equity commands a relatively large
market share and sometimes reduces price sensitivity, generating higher profits. Packages
and labels play an important role in product strategy because they affect the durability,
image, and convenience of an item. Labels are often subject to legal requirements, which
can vary from country to country.
1304 – Distribution Strategy
A firm’s distribution strategy is its plan for getting the right good or service to its
customers. Marketers develop distribution channels, paths that products follow from
producer to consumer or business user. Distribution channels can be direct, bringing
products straight from producer to customer, which is common in B2B transactions.
Makers of consumer goods that sell in large quantities at thousands of outlets often
distribute products through marketing intermediaries called wholesalers and retailers.
These intermediaries can lower consumer prices because they add significant value and
savings to the distribution process.
1305 – Wholesaling
A wholesaler is a distribution channel that sells primarily to retailers, other wholesalers,
or business users. The more than 450,000 wholesalers in the United States play a crucial
part in the distribution channels of many products. Wholesalers can be classified on the
basis of ownership. Firms sometimes distribute their own goods through manufacturerowned wholesaler intermediaries, which take the form of sales branches and sales offices.
Independent wholesaler intermediaries represent many different manufacturers as they
make sales calls on retailers, manufacturers, and other business accounts. To negotiate
bulk sales, retailers sometimes band together to form their own wholesaling
organizations.
1306 – Retailing
Retailers are distribution channel members that sell goods directly to end-users. Retailers
take one of two forms, either store or nonstore. There are four types of nonstore retailing:
direct-response retailing in which customers order directly from producers, Internet
retailing, automatic merchandising through outlets such as ATMs and vending machines,
and direct selling to individuals through company representatives. In-store sales still
Contemporary Business 12th ed.
Chapter 13 Summary
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account for most sales in the United States. Through a process called the wheel of
retailing, new stores establish themselves by offering lower prices made possible by
service reductions. As they become more established, they add services and raise prices,
allowing room for other new firms to enter the market. Retailers compete in a number of
ways. Like a company launching a product, a retailer develops a marketing strategy,
identifies target markets, selects a product strategy, develops a customer service strategy,
selects a pricing strategy, chooses a location, builds a promotional strategy, and creates a
store atmosphere aligned with all of these strategies.
1307 – Distribution Channel Decisions and Logistics
When deciding how to distribute its goods and services, a firm selects a specific
distribution channel and decides its distribution intensity. Market factors such as the
characteristics of the target market and the qualities of the product guide the selection of
the distribution channel. Firms should evaluate the performance of the distribution
channel to ensure their products are being effectively promoted and delivered. The
distribution intensity, the number of intermediaries or outlets through which a
manufacturer distributes its goods, falls along a continuum with three intensity levels:
intensive distribution, selective distribution, and exclusive distribution. The distribution
channels are the final link in a firm’s supply chain, the sequence of suppliers that
contribute to creating and delivering a good or service. The process of coordinating the
supply chain is called logistics. The major focus of logistics is the physical distribution of
a good to the buyer. This includes tracking the progress of goods through the distribution
channel, warehousing, and order processing. Managers frequently set quantitative
guidelines for customer service standards in areas such as order processing speed.
Customer service components also may include warranty and repair service programs.
The first two elements of the marketing mix are the product and it’s distribution.
Products can be tangible – these products are called “goods”, or intangible – these
products are called “services”. Both goods and services go through life cycles and
require specialized marketing strategies. Distribution is the act of moving a good or
service from its producer to its wholesaler or retailer, and eventually to its buyer.
Without products and services to market there would be no need for distribution. These 2
elements provide the basis for the marketing mix as a whole.