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Contemporary Business 12th ed. Chapter 13 Summary page 1 of 3 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 page 2 of 3 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 page 3 of 3 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.