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Topic 8
Product Issues in
Channel Management
By
Dr. Songporn Hansanti
1
Objective 1:
10
Marketing Mix Resources
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.
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Objective 2:
10
Product-Channel
Management Interfaces
New product planning
& development
The product life cycle
3 Major
areas of
product
management
Strategic product
management
3
Objective 3:
10
New Product Planning
1.
2.
3.
4.
5.
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?
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10
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.
5
10
Member Acceptance of
New Products
Determining Factors
• How the product will sell
• Whether the product is easy to stock & display
• Whether the product will be profitable
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10
Adding Products to the Assortment
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?
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Categories of New Products
New-To-The-World
New Product Lines
Product Line Additions
Improvements/Revisions
Repositioned Products
Lower-Priced Products
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The New-Product Development
Process
Long-Term Commitment
New Product Strategy
New Product
Success
Factors
Capitalize on Experience
Establish an Environment
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New-Product
Development Process
New-Product Strategy
Idea Generation
Idea Screening
Business Analysis
Development
Test Marketing
Commercialization
New Product
10
Idea Generation
Customers
Employees
Distributors
Competitors
Sources of
New-Product
Ideas
R&D
Consultants
Creative Thinking
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Brainstorming
Brainstorming
The process of getting a group to
think of unlimited ways to vary a
product or solve a problem.
2
12
Idea Screening
Screening
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 Test
A test to evaluate a
new-product idea, usually before any
prototype has been created.
2
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Business Analysis
Demand
Considerations
in
Business
Analysis Stage
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 Development
A new team-oriented approach to newproduct 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 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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Commercialization
Production
Inventory Buildup
Distribution Shipments
Steps in
Marketing a
New Product
Sales Training
Trade Announcements
Customer Advertising
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10
Educating Channel Members
Manufacturer
goal:
Method:
To sell new products
successfully
Educate or train
channel members in the
product’s use and the
special features to
emphasize in sales
presentations
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10
Trouble-Free New Products
Care in new product planning
=
New product problems
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Product Life Cycle
Growth
Stage
Maturity
Stage
Dollars
Introductory
Stage
Decline
Stage
Sales
Profits
0
Time
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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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Objective 4:
10
Product Life Cycle
Sales
($)
Sales curve
Introduction
Growth
Profit curve
Maturity
Decline
Time
28
10
Introduction
1. Assure sufficient number of channel
members for adequate market coverage
2. Assure adequate supply on channel
members’ shelves
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10
Growth
1. Assure sufficient number of channel member
inventories for adequate market coverage
2. Monitor the effects of competitive products
on channel member support
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10
Maturity
1. Extra emphasis on motivating channel members
to mitigate competitive impact
2. Investigate possibility for changes in channel
structure to extend maturity stage & possibly
foster new growth stage
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10
Decline
1. Phase out marginal channel members
2. Investigate impact of product deletion
on channel members
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Objective 5:
10
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
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Objective 6:
10
Product Strategies
Product differentiation
Product positioning
Product line expansion & contraction
Trading up & trading down
Product brand strategy
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10
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.
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10
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
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Product Line Expansion &
Contraction
10
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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10
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
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10
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.
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Objective 6:
10
Product Service Strategy
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
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