CHAPTER OBJECTIVES PRODUCT DEVELOPMENT AND DISTRIBUTION nIdentify why product development decisions are important to consumers as well as businesses. nDescribe.

CHAPTER

OBJECTIVESOBJECTIVES

PRODUCT DEVELOPMENT AND DISTRIBUTION

Identify why product development decisions are important to consumers as well as businesses.

Describe the three levels of product development and the types of product selection.

Discuss how packaging and branding improve product sales and customer satisfaction.

Discuss the important factors to be considered when selecting channels of distribution.

Describe the characteristics of major forms of transportation used to distribute products.

Give examples of product-handling procedures that improve product distribution.

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Companies must carefully coordinate each of the mix elements

Prod. development decisions must be made carefully

Produce the wrong products in wrong quantities w/o features and services customers need results in a great deal of time and money with no chance to sell the prod. for profit

Businesses cannot ignore the needs/ wishes of consumers

Product Development Product design (1st step) - 3 levels

Basic - physical prod. in its simplest form; meets important consumer need Ex: basic computer

Enhanced - offers different features and options; Ex: computer with different screen or hard drive

size, etc.

Extended - additional features that are NOT part of the physical prod. but are still part of the product Ex: customer service, guarantees, rebates

Product Development Product selection - 2nd step

Product line - group of similar products with variations in design/quality to meet the needs of distinct groups SUVs -- small (Toyota RV4); mid (Blazer); large

(Escalade) Appliance - low-, mid-, and high priced based on

construction, quality of materials and available features

Product assortment - complete set of all products Ex: Bath and Body Works -- deep product

assortment ; large # of choices for each product

MANY PRODUCTS WITH LIMITED

VARIETY

LIMITED PRODUCT CHOICES AND

VARIETY

LARGEVARIETY IN

FEW PRODUCT CHOICES

BROADVARIETYOF MANY

PRODUCTS

PRODUCT BREADTHMore Less

PR

OD

UC

T D

EP

TH Mo

reL

ess

PRODUCTASSORTMENT

Product Development Packaging - 3rd step Branding - 4th step

Neither are related to the actual physical prod, but are an important influence on purchase decisions

Packaging - 4 different purposes Protects Provide important info Easier to use - pop in plastic bottle Promotional tool - attractive package

Product Development Branding - 4th step Name, symbol, word or design that

IDs a prod., service, or co. Plays a major role in buying decisions

LEVELS OF CONSUMER BRAND AWARENESS

Consumers are unable to identify the brand. Consumers can identify the brand but it has

limited influence on their purchase decision. Consumers can identify the brand but will not

purchase it because of the brand. Consumers easily recognize the brand and

will choose it if it is available. Consumers view the brand as the most

satisfying; will not purchase a different brand.

Purpose of Distribution Economic system relies on successful

exchange of prod. and services between businesses and consumers

Not easy Most problems occur during the exchange

process--distribution Economic discrepancies - pg 575

Differences between business’s offerings and consumer’s requirements

Type, quantity, location, time

Channels of Distribution Routes products follow while moving from

the producer to the consumer, including all related activities and participating organizations

Businesses that participate in activities that transfer goods/services from the producer to the user are called channel members Usually retailers/wholesalers

The larger the channel, the more complex and difficult to control, more cost too

CHANNELS OF DISTRIBUTION

Direct distribution - producers sell directly to the ultimate consumer

Indirect distribution - when distribution takes place through channel members Major difference is the the types of channel

members involved

Once channels are chosen, they can be changed--reassessed to address changes in economy.

Channels of Distribution Direct distribution - AKA direct marketing

Less channels, less cost

From producer to consumer Sales rep to call on users in person Use of mail--brochures; catalogs Telemarketing Internet

Ethical Issues - pg 578 Think critically - 1 to 4

Direct Distribution

Producer

Consumer

Channels of Distribution Indirect distribution

Can simplify marketing operations by selling to retailers

Retailers - direct sales; advertising; storage; located near consumers; offer more than one product--do all shopping in one place

Retailers can range from large dept. stores to small retailers specializing in limited variety

Non-store retailers--vending machines; in-home parties; shopping channel; catalog

Indirect Distribution

Producer

Retailer

Producer

Wholesaler

Retailer

ConsumerConsumer

CHANNELS OF DISTRIBUTION

Integrated marketing channels Cooperation is difficult among businesses

that operate at different levels of a channel and have different responsibilities

Some large business attempt to solve this through channel integration--when one business owns the organizations at other levels of the channel

A manufacturer may purchase the bus. That provides wholesaling or retailing

DECIDING ON A CHANNEL OF DISTRIBUTION

Perishability of the product -- direct distrib. Geographic distance between producer

and consumer Need for special handling of the product Number of users Number of types of products manufactured Financial strength and interests of the

producer

TRANSPORTATION DECISIONS

Common transportation methods Railway - cheap but slow Trucks (truck tailers to train--piggyback) Airplanes - fast but expensive

Other transportation methods Waterways -- sloooooow Pipelines Containerization - less handling and damage

Product Handling Tracking products -- bar codes Product storage

Warehouse - simple storage Distribution center

Large bldg. designed to accumulate and redistribute products from many manufacturers efficiently

Replacing traditional warehouses

Order processing

Businesspeople (producers) do not have identical perceptions of a product--nor should they Producers think of their products as what they

have to offer Consumers think of products as a way to

satisfy their needs

Chpt. Questions Discussion - pg 588

2,3,4,9,10

Analyze - pg 589 #1 - need groups of 3

Questionnaire of 5 products due Thurs. Will be used over the break