distribution lesson 3 product issues

• The development of new products is a challenge faced by all producers and manufacturers. New technologies, changing customer preferences, and competitive forces all contribute to the need to introduce new products.
• Achieving success for new product is dependent on many factors. One of these factors is the degree of support a new product receives from independent channel members. It is therefore crucial for the channel manager to analyze the possible channel implications in the planning and development of new products.
• There is always a need for a new product
• Many factors depend on whether a product will be successful, including support from channel members
• The channel manager needs to analyze if the new product will fit the existing channel and how the members will react, as the new product may be difficult for them to carry
• Encouraging Channel Member Input into New Product Planning

  1. Soliciting ideas during the idea-generating stage

  2. Getting feedback from selected channel members during the test marketing or commercialization stage
• Input on the size of the product or on packaging changes may be all that is needed to enhance channel member cooperation
• Seeking input from channel members may require that the manufacturer keep channel members informed on new product plans, but many manufacturers are very sensitive about new product plans for competitive reasons
• Channel members are much more likely to enthusiastically support new products that they have played a part in developing
• For new products to be successful, it must be accepted by the final users - whether industrial customers or final consumers. But success is also equally dependent upon acceptance of the new product by the channel members through whom it passes.
• Final users are most concerned about how the product will perform when used


  Channel members are much more interested in how the product will sell, whether it will be easy to stock and display, and most importantly, whether it will be profitable
• Channel members have to believe that they can sell the product; otherwise, they are not going to be enthusiastic about carrying it
• The issue of ease of stocking and display has become more important than ever, as more and more new products compete for shelf space
• The profitability of new products for channel members cannot be overstated. Retailers, and to an increasing extent wholesalers, recognize that the only real asset they have to sell is shelf space. Hence, they are not going to allow this precious space to be clogged by a proliferation of unprofitable products.
• The particular mix of products carried by any given channel member is his assortment. The channel manager should try to learn whether channel members feel competent to handle their new products.
• If the channel members feel qualms about adding the new product because they lack experience in handling such products, steps should be taken to allay these fears before introducing the product.
• It is not unusual for channel members to need special education or training provided by the manufacturer in order to sell new products successfully.
• No channel member likes to take on a new product that will cause trouble. This applies to product problems that arise while the product is still in the channel member's inventory as well as those that may appear soon after the product is sold to the consumer.
• Problems with new products can range from being a nuisance that make it more difficult for the channel members to stock and sell, all the way to more serious flaws that can undermine the brand equity that channel members rely on to attract customers.
• Product life cycle (PLC)


  A model for describing the stages through which a product passes
• The Introductory Stage and Channel Management


  1. Strong promotional efforts are needed to launch a product

  2. The channel manager must assure that channel members can provide adequate market coverage for the product
• The Growth Stage and Channel Management


  1. Ensure that product availability is adequate so as not to inhibit growth

  2. Carefully monitor channel member actions with respect to competitive products
• A manufacturer must fight competitors for the channel members' support to sustain the growth of the firm's product
• A manufacturer who has developed carefully planned programs for supporting channel members has the edge over the competitor who seeks the support of the same channel members but lacks previously planned programs
• The Maturity Stage and Channel Management


  1. Put extra emphasis on making the product more desirable for channel members

  2. Investigate possible changes in channel structure, particularly the selection of different types of intermediaries, to forestall the decline stage and possibly create a new growth stage
• Such tactics as extra trade discounts, advertising allowances, special packaging deal discounts, and more liberal return policies are appropriate to make the product more attractive to channel members
• The Decline Stage and Channel Management


  1. Can marginal outlets be phased out quickly to avoid further profit erosion?

  2. Will dropping the product cause an adverse reaction on the part of existing channel members?
• Even when a product has reached the decline stage, a substantial number of channel members may still be carrying it. Many of them will be low-volume, often ordering in very small quantities.
• The high-cost, low-volume channel for the product further erodes an already deteriorating profit picture.
• The channel manager should consider whether the very-low-volume outlets should be phased out. Basically, this requires an analysis of the revenues produced by each outlet, weighed against the cost of servicing each of them.
• Channel manager has a high-cost, low-volume channel for the product

  Erodes an already deteriorating profit picture
• Procedure for analysing revenues vs cost of servicing each outlet is not clear-cut
• Some channel members still have small quantities of the product
• Slashing prices


  Affects distribution channels
• Channel members will gradually disappear, need to close down outlets with very low volume
• Channel manager is left with

  High cost (for maintaining channel) and low volume (low quantities sold)
• Successful product strategies depend on various factors
• One factor in a successful product strategy is

  Role played by channel members in implementing product strategies
• Success sometimes depends on how channel members carry out product strategy
• Product differentiation


  Manufacturer's attempt to portray a product as different from competitors to make it more desirable