10-1
Chapter 10
PRODUCT ISSUES IN CHANNEL MANAGEMENT
Teaching Notes
This chapter focuses on the product element of the marketing mix. Subsequent chapters
will examine price, promotion, and logistics. Students unfamiliar with the concept of the
Chapter Objectives
Effective channel management requires that the channel manager be aware of how
channel management interfaces with product, price, promotion, and logistics in the
marketing channel. Three basic areas of product management are considered: (1) new
product planning and development, (2) the product life cycle, and (3) strategic product
management. With respect to new product planning and development, the basic product
Learning objectives
1) Understand the concept of marketing mix variables as resources for channel
management.
2) Realize that there are many potential interfaces between product management and
Product Issues in Channel Management
10-2
Chapter Topics
1) New Product Planning and Channel Management
Chapter Outline
Channel management involves more than just motivation management; the channel
manager must also be skilled at using the element of the marketing mix to facilitate the
administration of the channel. The channel manager needs to use the firm’s product,
pricing, promotion, and logistics variables to their maximum effect in securing
Our purpose in this section is not to present a comprehensive inventory of possible
product-channel management interfaces. Rather it is to develop a sense of awareness on
the part of the channel manager about the impact of product decisions on channel
management decisions.
The discussions and examples presented are organized around three major areas of
product management:
Marketing Channels 8e
10-3
New Product Planning and Channel Management
The development of new products is a challenge faced by virtually all producers and
manufacturers. New technologies, changing customer preferences, and competitive
forces all contribute to the need to introduce new products.
Five issues are frequently important for a wide range of channels:
• What input can channel members provide into new product planning?
• What has been done to assure that new products will be acceptable to the channel
members?
A) Encouraging Channel Member Input into New Product Planning
One way of promoting increased enthusiasm and acceptance for new products by channel
members is by obtaining some input from them into new product planning. This input
may range from soliciting ideas during the idea-generating stage, all the way to getting
B) Fostering Channel Member Acceptance of New Products
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.
Product Issues in Channel Management
10-4
C) Fitting the New Product into Channel Member Assortments
The particular mix of products carried by any given channel member is his assortment.
The channel member’s assortment is analogous to a manufacturer’s product mix.
D) Educating Channel Members about New Products
It is not unusual for channel members to need special education or training provided by
E) Making Sure New Products Are Trouble Free
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
Marketing Channels 8e
10-5
The Product Life Cycle and Channel Management
At this point in the chapter, the instructor may want to poll his or her class to see what
level of understanding the students have on the Product Life Cycle. For those classes
containing less informed students some additional class time explaining the product life
cycle may be warranted.
Key Term and Definition
▪ Product life cycle (PLC): A model for describing the stages through which a product
passes.
A) The Introductory Stage and Channel Management
During the introductory stage, strong promotional efforts are needed to launch a product.
B) The Growth Stage and Channel Management
As the product enters the growth stage, rapid market growth begins. In order to help
sustain this growth, the channel manager faces two important challenges:
Product Issues in Channel Management
10-6
C) The Maturity Stage and Channel Management
The slow growth or saturation characteristics of the maturity stage suggest two strategic
emphases for channel management.
1) Extra emphasis should be put on making sure the product is more desirable for
channel members.
2) At the same time, possible changes in channel structure, particularly the selection of
D) The Decline Stage and Channel Management
Total demise is usually imminent when a product is in the decline stage. Given this
situation, the channel manager should focus attention on two final channel implications:
Marketing Channels 8e
10-7
Strategic Product Management and Channel Management
Successful product strategies depend on a variety of factors such as the quality,
innovativeness, or technological sophistication of the products themselves, the
A) Product Differentiation and Channel Management
Product differentiation is probably the most widely used product strategy. In essence,
product differentiation represents the manufacturer’s attempt to portray a product or
products as being different from competitive products and therefore more desirable to
Two channel management implications for product differentiation strategy can be
derived.
1. First, when product differentiation strategy is affected by who will be selling the
Product Issues in Channel Management
10-8
B) Product Positioning and Channel Management
Product positioning refers to a manufacturer’s attempt to have consumers perceive the
products in a particular way relative to competitive products. If this is accomplished, the
There are three implications for channel management in product positioning.
• First, the possible interfaces between the product positioning strategy and where
the product will be displayed and sold to consumers should be considered before
C) Product Line Expansion/Contraction and Channel Management
At one time or another, most manufacturers find it necessary to expand or contract their
product lines, often simultaneously.
While there are no simple clear-cut approaches for always having the right mix of
products to satisfy even more demanding channel members, several points are worth
considering when dealing with the interface between product line expansion and
contraction and channel strategy. These are:
• It makes good sense to incorporate channel member views before the expansion
Marketing Channels 8e
10-9
for such changes.
Trading Down, Trading Up, and Channel Management
Key Terms and Definitions
▪ Trading down: Refers to the addition of lower-priced products or a product line to a
product mix than had typically been offered in the past.
▪ Trading up: Essentially the opposite – adding products or a product line that are
substantially more expensive than other products in the line or mix.
When making a decision to trade up or trade down, from a channel management
perspective there are two problems to consider.
The first is whether existing channel members provide adequate coverage of the high-end
or low-end market segments to which the new product is aimed.
A) Product Brand Strategy and Channel Management
Most manufacturers have several options when considering product brand strategies.
They might sell their products (1) under one national brand, (2) under several national
brands (a “family” of brands), (3) under private brands, or (4) under both national and
private brands.
Product Issues in Channel Management
10–10
Such dual distribution or multimarketing strategies are becoming increasingly common as
national brand manufacturers seek to make use of excess production capacity and
compete against private brand products made for large chain retailers.
If the competition becomes too direct, then this dual product brand strategy can create
serious problems between the manufacturer and its channel members.
B) Product Service Strategy and Channel Management
Many products require service after the sale. Manufacturers of these products should
make some provision for after-sale service, either by offering it directly at the factory,
through their own network of service centers, through channel members, through
authorized independent service centers, or by some combination of these.
Marketing Channels 8e
10–11
Answers to Review Questions
1. Because each of the elements of the marketing mix interfaces with all the others, each
element can either inhibit or enhance the effectiveness of the others. It is in this
enhancement capability that product, price, promotion and logistics become resources
2. Since most producers and manufacturers do not sell their products directly to their
ultimate target markets, they must utilize the services of independent channel
members. Strong acceptance of the new product by the channel members is therefore
a critical factor in determining whether the product will be successful in its ultimate
3. Channel members are not immune to “pride of authorship” and are more likely to
support new products in which they feel such pride. Except in cases where secrecy is
paramount, it can be quite practical to elicit channel member input and, in cases
Product Issues in Channel Management
10–12
4. Students should recall from Chapter 9 that channel members perceive themselves as
purchasing agents for their customers and view their product assortment as a “family”
of items assorted to meet their customers’ needs. If a channel member does not
5. This question is discussed at length in the text, so only the key implications will be
outlined here:
Introduction stage:
a. Assure sufficient number of channel members for adequate market coverage.
6. Several conditions under which a product deletion decision may create adverse
reaction on the part of channel members are:
Marketing Channels 8e
7. Strategic product management depends upon several factors, including channel
management, for successful implementation. Such product management strategies as
product differentiation, product positioning, product line expansion and contraction,
8. Product differentiation and product positioning strategies may require particular
forms of distribution to help create the desired differentiation or position. For
example, the type of store the product is sold in may be just as important in
9. These strategies underscore the different perspectives of the manufacturer and the
channel member, and the problems that arise from them. In product line extensions,
the manufacturer may expect the product’s sales to come from competitors’ products.
To the channel manager, this is not new business; it is simply the sale of a different
Product Issues in Channel Management
10–14
10. Post-sale service is as much a deliverable as the product itself. Further, post-sale
service can have a consequential impact on the final user’s ultimate product
Commentaries on Issues for Discussion
1. In the early 90’s, movie and TV studios faced a challenge, when to release movies and
what distribution channel to use. According to David Hsu, a management professor
at Wharton. “The decision of when to release a movie and to what channel is a
strategic issue for the industry. At the end of the day, the studios are trying to
maximize profits. The various distribution models revolve around maximizing the
2. It is clear that being able to distribute the iPhone was a coup for RadioShack which
struggles to compete with retailers like Best Buy. Apparently the market agreed
because RadioShack shares rose almost 16 cents the day following the announcement
that it would begin to carry Apple products. The strength of Apple’s brand is sure to
help RadioShack attract new and younger customers, but what is in it for Apple?
Marketing Channels 8e
10–15
In mid 2010, the Apple iPhone 4 went on sale at RadioShack, as well as other major
retailers such as Best Buy, Wal-Mart, AT&T and Apple online and retail stores.
3. This example shows the interface between products and channels. The main problem
shoe retailers (and wholesalers) have in carrying these products is the high levels of
inventory they must have because of the many sizes of footwear. The new product
4. Quite clearly, P&G is worried about the impact of private brand merchandise on the
sale of its own famous brands. But P&G is doubly worried about F&M’s own private
label brands because they appear to be close imitations of P&G products. P&G
probably believes and perhaps rightly so, that F&M which also sells P&G products
5. Retailers play a crucial role in bringing off this positioning strategy. To position
Product Issues in Channel Management
10–16
6. In many cases it is not the fact that manufacturers occasionally have products with
defects, it is how they address such issues. Retailers rely upon the strength of a
manufacturer’s brand to produce sales and when that brand image is tarnished, the
referent hold that the manufacturer has on the retailer begins to loosen. For example,
7. One cannot keep score in the “Battle of the Brands” by store count. Eight big U.S.
supermarket chains carry President’s Choice, a premium private-label brand. Other
premium brands include Master Choice (A&P), Select (Safeway) and Royal Request
(Vons). However, neither Kroger, the nation’s biggest supermarket chain, nor
Marketing Channels 8e
10–17