MGT301 Principles of Marketing Lecture-31

Summary of Lecture-30

Retailing and Wholesaling

Today’s Topics Review 3rd P (Place)

Place….Distribution Channel….Marketing Channel

Simple Marketing System Communication Product/Service Producer/Seller Consumer Money Feedback

Right Place Right Cost Right Product Right Time Right Condition

Manufacturer Customer Manufacturer Customer Manufacturer Customer 20 Contacts

Wholesaling Intermediary Manufacturer Customer Manufacturer Wholesaling Intermediary Customer Manufacturer Customer Manufacturer Customer Manufacturer 9 Contacts

How Channel Members Add Value? Channel members add value by bridging the major time, place and possession gaps that separate goods and services from those who would use them.

Distribution Channel Functions This CTR relates to the material on pp. 354-355. Risk Taking Information Financing Promotion Distribution Channel Functions Information. This function involves gathering and distributing marketing research and intelligence about the environment for planning purposes. Discussion Note: The use of scanner technology has dramatically changed this function in the last few years. Promotion. This involves developing and spreading persuasive communications about an offer. Contact. Contact involves finding and communicating with prospective buyers. Matching. This function consists of shaping and fitting the offer to the buyer’s needs by manufacturing, grading, assembling, and packaging. Negotiation. This involves reaching an agreement on price and other terms. Physical Distribution. This function consists of the transporting and storing of goods. Financing. This function addresses the acquiring and using of funds to cover the costs of channel work. Risk Taking. This function assumes the risk of carrying out the channel work. Discussion Note: Students often assume business is risk-free. You might expand upon the link between risk and value-added services as the justification for profits. Physical Distribution Contact Negotiation Matching

M W J R Direct In-Direct C  Channel 1 Channel 2 Channel 3 Channel 4 Channel Levels and Channel Conflict This CTR corresponds to Figure 12-2 (A) on p. 355 and relates to the material on pp. 355-356. M W J R C  Direct Channel 1 Channel Levels Distribution channels can be described by the number of channel levels involved. A channel level is defined as each of the marketing intermediaries that perform some work in bringing the product and its ownership closer to the final buyer. Distribution channels can be categorized broadly as: Direct Marketing Channel. This is a marketing channel that has no intermediary levels. The company sells directly to final consumers. Discussion Note: The company may not be the actual producer. Land’s End only makes a small fraction of its clothes but coordinates the sale and ships from its warehouses. Dell Computer assembles its computers on site but from component parts made elsewhere. Indirect Marketing Channels. These contain one or more intermediary levels. Channel 2 In-Direct Channel 3 Channel 4

Marketing Channels for Consumer Goods Producer Consumer Producer Retailer Consumer Producer Wholesaler Retailer Consumer Producer Agent/ Broker Wholesaler Retailer Consumer

Marketing Channels for Business Goods Producer Business User Producer Agent/ Broker Business User Producer Wholesaler Business User Producer Agent/ Broker Wholesaler Business User

Evaluation of Channel Alternatives Economic Criteria -Potential sales, costs and profits of channels Control Criteria -Amount of control company has over sales efforts Adaptive Criteria -flexibility of channel to adapt to changing situations

Channel Management Decisions Selecting Channel Management Decisions Channel Management Decisions This CTR relates to the material on pp. 369-370. Motivating Channel Management Decisions Selecting Channel Members. Choosing middlemen will vary in difficulty be product and producer. Very large and well known companies often have more qualified middlemen seeking to carry their products than the company can effectively use. Some new products will be resisted by existing channels and may require adopting new channel members to carry the line. Motivating Channel Members. Channel members must be motivated to perform. Positive motivators come from high margins, special deals, premiums, cooperative advertising allowances, display allowances, and sales contests. Negative motivators may include threatening margins, delaying delivery, or ending the relationship. Long term cooperation is enhanced by distribution programming which involves building a planned, professionally managed, VMS that meets al channel member needs. Evaluating Channel Members. Assessing channel members requires regular measurement of performance against established criteria such as sales quotas, inventory levels, customer delivery time, training, and overall customer service for each channel member. Effective channel management rewards superior performance and seeks to improve substandard performance in a cooperative professional partnership. Channel member replacement should be used as a last resort with sincere efforts to improve performance have not succeeded. FEEDBACK Evaluating

The channel will be most effective when.. Each member is assigned tasks it can do best. All members cooperate to attain overall channel goals and satisfy the target market.

Conventional Distribution Channel vs. Vertical Marketing Systems

Conventional Marketing Channel Vertical Marketing Channel Manufacturer Manufacturer Wholesaler Wholesaler Retailer Retailer Consumer Consumer

Logistic Management Channels of distribution Two different perspectives

(Physical distribution) Channels of distribution Two different perspectives Logistics (Physical distribution)

Push Strategy Pull Strategy Producer Interme- diaries End users Marketing activities Demand Demand Push Strategy Marketing activities Producer Interme- diaries End users Demand Demand Pull Strategy

Marketing Logistics and Supply Chain Management

Functions of Logistics Systems

Transportation Water, Truck, Rail, Pipeline & Air Logistics Systems This CTR relates to the material on pp. 374-377. Instructor’s Note: Transportation is covered separately on the following CTR. Costs Minimize Costs of Attaining Logistics Objectives Order Processing Submitted Processed Shipped Nature of Logistics Systems Costs. Distribution costs stem from factors other than just size. How products are transported, stored, sorted, inventoried, ordered, and tracked can all affect distribution costs over and above the sheer volume being distributed. Modern facilities utilizing technology to help innovate what it means to physically distribute goods both save on costs and become a viable promotional tool in providing customer service. Order Processing. Processing orders is an area of distribution that benefits from the application of computer technology. Innovative applications of hardware and software can streamline order processing by connecting the salesperson with dispatchers and warehouses. Warehousing. Storage of products to best meet demand requires decisions on stocking locations, estimation of time to be stored and distinguishing between storage warehouse needs and distribution centers utilizing automation to move goods quickly. Inventory. The cost of holding inventory requires developing accurate knowledge on when to order and how much to order to meet demand but not overburden inventory processing capacity. Warehousing Storage Distribution Logistics Functions Transportation Water, Truck, Rail, Pipeline & Air Inventory When to order How much to order Just-in-time

Customer Service Concept Customer service is the ability of logistics management to satisfy users in terms of: - time - dependability - communication - convenience

Companies today place greater emphasis on logistics because….. Effective logistics is becoming a key to winning and keeping customers. Logistics is a major cost element for most companies.

The explosion in product variety has created a need for improved logistics management. Information technology has created opportunities for major gains in distribution efficiency.

Classification of Retailing Retailing and Wholesaling

Amount of Service Product Line Relative Prices Retail Organizations Self-Service, Limited-Service and Full-Service Retailer Product Line Length and Breadth of the Product Assortment Relative Prices Pricing Structure that is Used by the Retailer Retail Organizations Independent, Corporate, or Contractual Ownership Organization

Nonstore Retailing

Catalogs - from clothing to computers Mail Order Catalogs - from clothing to computers Direct Mail - brochure offering a product or service at one point in time. Direct Selling Door-to-Door Sales - declining in U.S. Parties & Networks - presentations Telemarketing - over the phone Automatic Vending Best suited to inexpensive merchandise and food and beverages. Direct Response Television Home Shopping Networks - TV channels that sell products

What is Wholesaling? All the activities involved in selling goods and services to those buying for resale or business use. Wholesaler - those firms engaged primarily in wholesaling activity.

Customer Expectations for Wholesaling

Suppliers’ Logistics Systems Accuracy Easy Inquiry and Order Reliable Delivery On-time Error-Free Invoicing Post-Sales Support Easy Claims Handling

Warehouse and Materials-Handling Functions of Materials Handling Receive goods into warehouse Dispatch the goods to temporary storage Recall, select, or pick the goods for shipment Identify, sort, and label goods

Types of Wholesalers

They Don’t Take Title to Wholesaling by Sellers Brokers/ Agents They Don’t Take Title to the Goods, and They Perform Only a Few Functions. Merchant Wholesaler Independently Owned Business that Takes Title to the Merchandise it Handles. Manufacturers’ Sales Branches and Offices Wholesaling by Sellers or Buyers Themselves Rather Than Through Independent Wholesalers.

Right Place Right Cost Right Product Right Time Right Condition

Compete on value (not just price.) Save customers time and energy. Make shopping fun.

Enough for Place. . .

Summary

Next….

MGT301 Principles of Marketing Lecture-31