Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Distributing Products CHAPTER 15

WHAT IS THE DISTRIBUTION (PLACE) ELEMENT OF THE MARKETING MIX? 15-2 The process that makes products available to consumers when and where consumers want them.

WHAT are MARKETING INTERMEDIARIES? 15-3 LO 15-1 Marketing Intermediaries (aka Middlemen) -- Organizations that assist in moving goods and services from businesses to businesses (B2B) and from businesses to consumers (B2C). They are called intermediaries because they’re in the middle of a series of firms that distribute goods. Channel of Distribution -- A group of marketing intermediaries that joining together to transport and store goods from producers to consumers.

DISTRIBUTION: GETTING THE PRODUCT TO THE CONSUMER 15-4 LO 15-1 ProducerWholesaler Channel of Distribution – the path that a product takes from the producer to the consumer Distribution Strategy: getting the right product to the right person at the right place, at the right time Consumer

TYPES of MARKETING INTERMEDIARIES? 15-5 LO 15-1 Agents and Brokers -- Intermediaries who bring buyers and sellers together and assist in negotiating an exchange but do not take title to the goods. Wholesaler -- An intermediary that sells products to other organizations such as retailers, manufacturers, and hospitals. Retailer -- An organization that sells products to ultimate customers.

SELECTED CHANNELS of DISTRIBUTION 15-6 LO 15-1

WHY MARKETING NEEDS INTERMEDIARIES 15-7 LO 15-1 Justifications for marketing intermediaries Intermediaries perform essential marketing services (promotion of products, help sell product) Intermediaries provide important market information to producers (what’s selling, who’s buying, customer feedback) Intermediaries help store products (producers won’t be burdened with storage costs) Intermediaries provide customers with convenience and choice selection Intermediaries accept risk for customer non-payment or non-sold products Intermediaries create EFFICIENCY and UTILITY Intermediaries help REDUCE COSTS and provide VALUE! How?

HOW INTERMEDIARIES CREATE EXCHANGE EFFICIENCY 15-8 LO 15-1

THREE KEY FACTS ABOUT MARKETING INTERMEDIARIES 15-9 LO ) Marketing intermediaries can be eliminated but their activities cannot. 2) Intermediaries perform marketing functions faster and cheaper than other organizations can. 3) Marketing intermediaries add costs to products but they are generally offset by the values they provide.

DISTRIBUTION’S EFFECT on YOUR FOOD DOLLAR LO 15-1

INTERMEDIARIES CREATE UTILITY LO 15-2 Utility -- The want-satisfying ability, or value, that organizations add to goods and services by making them more useful or accessible to consumers. Four types of utilities: 1. Form 2. Time 3. Place 4. Possession

HOW MARKETERS USE UTILITY LO 15-2 Form Utility -- Changes raw materials into useful products; producers generally provide form utility.  Starbucks makes coffee the way the customers want it. Starbucks  Dell assembles computers according to customer needs. Time Utility -- Makes products available when customers want them.  Many Walgreens stores are open 24-hours a day.Walgreens  Colleges offer day and evening classes. Place Utility -- Adds value to products by placing them where people want them.  Banks place ATMs at convenient locations.  7-11 stores are found in easy-to-reach locations Possession Utility -- Helps transfer ownership from one party to another, including providing credit.  Pay for lunch at McDonalds with your Visa card.McDonaldsVisa  A savings and loan office offers loans to home/car buyers.

There are over 2 million retailers in the U.S., not including websites. RETAILING in the U.S LO 15-4 Retailers in the U.S. employ about 5 million people and operate under many different structures.

FASTEST GROWING RETAIL CATEGORIES LO 15-4 Video games Sports and fitness Home, garden, and furniture Event tickets Consumer electronics

TYPES of RETAIL STORES TypesExamples Department StoreSears, JC Penney, Nordstom Discount StoreWal-Mart, Target SupermarketSafeway, Kroger, Albertson’s Warehouse ClubCostco, Sam’s Club Convenience Store7-Eleven Category KillerToys-R-Us, Bass Pro Shops, Office Depot Outlet StoreNordstrom Rack, TJ Maxx, Nike Outlet Specialty StoreJewelry store, shoe stores, bicycle shops LO 15-4

RETAIL DISTRIBUTION STRATEGIES LO 15-4  Intensity of market coverage Intensive distribution – The use of all available outlets for a product to saturate the market – Convenience Products Selective distribution – The use of only a portion of the available outlets for a product in each geographic area – Shopping Products Exclusive distribution – The use of only a single retail outlet for a product in a larger geographic area – Specialty Products

PICK a STRATEGY… What’s the Correct Retail Strategy for These Products? LO 15-4 Ralph Lauren Polo Shirts Diet Pepsi Rolls Royce Automobiles Calloway Golf Clubs Snickers Candy Bars Steinway Pianos