MT 219 Marketing Unit Six Marketing Channels Retailing and Wholesaling Note: This seminar will be recorded by the instructor.

MT 219 Marketing Unit Six Marketing Channels Retailing and Wholesaling Note: This seminar will be recorded by the instructor.

Review of Unit 5 How did Unit 5 go? Questions or concerns? Instructor suggestions for Unit 6 Are the Research Projects on segmentation almost ready for submission this week? Additional questions?

What is Price? Value exchanged for products -Money -Barter Only primary source of revenue

Price Our textbook refers to price as the value exchanged for products in a marketing transaction. Price is also the amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. Kotler

Ebay.com

The term price goes by many names Education we pay tuition, real estate agents charge a commission, clubs charge dues, credit cards charge interest.

“ So how do you think marketers determine the price for the product? ”

Cost based pricing Cost based pricing is adding a dollar amount or percentage to the cost of the product. Pride and Ferrell

Cost-Based Pricing Assesses price based on costs Cost-plus pricing- adds a markup to the cost of the product Breakeven pricing- sets prices to ensure that costs are covered and there is a certain rate of return

Demand Pricing Demand based pricing is based on the level of demand for a product. P ride and Ferrell

Competition Based Pricing Competition based pricing by definition is pricing influenced primarily by competitors prices. Pride and Ferrell

Competition-Based Pricing Sets prices based upon what the competition’s strategies, market offerings, costs and prices are. Consumers will look at value in the product compare it to the competition and make a purchase decision based on what they see.

Value pricing Value pricing is a pricing strategy that emphasizes benefits derived from a product in comparison to the price and quality levels of competing offerings Pride and Ferrell

Customer Value-Based Pricing Assesses prices based on customer perceptions of value Good-value pricing- The correct amount of quality and service at a fair price Value-added pricing- Differentiates the product by attaching value-added features and services and charges higher prices for them

Target Market and Profit A set of buyers that share common needs or characteristics that the company decides to serve. A group of people toward whom the firm decides to direct its marketing efforts, and ultimately its goods and services. Boone and Kurtz Profit= Total revenue - Total expenses Other pricing strategies

Maximizing Volume Setting a minimum acceptable profit level and then seek to maximize sales in the belief that the increased sales are more important then immediate high profits to the long-run competitive picture. Boone and Kurtz

Psychological Pricing Prestige Reference Bundle Multiple unit EDLP Odd-Even Customary

Our Topics for This Week Channel importance, functions, types, and coverage Physical distribution and supply chain management Retailing types and trends Wholesaling types and role in marketing

Important Definitions Marketing Channel – A group of individuals and organizations directing products from producers to customers Value Delivery Network- Composed of the company, intermediaries, suppliers and consumers who are in partnership to deliver customer value system- wide.

Distribution Our text defines distribution as the activities that make products available to customers when and where they want to purchase them. Distribution is also moving goods and services from the producer to the customer. (Boone and Kurtz)

Marketing Channel/Distribution Channel Our text defines a marketing channel as a group of individuals and organizations directing products from producers to customers.

Intermediaries Intermediaries are middlemen between the seller and the buyer. Sometimes there is one intermediary between the buyer and seller and other times there are several middlemen. Our textbook definition of a marketing intermediary is a middleman linking producers to other middlemen or ultimate consumers through contractual arrangements or through the purchase and resale of products.

Other definitions for marketing/distribution channel A distribution Channel (Marketing Channel) are organizations involved in the process of making the product or service available for use or consumption by the consumer/business user- Kotler Boone and Kurtz similarly defines a Distribution Channel (Marketing Channel) as a system of marketing institutions that promotes the physical flow of goods and services, along with ownership title, from producer to consumer or business user.

Do your think marketing intermediaries (or middlemen) necessary?

Benefits of Intermediaries Contacts and experience Facilitates the exchange process Joint effort of all channel members Order processing and the exchange process Inventory management. Sorting Handling materials Warehousing and transportation Search for buyers and sellers Provide information Promotion Negotiation

Distribution Channel (Marketing Channel) A producer/manufacturer of a product can sell directly to the consumer. The second option is that a producer could sell directly to a retailer and the retailer could sell directly to the consumer. Producers can sell directly to wholesalers and a wholesaler is responsible for selling to the retailer and the retailer sells to the consumer. The last option is the producer uses an agent/broker to find wholesalers and the wholesalers sell to the retailers and the retailers sell to the customer

So how do you know what Distribution Channel (Marketing Channel) to select?

Short vs long distribution Expensive or inexpensive

Why do we need channels? Channels create value for the consumer Help facilitate transactions: -Act as information conduits -Promote the product and company -Provide a contact for the consumer -Match products with the consumers needs by developing appropriate offers -Negotiate the terms of the sale with the consumer Fulfill completed transaction: - Physically transport or store goods and products -Finance transactions -Assume risk in undertaking channel activities

Types of Conventional Channels Producer - Consumer (no intermediary) Producer - Retailer - Consumer Producer – Wholesaler – Retailer – Consumer Producer-agent/broker – Wholesaler-Retailer – Consumer These intermediaries are independent entities

Vertical Marketing Systems System where the producer and intermediaries act as one system. Corporate VMS- One entity owns the other intermediaries. Example: Kroger Contractual VMS- Uses legal agreements between independent producer and intermediaries to provide product or services. Example: McDonalds. Administered VMS- System is controlled by size and power of one of the intermediaries or the producer. Example: Wal-Mart.

Channel Issues and Decisions Number of distribution channels (coverage intensity)- selective, intensive or exclusive distribution Conflict- horizontal and vertical Leadership and Power- Concept of Channel Captain Disintermediation

What is Supply Chain Management? Long term partnerships among marketing channel members that reduce inefficiencies, costs, and redundancies. They also develop innovative approaches to satisfy customers. Emphasis is on stability for customers

Marketing Logistics Warehousing Inventory Management Transportation Logistics Information Management

Retailing Activities associated with providing products to the final consumer for their own use

Types of Retailers Retailers can be classified in different ways Amount of Service -Self-service, limited-service or full-service Product Line -Specialty, department, supermarket, convenience, superstore

Types of Retailers- continued Relative Price -Discount, off-price, factory outlet, warehouse club Organizational Approach -Chain, franchise

Retailer Marketing Decisions- Strategy Segmentation and targeting- Seeks to identify those groups of people that the retailer will target. Store differentiation and positioning- Seeking to set the retailer apart from the competition in the eyes of the consumer. How might the segmentation, targeting and positioning of Wal-Mart differ from JC Penny? What value is created by each?

Retailer Marketing Decisions- Marketing Mix Product and service assortment- -Product assortment decisions impact the types of brands that will be carried and the level of quality the assortment will have -Service assortment looks at the level of support, advice or assistance that will be available for customers. -Store atmosphere looks at what the general ambiance and store environment will be like.

Retailer Marketing Decisions- Marketing Mix- continued Price- Looks at the prices that will be charged by the store. Place- Involves where stores will be located. Will it be stand-alone or part of a shopping center or mall? Many bricks and mortar retailers have website retail locations also. Promotion- Involves how and where the retail store will promote to their customers and public.

Retailing Trends Retail life cycles are shortening and new retail forms are appearing. -Retailing is dynamic and always evolving -Wheel of Retailing concept Slower economies means consumers are becoming thriftier -In difficult times consumers curtail discretionary spending -As economic conditions improve consumers will purchase more -Consider that some products sell better in difficult times

Retailing Trends- continued Growth of non-store retailing as consumers buy off the internet and through direct marketing Retail convergence is taking place where retailers sell the same products to the same consumers across all competition. This makes for keen competition. Megaretailers are increasingly becoming prevalent and making it challenging for smaller retailers to compete on the basis of price.

Retailing Trends- continued The growth of retail technology that help retailers manage inventory and keep track of sales Major retailers are expanding internationally Retail stores are trying to create a community atmosphere to provide a social retail environment

Wholesaling Activities involving marketing intermediaries who purchase or represent products for resale or business use. Types of wholesalers -Merchant wholesalers- Independent companies that take title to the goods -Agents and brokers- Do not take title to merchandise -Manufacturer’s sales branches and offices- Owned by maker of the products

Wholesaler Activities Promote and sell the products they carry Build assortments of goods for customers Bulk-break goods for their customers Offer warehouse services and often transport goods Offer financing of purchases Channel market information Assume risk of title for manufacturers Provide training and promotional services to retailers

Any Questions? Thank you for attending! See you next week!