1. Unit 10 Channel Management
Marketing
Unit 10
Channel Management
Danna Nelson-Gresham High School

2. The Marketing Elements – Again!
(AKA – The Marketing Mix or the 4 P’s)
Product
Price
Place/Distribution
Promotion
Distribution as a part of the marketing mix involves the locations and methods used to make the product available to customers.
Frameworks 10.2

3. Marketing Through Distribution
The most challenging and complex part of marketing is distribution.
The oldest and most basic part of marketing is distribution.

4. Marketing Through Distribution
For most products and services, distribution activities account for over 50% of the total marketing costs.
The distribution function involves determining the best methods and procedures to use so that prospective customers can locate, obtain, and use a business’s products and services.
Video: Channel Management
Frameworks 10.1

5. A Channel of Distribution
A channel of distribution is the path a product takes from the producer to the ultimate consumer. It is made up of the organizations and individuals who participate in the movement or exchange of products from the producer to the final consumer.
There are two types of distribution channels: direct and indirect.
Frameworks 10.1

6. Channels of Distribution
Consumers
Wholesalers
Agents
Retailers
Manufacturers / Producers
Direct
Indirect
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7. Types of Distribution Channels
In a direct channel, the producer sells the product directly to the final consumer.

8. Types of Distribution Channels
A direct channel of distribution is often selected when:
There are a small number of customers.
Customers are located in a small area.
The product is complex or requires a lot of service.
The producer wants to maintain control over the marketing mix for the product.

9. Types of Distribution Channels
An indirect channel includes other businesses between the producer and the consumer.
This “Brick and Mortar” retailer also uses “Electronic Retailing” to reach its customers.
Frameworks 10.1

10. Distribution Channel Members
All the businesses involved in sales transactions that move products from the manufacturer to the final user are called intermediaries or middlemen Examples include wholesalers, retailers, and agents.
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11. Intermediaries reduce the number of transactions required by manufacturers to reach their final customers.
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12. Intermediaries
Agents and brokers are independent businesses that do not own the goods they represent. Agents act as intermediaries by bringing buyers and sellers together.
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13. Wholesaling Manages the Middle
Wholesalers are companies that assist with distribution activities between businesses.
Wholesalers buy in large quantities from manufacturers, store the goods, and then resell them to other businesses. Their customers are called retailers.
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14. Types of Wholesalers
A full-service, or merchant, wholesaler takes title to the goods they sell and provide a full range of services including credit for their customers.
Rack jobbers manage inventory and merchandising for retailers by counting stock, filling it in when needed, and maintaining store displays. They provide the display racks and bill the retailer only for the goods sold.
A drop shipper is a wholesaler who owns the goods, but never handles these large, bulky orders. Instead, the goods go from the producer directly to the buyer.
Frameworks 10.3

15. Wholesale Member Clubs
Wholesale member clubs are businesses that offer a variety of consumer products to members through a warehouse outlet. These initially targeted small businesses, but sell primarily to final consumers today.

16. Wholesale and Retail Buyers
Wholesale and retail buyers purchase goods for resale—they forecast customers’ needs and buy the necessary products. Buyers must plan far in advance of the selling season to know how much of each item to purchase.
Adam Curtis is a wholesale buyer for Pippin.

17. Adam Curtis – Buyer for Pippin
Adam Curtis has worked with Pippin Wholesale Company for 13 years, primarily as a buyer. His first job with Pippin was sweeping the floors.

18. Class Tour of Pippin Wholesale Company

19. Class Tour of Pippin Wholesale Company

20. The 80/20 Rule in Business
In business (particularly in wholesaling) the 80/20 rule means that 80% of sales will come from 20% of the customers.
The opposite is also true, 80% of customers will account for only 20% business sales.

21. Institutional Markets
Institutional markets include nonprofit organizations that do not compete in the business world. Examples include hospitals, schools, colleges, churches, civic clubs, and foundations.

22. The Role of the Buyer Open-To-Buy
During the buying season, a buyer may want to know the open-to-buy (OTB), or the amount of money left for buying goods. OTB is calculated as follows:
planned purchases – (goods received + goods ordered)

23. From the Video: Modern Marvels
The area where deliveries are made:
the loading dock!

24. The Role of Retailing
The final business organization in an indirect channel of distribution for consumer products is a retailer. – Frameworks 10.1

25. Types of Retailers
Specialty or limited-line retailers offer products from one category of merchandise or closely related items.

26. Types of Retailers
Mixed merchandise retailers offer products from several different categories.

27. Types of Retailers
Another example of a mixed merchandise retailer is a superstore that offers consumers a wide variety of choices in a very large retail store.

28. Types of Retailers
A category killer is a big-box retail chain that is focused on one or a few categories of merchandise and offers a wide selection of merchandise in these categories at relatively low prices.

29. Types of Retailers
Service retailers have services as their primary offering with a limited number of for sale that compliment the service.

30. Non-Store Retailing
Non-store retailing involves selling directly to the consumer at home rather than requiring consumers to travel to a store.

31. How is Retailing Changing?
The number of small specialty retailers has began to increase after a period of decline.
The internet has allowed small retailers to compete effectively on a larger scale.

32. Physical Distribution
Physical distribution, also known as logistics, is the process of efficiently and effectively moving products and materials through the distribution channel.
Factors involved in selecting the best transportation methods include:
location where the product is to be delivered
type of product to be shipped
speed of delivery
The main physical distribution activities are:
transportation
storage
product handling

33. Choosing Transportation Methods
Railroads
Trucks
Ships and boats
Airplanes
Pipelines
Combining methods
Frameworks 10.4

34. The chart shows the amount of freight in ton miles shipped by each method of transportation.
Frameworks 10.4

35. Railroad Transportation
Railroads are useful for carrying large quantities of heavy bulky items.
Trains transport nearly 38 percent of the total intercity ton-miles (the movement of one ton of freight one mile) of freight. Trains are important for moving heavy and bulky freight, such as coal, steel, lumber, chemicals, grain, farm equipment, and automobiles, over long distances.
Frameworks 10.4

36. Railroad Transportation
A carload refers to one boxcar full of freight.

37. Rail Transportation Advantages relatively low costs
handle large quantities
seldom slowed or stopped by bad weather
Disadvantages
lack of flexibility—pick up and delivery available only at established stations
Frameworks 10.4

38. Warren Buffett Buys Burlington Northern for $26 Billion
Warren Buffett tells CNBC his $26 billion acquisition of Burlington Northern Santa Fe is a "bet on the country."
Berkshire Hathaway surprised the financial world this morning with word it is buying the roughly 77% of Burlington Northern shares it doesn't already own for a combination of cash and Berkshire Hathaway shares.
Warren Edward Buffett (born August 30, 1930) is an American investor, businessman, and philanthropist. He is one of the most successful investors in the world, the primary shareholder and CEO of Berkshire Hathaway.
Handout Here: Buffett Buys Burlington Northern

39. Motor Carriers
Motor carriers (trucks) are the most flexible of the major transportation methods.
Trucks are the most frequently used form of transportation. (But not the most ton miles!)
Businesses use trucks for virtually all intracity (within a city) shipping and for 26 percent of the intercity (between cities) freight traffic in the United States.
Frameworks 10.4

40. Harrison High School Cafeteria receives deliveries by truck.

41. Types of Motor Carriers
A common carrier provides transportation services to any business in its operating area for a fee.

42. Types of Motor Carriers
A contract carrier provides equipment and drivers for specific routes, according to agreements with the shipper.

43. Types of Motor Carriers
A private carrier transports goods for an individual business. Starting a private carrier fleet can require significant capital, but a business that regularly ships a large amount of merchandise may like the flexibility of owning its own means of transporting its products.

44. Motor Carriers Advantages door-to-door delivery
reduced packaging costs for some products
rapid deliveries
Disadvantages
susceptibility to delays due to traffic jams, equipment breakdowns, and traffic accidents
size and weight restrictions enforced by states
Frameworks 10.4

45. Ships and Boats
Transportation by water is particularly important for international product shipments.
Almost all overseas freight is transported by ships and barges because of the low cost.
Frameworks 10.4

46. Ships and Boats
Internal shipping is shipping from one port to another on connecting rivers and lakes. The St. Lawrence Seaway, the Mississippi and Ohio rivers, and the Great Lakes are important internal shipping routes.
Intracoastal shipping is shipping between ports along the Atlantic or Pacific coasts or from one coast to the other.

47. Ships and Boats Advantages
low cost, the cheapest form of freight transportation
Disadvantages
slowest form of freight transportation
not appropriate for perishable items
inconvenient for shippers far from ports
can be affected by bad weather
Frameworks 10.4

48. Airplanes
Currently, air transportation is less than 1 percent of the total ton-miles of freight shipped. Items shipped by air include:
overnight mail
emergency parts
precisions instruments
medicines
perishable food products
Frameworks 10.4

49. Airplanes Advantages speed, overnight delivery possible
reduces inventory expenses and storage costs
Disadvantages
the most expensive form of transportation
possible delays from mechanical breakdowns and bad weather
Frameworks 10.4

50. Pipelines
Pipelines are expensive to construct and can be difficult to maintain.
Pipelines are most frequently used to transport oil and natural gas.
There are more than 200,000 miles of pipelines in the United States.
Small coal and wood particles can be mixed with water into a slurry and through a pipeline. .
Frameworks 10.4

51. Pipelines
Advantages
best safety record among major transportation systems
products move slowly, but continuously
little damage or theft
no delays due to bad weather
Disadvantages
high initial investment for construction
potential for environmental damage .

52. Combining Methods
Products often move through long channels of distribution.
It is likely that many products will be transported using a combination of methods.
Oil from Saudi Arabia is moved to the US by ship, then transported to refineries by pipeline. The finished product, gas, is transported by truck to service stations. .

53. Video: Intermodal Container Shipping
Combining Methods
Intermodal freight transport involves the transportation of freight in an intermodal container or vehicle, using multiple modes of transportation (rail, ship, and truck).
The method reduces cargo handling, and so improves security, reduces damage and loss, and allows freight to be transported faster.
Video: Intermodal Container Shipping

54. Inventory Management Systems
Inventory is the assortment of products maintained by a business.
Frameworks 10.5

55. Inventory Management Systems
Just-in-time (JIT) means that the inventory level is kept low and resupplied by supply chain members just as it is needed.
Frameworks 10.5

56. Inventory Management Systems
A perpetual inventory system determines the amount of a product on hand by maintaining records on purchases and sales.
This is the amount of inventory that SHOULD be on hand according to computer inventory records.
Frameworks 10.5

57. Inventory Management Systems
A physical inventory system determines the amount of product on hand by visually counting the items.
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58. Buying and Purchasing
A receiving record is completed listing all the merchandise received in the shipment and its condition.
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59. Inventory Management Systems
Vendors are companies that offer products for sale to other businesses, aka suppliers.
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60. Buying and Purchasing
The vendor will provide an invoice which is an itemized billing statement with terms of payment for the order.
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61. Buying and Purchasing
A purchase order is a form listing the variety, quantity, and prices of products ordered and is completed by the buyer and sent to the seller to begin the purchasing process.
Frameworks 10.6
Frameworks 10.6

62. End of Unit 10
Channel Management