1. Distributing Products
Chapter 15
Distributing Products
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2. What Are Marketing Intermediaries?
Marketing Intermediaries -- 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.

3. Types of Marketing Intermediaries
Wholesaler -- An intermediary that sells products to other organizations such as retailers, manufacturers, and hospitals.
Retailer -- An organization that sells products to ultimate customers.
Agents and Brokers -- Intermediaries who bring buyers and sellers together and assist in negotiating an exchange but do not take title to the goods they offer.

4. Why Marketing Needs Intermediaries
Marketing intermediaries can be eliminated but their activities cannot.
Intermediaries perform marketing tasks faster and cheaper than most manufacturers could provide them.
Marketing intermediaries add costs to products but they are generally offset by the values they provide.
See Learning Goal 1: Explain the concept of marketing channels and their value.
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5. INTERMEDIARIES CREATE UTILITY
Utility -- The want-satisfying ability, or value, that organizations add to goods and services by making them more useful or accessible to consumers.
Six types of utilities:
Form
Time
Place
Possession
Information
Service
See Learning Goal 2: Demonstrate how intermediaries perform the six marketing utilities.
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6. How Marketers Use Utility
Form Utility -- Changes raw materials into useful products; producers generally provide form utility.
Starbucks makes coffee the way the customers want it.
Levi-Strauss transforms denim into clothes.
Time Utility -- Makes products available when customers want them.
Many Walgreen’s stores are open 24-hours a day.
Colleges offer day and evening classes.

7. How Marketers Use Utility
Place Utility -- Adds value to products by placing them where people want them.
Banks place ATMs at convenient locations.
Pepsi is available in campus vending machines.
Possession Utility -- Helps transfer ownership from one party to another, including providing credit.
Pay for lunch at McDonald’s with your Visa card.
Car dealers offer loans to buyers.

8. How Marketers Use Utility
Information Utility -- Opens two-way flows of information between marketing participants.
Dell’s website offers advice to PC buyers.
Local government maps show tourist locations.
Service Utility -- Provides service during and after a sale and teaches customers how to best use products.
Apple offers classes to help computer buyers.
College placement offices help students find jobs.

9. Types of Marketing Intermediaries
Wholesalers
Retailers
Agents / Brokers

10. Wholesale Intermediaries
Wholesalers normally make B2B sales, however, stores like Staple’s and Costco also have retail functions.
Retail sales are sales of goods and services to customers for their own use.
Wholesale sales are sales of goods and services to other businesses for use in the business or resale.

11. Wholesale Intermediaries
Merchant Wholesalers -- Independently owned firms that take title to the goods they handle. There are two types:
Full-service wholesalers perform all distribution functions. (transportation, storage, risk bearing, credit, market information, standardizing, grading, buying, and selling)
Limited-function wholesalers perform only selected distribution functions.
About 80% of wholesalers are merchant wholesalers.

12. Types of Limited-Function Wholesalers
Rack Jobbers -- Furnish racks or shelves of merchandise such as music, magazines, and hosiery for retailers for display and sell them on consignment.
Cash-and-Carry Wholesalers -- Serve mostly smaller retailers with a limited assortment of products.
Drop Shippers -- Take orders from retailers and other wholesalers and have the merchandise shipped from producer to buyer.

13. Roles of Agents and Brokers
Brokers/Agents
Provide services in exchange for commissions
Do not take title

14. Roles of Agents
Agents generally maintain long-term relationships with the clients they represent.
Manufacturers’ Agents – may represent several manufacturers in a specific territory
Sales Agents – represent a single manufacturer in a larger territory

15. Roles of Brokers
Brokers are usually hired on temporary basis

16. Retail Intermediaries
Sell to Consumers

17. Types of Retail Stores Types Examples Department Store
Sears, JC Penney, Nordstom
Discount Store
Wal-Mart, Target
Supermarket
Safeway, Kroger, Albertson’s
Warehouse Club
Costco, Sam’s Club
Convenience Store
7-Eleven
Category Killer
Toys-R-Us, Bass Pro Shops, Office Depot
Outlet Store
Nordstrom Rack, Nike Outlet
Specialty Store
Jewelry store, shoe stores, bicycle shops

18. Types of Retail Stores, cont.
Off-Price Retailing
Single/One-Price Policy Store

19. They All Started in 1962 Company 1st Store Objective Wal-Mart Target
Rogers, Ark.
July 1962
Slash prices. Makeup difference in volume
Target
Roseville, MN
May 1962
Discount retailer with strong sense of value
Kmart
Garden City, MI
March 1962
Bring discount store concept to suburban malls
Source: Business 2.0, June 2003, p. 38.

20. Forms of Non-Store Retailing
Electronic Retailing -- Selling goods and services to ultimate consumers over the Internet.
Telemarketing -- The sale of goods and services via the telephone.
Vending machines -- Dispense convenience goods when consumers deposit sufficient funds.
Kiosks and Carts

21. Forms of Non-Store Retailing, cont.
Direct Selling -- Selling goods and services to customers in their homes or workplaces.
Multilevel Marketing uses salespeople who work as independent contractors.
Direct Marketing -- Any activity that directly links manufacturers or intermediaries with ultimate customers.

22. The Four Systems of Channel Relationships
Corporate Distribution Systems
Contractual Distribution Systems
Administered Distribution Systems
Supply Chains
See Learning Goal 6: Explain the various ways to build cooperation in channel systems.
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23. Corporate Distribution
All of the organizations in the channel of distribution are owned by the same firm
Sherwin-Williams
Goodyear

24. Contractual Distribution
Members are bound to cooperate through contractual agreements
Franchise Systems
McDonald’s, Subway, AAMCO
Wholesaler-Sponsored Chains
ACE Hardware, IGA food stores
Retail Cooperatives
Associated Grocers, True Value

25. Administered Distribution
Producers manage all the marketing functions at the retail level.
Retailers cooperate because they get so much free help.
Kraft
Ralph Lauren

26. Channel of Distribution
Channel of Distribution -- A group of marketing intermediaries that joining together to transport and store goods from producers to consumers.

27. Intermediaries and the Channel of Distribution

28. The Supply Chain vs. The Channel of Distribution

29. The Supply Chain

30. Logistics
Marketing activity that involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption

31. Logistics
You are here

32. Logistics Applications
Inbound Logistics -- Brings raw materials, packaging, other goods and services and information from suppliers to producers.
Materials Handling -- Movement of goods within a warehouse, from warehouse to the factory floor and from the factory floor to workstations.

33. Logistics Applications
Outbound Logistics -- Manages the flow of finished products and information to business buyers and consumers.
Reverse Logistics -- Brings goods back to the manufacturer because of defects or for recycling.

34. Logistics
Marketing activity that involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption

35. Channel of Distribution
Transport and Store

36. Transportation & Storage Modes

37. Transportation Modes

38. Transportation
Transportation: mode by which products move among channel members
Modes differ in their--
Dependability (safety and punctuality)
Cost
Speed of delivery
Accessibility (different locations served)
Capability (variety of products handled)
Traceability (ability to locate goods
in shipment)

39. Transportation Pipeline Railroad Air Motor Vehicles Water Intermodal
35-40 %
Motor Vehicles
25%
Water
15-17%
Pipeline
20%
Air
Small fraction
Intermodal

40. Intermodal Shipping
Intermodal Shipping -- Uses multiple modes of transportation to complete a single long- distance movement of freight.

41. Types of Intermodal Shipping
Piggybacking: Truck trailers placed on trains
Fishybacking: Truck trailers placed on ships
Birdybacking: Truck trailers placed on planes

42. Logistics Specialists
Freight Forwarder -- Puts many small shipments together to create a single large shipment that can be transported cost-effectively by truck or train.

43. Storage Modes

44. Storage Modes Warehousing 25-30% of cost of logistics Storage
Distribution

45. Storage Warehouses
Storage Warehouses hold products for a relatively long period of time.
Distribution Warehouses are used to gather and redistribute products.