1. Distributing Products*
Chapter Fifteen *
Distributing Products
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

2. WHAT are MARKETING INTERMEDIARIES?*
WHAT are MARKETING INTERMEDIARIES?
The Emergence of Marketing Intermediaries *
LG1
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.
See Learning Goal 1: Explain the concept of marketing channels and their value.
To start this chapter, it is often interesting to ask students the following question: “How many of you think marketing intermediaries are an unnecessary cost?” Often a majority of students will respond emphatically with a “yes.” Use this a basis to begin this chapter and an opportunity to explain the benefits these intermediaries play.
15-2

3. WHAT are MARKETING INTERMEDIARIES?*
WHAT are MARKETING INTERMEDIARIES?
The Emergence of Marketing Intermediaries *
LG1
Channel of Distribution -- A group of marketing intermediaries that joining together to transport and store goods from producers to consumers.
See Learning Goal 1: Explain the concept of marketing channels and their value.
15-3

4. TYPES of MARKETING INTERMEDIARIES?*
TYPES of MARKETING INTERMEDIARIES?
The Emergence of Marketing Intermediaries *
LG1
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.
Wholesaler -- An intermediary that sells products to other organizations such as retailers, manufacturers, and hospitals.
Retailer -- An organization that sells products to ultimate customers.
See Learning Goal 1: Explain the concept of marketing channels and their value.
There are different types of marketing intermediaries each with a different role.
15-4

5. WHY MARKETING NEEDS INTERMEDIARIES*
WHY MARKETING NEEDS INTERMEDIARIES
Why Marketing Needs Intermediaries *
LG1
Intermediaries perform marketing tasks faster and cheaper than most manufacturers could provide them.
Marketing intermediaries make markets more efficient by reducing transactions and contacts.
See Learning Goal 1: Explain the concept of marketing channels and their value.
15-5

6. HOW INTERMEDIARIES CREATE EXCHANGE EFFICIENCY*
HOW INTERMEDIARIES CREATE EXCHANGE EFFICIENCY
Why Marketing Needs Intermediaries *
LG1
See Learning Goal 1: Explain the concept of marketing channels and their value.
This slide answers the question addressed in slide one. Intermediaries do add cost, as many assume, but they also create an efficient exchange of product. Many students are surprised how intermediaries create value for the consumer.
15-6

7. THREE KEY FACTS ABOUT MARKETING INTERMEDIARIES*
THREE KEY FACTS ABOUT MARKETING INTERMEDIARIES
The Value vs the Cost of Intermediaries *
LG1
Marketing intermediaries can be eliminated but their activities can’t.
Intermediaries perform marketing functions faster and cheaper than other organizations can.
Marketing intermediaries add costs to products but they’re generally offset by the values they provide.
See Learning Goal 1: Explain the concept of marketing channels and their value.
15-7

8. INTERMEDIARIES CREATE UTILITY*
INTERMEDIARIES CREATE UTILITY
The Utilities Created by Intermediaries *
LG2
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.
15-8

9. HOW MARKETERS USE UTILITY*
HOW MARKETERS USE UTILITY
The Utilities Created by Intermediaries *
LG2
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 Walgreens stores are open 24-hours a day.
Colleges offer day and evening classes.
See Learning Goal 2: Demonstrate how intermediaries perform the six marketing utilities.
15-9

10. HOW MARKETERS USE UTILITY*
HOW MARKETERS USE UTILITY
The Utilities Created by Intermediaries *
LG2
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 McDonalds with your Visa card.
Car dealers offer loans to buyers.
See Learning Goal 2: Demonstrate how intermediaries perform the six marketing utilities.
15-10

11. HOW MARKETERS USE UTILITY*
HOW MARKETERS USE UTILITY
The Utilities Created by Intermediaries *
LG2
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.
See Learning Goal 2: Demonstrate how intermediaries perform the six marketing utilities.
15-11

12. WHOLESALE INTERMEDIARIES*
WHOLESALE INTERMEDIARIES
Wholesale Intermediaries *
LG3
Wholesalers normally make B2B sales, however, stores like Staples 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.
Consumers are more familiar with retailers than wholesalers.
See Learning Goal 3: Identify the types of wholesale intermediaries in the distribution system.
15-12

13. TYPES of WHOLESALE INTERMEDIARIES*
TYPES of WHOLESALE INTERMEDIARIES
Wholesale Intermediaries *
LG3
Merchant Wholesalers -- Independently owned firms that take title to the goods they handle. There are two types:
Full-service wholesalers perform all distribution functions.
Limited-function wholesalers perform only selected distribution functions.
About 80% of wholesalers are merchant wholesalers.
See Learning Goal 3: Identify the types of wholesale intermediaries in the distribution system.
15-13

14. TYPES of LIMITED-FUNCTION WHOLESALERS*
TYPES of LIMITED-FUNCTION WHOLESALERS
Wholesale Intermediaries *
LG3
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.
See Learning Goal 3: Identify the types of wholesale intermediaries in the distribution system.
15-14

15. ROLES of AGENTS and BROKERS*
ROLES of AGENTS and BROKERS
Agents and Brokers *
LG3
Agents generally maintain long-term relationships with the clients they represent.
Manufacturer’s agents represent several manufacturers in a specific territory.
Sales agents represent a single client in a larger territory.
Brokers usually represent clients on a temporary basis.
See Learning Goal 3: Identify the types of wholesale intermediaries in the distribution system.
Agents and brokers do not take title or possession of the product but simply represent the interest of their clients.
15-15

16. RETAILING in the U.S. *
Retail Intermediaries *
LG4
There are approximately 2.3 million retailers in the U.S., not including websites.
Retailers in the U.S. employ over 11 million people and operate under many different structures.
See Learning Goal 4: Compare the distribution strategies retailers use.
15-16

17. * * TOP ONLINE RETAILERS eBay Amazon Wal-Mart Target Netfilx
Retail Intermediaries *
LG4
eBay
Amazon
Wal-Mart
Target
Netfilx
See Learning Goal 4: Compare the distribution strategies retailers use.
Top Internet Shopping Sites
This slide presents the top five online shopping sites per Nielsen Online.
The top online retailers should not come as a big surprise especially the first two are eBay and Amazon. Many students have probably shopped on these sites.
Ask the students: How many of you have shop online and on which sites? Which are your favorite shopping sites? Why?
4. Share with the students the fact that Wal-Mart and Target were on the list of top online shopping sites. Since both maintain physical locations, are they surprised by this fact?
Source: Nielsen Online,
15-17

18. FASTEST GROWING RETAIL CATEGORIES*
FASTEST GROWING RETAIL CATEGORIES
Retail Intermediaries *
LG4
Video games
Sports and fitness
Home, garden, and furniture
Event tickets
Consumer electronics
See Learning Goal 4: Compare the distribution strategies retailers use.
Fastest Growing Retail Categories
This slide presents the fastest growing retail categories.
Have students brainstorm reasons why they believe these categories are growing at a fast rate.
Ask students: What value do consumers see in these particular categories?
15-18

19. RETAIL DISTRIBUTION STRATEGIES*
RETAIL DISTRIBUTION STRATEGIES
Retail Distribution Strategy *
LG4
Intensive Distribution -- Puts products into as many retail outlets as possible including vending machines.
Selective Distribution -- Uses only a preferred group of the available retailers in an area.
Exclusive Distribution -- The use of only one retail outlet in a given geographic area.
See Learning Goal 4: Compare the distribution strategies retailers use.
The retail strategy employed often depends on the product one is selling.
15-19

20. *
PICK a STRATEGY… What’s the Correct Retail Strategy for These Products?
Retail Distribution Strategy *
LG4
Ralph Lauren Polo Shirts
Diet Pepsi
Rolls Royce Automobiles
Calloway Golf Clubs
Snickers Candy Bars
Steinway Pianos
See Learning Goal 4: Compare the distribution strategies retailers use.
Ralph Lauren Polo Shirts - selective strategy
Diet Pepsi - intensive strategy
Rolls Royce Automobiles - exclusive strategy
Calloway Golf Clubs - selective strategy
Snickers Candy Bars - intensive strategy
Steinway Pianos - exclusive strategy
15-20

21. FORMS of NON-STORE RETAILING*
FORMS of NON-STORE RETAILING
Non-Store Retailing *
LG5
Electronic Retailing -- Selling goods and services to ultimate consumers over the Internet.
Telemarketing -- The sale of goods and services via the telephone.
Vending machines, kiosks, and carts dispense convenience goods when consumers deposit sufficient funds.
See Learning Goal 5: Explain the various kinds of non-store retailing.
In many countries vending machines, kiosks and carts are more popular than in the United States. The Japanese Vending Machine Manufacturers Association estimates there is one vending machine for every 23 people, selling everything from soft drinks to umbrellas.
15-21

22. FORMS of NON-STORE RETAILING*
FORMS of NON-STORE RETAILING
Non-Store Retailing *
LG5
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.
See Learning Goal 5: Explain the various kinds of non-store retailing.
15-22

23. WHAT ONLINE SITES NEED Important Features on E-Commerce Web Sites*
WHAT ONLINE SITES NEED Important Features on E-Commerce Web Sites
Electronic Retailing *
LG5
Convenient return policies
Established brands
User reviews
Professional site design
Alternative payment options
See Learning Goal 5: Explain the various kinds of non-store retailing.
What Online Sites Need
Online retailing is still new and is evolving to be more customer friendly.
This slide gives students an idea of the important features on e-commerce websites.
The lack of these features often causes people to shy away from making purchases online.
Ask the students: Do you have hesitations about shopping online? Why or why not?
Source: GSI Commerce; Harris Interactive.
15-23

24. *
COME BACK AGAIN! Retail Web Sites with the Highest Customer Satisfaction
Electronic Retailing *
LG5
Amazon
Netflix
QVC
Apple
L.L. Bean
See Learning Goal 5: Explain the various kinds of non-store retailing.
Come Back Again
This slide and the next profile websites with the best and worst service.
Ask students: What creates high customer satisfaction? (Answers will vary)
Ask students: What websites do you prefer shopping on? Why? What features other than the products/services being offered make these websites appealing?
Source: ForeSee Results,
15-24

25. RETAIL WEB SITES with the LOWEST CUSTOMER RATING*
RETAIL WEB SITES with the LOWEST CUSTOMER RATING
Electronic Retailing *
LG5
Circuit City - Now Bankrupt!
Gap
Home Shopping Network
Overstock
Home Depot
See Learning Goal 5: Explain the various kinds of non-store retailing.
Come Back Again
This slide profiles companies with the lowest customer rating.
Ask students: What creates low customer satisfaction? (Answers will vary)
As a manager what action can you take to improve the level of customer satisfaction? (Answers will vary)
Source: ForeSee Results,
15-25

26. The FOUR SYSTEMS of CHANNEL RELATIONSHIPS*
The FOUR SYSTEMS of CHANNEL RELATIONSHIPS
Building Cooperation in Channel Systems *
LG6
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.
15-26

27. CORPORATE DISTRIBUTION SYSTEMS*
CORPORATE DISTRIBUTION SYSTEMS
Building Cooperation in Channel Systems *
LG6
Corporate Distribution Systems -- Exist when one firm owns all the organizations in a channel of distribution.
Examples:
Goodyear
Sherwin Williams
See Learning Goal 6: Explain the various ways to build cooperation in channel systems.
15-27

28. CONTRACTUAL DISTRIBUTION SYSTEMS*
CONTRACTUAL DISTRIBUTION SYSTEMS
Building Cooperation in Channel Systems *
LG6
Contractual Distribution Systems -- Exist when members are bound to cooperate through contractual agreements.
Examples:
Franchise System: McDonald’s, Subway, Sonic
Wholesale-Sponsored Chain: IGA, Ace Hardware
Retail Cooperative: Associated Grocers, True Value
See Learning Goal 6: Explain the various ways to build cooperation in channel systems.
15-28

29. ADIMINISTERED DISTRIBUTION SYSTEMS*
ADIMINISTERED DISTRIBUTION SYSTEMS
Building Cooperation in Channel Systems *
LG6
Administered Distribution Systems -- Exist when producers manage all the marketing functions at the retail level.
Examples:
Kraft
Ralph Lauren
See Learning Goal 6: Explain the various ways to build cooperation in channel systems.
15-29

30. *
SUPPLY CHAINS
Building Cooperation in Channel Systems *
LG6
Supply Chain -- All the linked activities various organizations must perform to move goods and services from the source of raw materials to ultimate consumers.
Supply Chain Management -- The process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all the organizations in the supply chain.
See Learning Goal 6: Explain the various ways to build cooperation in channel systems.
15-30

31. * * The SUPPLY CHAIN LG6 Building Cooperation in Channel Systems
See Learning Goal 6: Explain the various ways to build cooperation in channel systems.
Supply chain management is a key to effective distribution in the 21st century. This slide illustrates to students how supply chains are structured and implemented in the market.
15-31

32. *
USING LOGISTICS
Logistics: Getting Goods to Consumers Efficiently *
LG7
Logistics -- The planning, implementing and controlling of the physical flow of material, final goods and related information from points of origin to points of consumption.
Firms may outsource to companies specializing in trade compliance to determine what is needed to market products to global customers.
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
15-32

33. LOGISTICS APPLICATIONS*
LOGISTICS APPLICATIONS
Logistics: Getting Goods to Consumers Efficiently *
LG7
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.
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
15-33

34. LOGISTICS APPLICATIONS*
LOGISTICS APPLICATIONS
Logistics: Getting Goods to Consumers Efficiently *
LG7
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.
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
15-34

35. COMPARING TRANSPORTATION MODES*
COMPARING TRANSPORTATION MODES
Logistics: Getting Goods to Consumers Efficiently *
LG7
Mode
Cost
Speed
Dependability
Flexibility
Frequency
Reach
Rail
Med.
Slow
Medium
High
Low
Trucks
Fast
Highest
Pipeline
Lowest
Ships
Slowest
Air
Fastest
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
15-35

36. LOGISTICS SPECIALISTS*
LOGISTICS SPECIALISTS
Logistics: Getting Goods to Consumers Efficiently *
LG7
Freight Forwarder -- Puts many small shipments together to create a single large shipment that can be transported cost-effectively by truck or train.
Intermodal Shipping -- Uses multiple modes of transportation to complete a single long-distance movement of freight.
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
15-36

37. TYPES of INTERMODAL SHIPPING*
TYPES of INTERMODAL SHIPPING
Logistics: Getting Goods to Consumers Efficiently *
LG7
Piggybacking: Truck trailers placed on trains
Fishybacking: Truck trailers placed on ships
Birdybacking: Truck trailers placed on planes
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
A truck driver from North Carolina, Malcolm McLean invented container shipping in 1956.
15-37

38. GET YOUR PRODUCT THERE Most Popular Modes of Freight Transport*
GET YOUR PRODUCT THERE Most Popular Modes of Freight Transport
Logistics: Getting Goods to Consumers Efficiently *
LG7
Method
% of Distributors
Trucks
69%
Trains
15%
Pipelines
10%
Ships 6%
Air
Under 1%
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
Get Your Product There
Not only must a manufacturer produce a product, they then must figure out the best way to ship the product.
This slide gives students insight into the most popular methods of freight transportation.
To make sure students understand this slide, discuss with the class the advantages and disadvantages of each method of transportation.
Source: U.S. Freight Transportation Forecast 2008.
15-38

39. *
STORAGE WAREHOUSES
The Storage Function *
LG7
Storage warehouses hold products for a relatively long period of time.
Distribution warehouses are used to gather and redistribute products such as:
Beer and soft drinks
Package deliveries
See Learning Goal 7: Describe logistics and outline how intermediaries manage the transportation and storage of goods.
Seasonal items, like snow shovels and lawnmowers, are often held in storage warehouses.
15-39