1. Marketing and Distribution

2. Marketing OOOOnce, as a business, you have a good or service, what must you do? MMMMarketing: all activities involved in moving goods and services from the producer to the consumer Some economists estimate that close to 50% of the price people pay is for the cost of marketing the product

3. Marketing TTTThe sole purpose of marketing is to convince consumers that a certain product will add to their utility Utility: the amount of satisfaction you receive from a good or service

4. Marketing  Four types of utility: Form utility: converting raw materials into products (refining crude oil into gasoline; cotton into shirts)Form utility: converting raw materials into products (refining crude oil into gasoline; cotton into shirts) Place utility: having a good or service where people want to buy it; being in the right place (gas stations at a busy corner)Place utility: having a good or service where people want to buy it; being in the right place (gas stations at a busy corner) Time utility: having a good or service at the right time (taco bell being open late; Wal-Mart being open 24/7)Time utility: having a good or service at the right time (taco bell being open late; Wal-Mart being open 24/7) Ownership utility: satisfaction by simply owning a product (MTV cribs with celebrity houses and cars; diamond engagement rings)Ownership utility: satisfaction by simply owning a product (MTV cribs with celebrity houses and cars; diamond engagement rings)

5. Market Research MMMMarket research: finding out what consumers want, by gathering, recording, and analyzing data on consumer preferences. Usually done before product is offered/released (helps determine production of the product—features, quality) To get initial consumer response, research is done immediately after product release (Xbox 360)

6. MMMMarket survey: i i i information on who maybe possible product users, based on characteristics such as age, gender, income, education, location (Best Buy survey, warranty cards, focus groups, individual interviews) BBBBefore national or large distribution, most companies use test- marketing: offering a product for sale in a small area for a limited amount of time to see how successful it will be

7. Marketing Mix Product: WWWWhat should be produced? WWWWhat services should be offered with product? (warranties, rebates) HHHHow should the product be packaged? (“new & improved”; size, color, design, catch phrase, coupons) PPPProduct Identification: How should product be identified? (logos, endorsements, songs)

8. Price:Price:  Determined by supply and demand (companies must consider costs of production, advertising, selling & distribution, as well as profits)  Price leadership: selling products at a price of similar established products  Penetration pricing: setting price lower on a new product to attract consumers away from already established products

9. Place: WWWWhere the product should be sold? BBBBased on past experiences of similar products Promotion: a a a advertising to convince a consumer that a new & improved product is available and they should purchase it DDDDepends on 3 factors: product, target consumers, and money (budget) DDDDirect-mail advertising: mail informing about products and order forms (“junk mail” to most)

10. Product Life Cycle  Product life cycle: the stages a product travels through, from introduction to withdrawal from the market Typical life cycle: Introduction, growth, maturity, declineTypical life cycle: Introduction, growth, maturity, decline  Marketing and price are different in each stage of the product life cycle  Many producers try to extend the product’s life cycle by redesigning the product (looks, uses, advertising)

11. Distribution Channels CCCChannels of distribution: routes which goods are moved from producers to consumers CCCConsumer Goods: Manufacturer → Consumer Manufacturer → Retailer → Consumer Manufacturer → Wholesaler → Retailer → Consumer (most common) RRRRaw materials and Producer goods: Producers → Business Producers → Wholesaler → Business WWWWholesaler: businesses that purchased large quantities of goods from producers for resale to other businesses (Sam’s club)

12. RRRRetailers: businesses that sell consumer goods directly to the public Growing more and more is e- commerce: business conducted over the internet (“virtual companies”) SSSStorage and Transportation: producers, wholesalers, or retailers may store products Most retailers keep some inventory: lengthy supply of products for future sales Transportation of products depends on type of good (speed, weight, shipping costs)

13. DDDDistribution channels have grown in the past years: Club warehouse stores: r r r require membership, usually groups oriented (Sam’s club) Direct marketing: done mainly through catalogs and the internet (avoid most state sales taxes); increases sales because of ease and convenience of ordering products on consumers own timeline; order almost anything with valid credit card

14. Figure 11.7 Channels of Distribution