15: Chapter Distribute Products quickly and efficiently I> The emergence of marketing intermediaries a. Marketing intermediaries: a.i. Organization that assist in moving goods and services from producers to industrial and consumer users b. Channel of distribution: b.i. A whole set of marketing intermediaries, such as wholesalers and retailers that join together to transport and store goods in their path (or channel) from producers to consumers c. Agents/brokers c.i. Marketing intermediaries who bring buyers and sellers together and assist in negotiating an exchange, but don't take title to the goods--at no point do they own the goods d. Wholesaler: d.i. A marketing intermediary that sells to other organizations, such as retailers, manufacturers, and hospitals e. Retailer: e.i. An organization that sells to ultimate consumers Why marketing intermediaries? a. Not always necessary, but they often perform certain marketing tasks faster and cheaper than most maufacturers could How intermediaries create exchange efficiency a. 5 trying to set up, ends up being 25 contacts whereas a wholesaler results in only 10. adds value that exceeds cos The supply chain a. Supplier's plants b. Channel of distribution b.i. Manufacturers b.ii. Wholesalers b.iii. Retailers b.iv. Consumers Three basic points of intermediaries a. Can eliminate intermediaries, but then consumers or omeone else would have to perform their tasks, such as transporting and storing goods, finding suppliers, and establishing communication with suppliers b. Overall costs are offset by the value they create The Utilities created by intermediaries a. Utility: a.i. The want-satisfying ability, or value, that organizations add to goods or ervics when the products are made more useful or accessible to consumers than they were before b. 6 types of utility b.i. Form utility
II> III> IV>
V>
VI>
b.i.1. taking raw materials and changing their form so that they become useful products b.i.2. example: farmer separating wheat from chaff and processor who turns wheat into flour b.ii. Time utility b.ii.1. adding value to products by making them available when they're needed b.ii.2. example: grocery stores open 24 hours a day b.iii. Place utility b.iii.1. making products available where they are needed b.iii.2. example: 7-11 popular because they are usually in easy-toeach locations b.iv. Possession utility b.iv.1. doing whatever is necessary to transfer ownership from one party to another, including providing credit b.iv.2. examples: delivery, installation, guarantees, and follow-up service b.iv.3. allows people to rent or lease goods when they don't want to own them b.v. Information utility b.v.1. opening two-way flows of information between marketing participants b.v.2. example: newspapers, salespeople, libraries, and websites are all info sources made available by intermediaries, provide information that help people make purchasing decisions b.vi. Service utility b.vi.1. the provision of fast, friendly service during and after the sale, including teaching customers how to best use products over time b.vi.2. example: computer manufacturer and retailer continue to help consumer whenever needed, also gets software updates etc. VII> Wholesalers function a. Provide a sales force to sell the goods to retailers and other buyers b. Communicate manufacters' advertising deals nad plans c. Maintain inventory, thus reducing the level of the inventory uppliers have to carry d. Arrange or undertake transportation e. Provide capital by paying cash or quick payments for goods f. Provide suppliers with market information they can't afford or can't obtain themselves g. Undertake credit risk by granting credit to customers nad absorbing any bad debts, thus relieving the supplier of this burden h. Assume the risk fo rhte product by taking title VIII> Wholesaler may perform the following services for customers: a. Buy goods the end market will desire and make them available to customers b. Maintain inventory, thus reducing customers' costs c. Transport goods to customers quickly
IX>
X>
d. Provide market informatoina dn business consulting services e. Provide financing through grnating c redit, which is especially critical to small retailers f. Order goods in the types and quantities customer desire Wholesale intermediaries a. Merchant wholesalers: a.i. independently owned firms that take title to (own) the goods they handle a.ii. Accounts for about 80% of wholesalers a.iii. Two types: full-service wholesalers and limited-function wholesalers a.iii.1. limited function types a.iii.1.a. rack jobbers a.iii.1.a.i. furnish racks or shelves full of merchandise to retailers, display products and sell on consignment a.iii.1.b. cash-and-carry wholesalers a.iii.1.b.i. wholesalers that serve mostly smaller retailers with a limited assortment of products a.iii.1.c. drop shippers a.iii.1.c.i. wholesalers that solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer b. Agents and brokers b.i. Bring buyers and sellers together and assist in negotiating an exchange b.ii. BUT agents/brokers never own the products they distribute b.iii. Manufacturer's/sales agents: agents who represent producers Retail intermediaries a. Department store a.i. Sells a wide variety of products in separate departments b. Discount store b.i. Sells many different products at prices generally blow those of department stores c. Supermarket c.i. Sells mostly food with other nonfood products such as detergent and paper products d. Warehouse club d.i. Sells food and general merchandise in facilities that are usually larger than upermarkets and offer discount prices; membership may be required e. Convenience store e.i. Sells food and other often-needed items at convient locations; may stay open all night f. Category killer f.i. Ells a huge variety of one type of product to dominate that category of good f.ii. toys Example: `r' us; office depot g. Outlet store g.i. Sells general merchandise directly from the manufacturer at a discount; items may be discontinued or have flaws ("seconds")
h. Specialty store h.i. Sells a wide selection of good sin one category h.i.1. jewelry stores, shoe stores, bicycle shops XI> Retail distribution strategy a. Intensive distribution a.i. Distribution that puts products into as many retail outlets as possible b. Selective distribution b.i. Disributoin that send products to only a preferred group of retailers in an area c. Exclusive distribution c.i. Distribution that sends products to only one retail outlet in a given geographic area XII> Non-store retailing a. Electronic retailing: a.i. Selling goods and service to ultimate customers (e.g. you and me) over the internet b. Telemarketing: the sale of good and service by telephone b.i. many companies send a catalog to consumer and let them order by calling a toll-free number c. Vending machines, kiosks, and carts c.i. A vending machine dispenses convenience goods c.i.1. carry the benefit of location: found everywhere c.ii. carts and kiosks have lower overhead costs than stores do, so therefore ecan ofer lower prices on items like t-shirts, purses, watches, and umbrellas d. direct selling: elling to consumer sin their homes or where they work d.i. examples: Avon e. Multilevel marketing (MLM) e.i. MLm salepeople work as independent contractors e.ii. Earn commission son their own sale and reeive commissions from any "downliners" they recruit to ell e.iii. Main attraction: low cost of entry e.iv. Also create commission for the "upliners" who recruited them f. Direct marketing: any activity that directly links manufacturers or intermediaries with the ultimate consumers f.i. Includes: direct mail, catalog sales, and telemarketing as well as online marketing f.ii. Why popular? f.ii.1. shopping from home/work is more convenient than going to stores XIII> Building cooperation in channel systems a. Corporate distribution system: a.i. A distribution system in which all of the organizations in the channel of distribution are owned by one firm b. Contractual distribution system: b.i. Member are bound to cooperate through contractual agreements
franchise systems b.i.1.a. franchisee agrees tao all of the ruels, regulations, and procedure established by the franchisor b.i.2. wholesaler-sponsored chains b.i.2.a. each store signs an agreement to use the same name, participate in chain promotions, and cooperate as a unified system of stores, even though each store is independently owned and managed b.i.3. retail cooperatives c. Administered distribution systems c.i. A distribution system in which producers manage all of the marketing functions at the retail level d. Supply chain d.i. The sequence of linked activitie that must be erformed by various organization sto moe goods from the sources of raw materials to ultimate consumers d.ii. Suppliers' plants manufacturerswholesalersretailersconsumers d.ii.1. longer than a channel fo distribution becaue it includes links from suppliers to manufactuerers, whereas the channel of distribution begins with manufactuerers d.ii.2. channels of distribution are part of the overall supply chain d.iii. supply-chain management: d.iii.1. the progress of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all the organizations involved in the supply chain; managing the return of such goods, if necessary; and recycling materials when appropriate XIV> The emergence of logistics a. Logistics: a.i. The planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit b. Inbound logistics; b.i. brings raw materials, packaging, other goods and services, and information from suppliers to producers c. materials handling: c.i. movement of goods within a warehouse or factory d. outbound logistics: d.i. manages the flow of finished products and information to business buyers and ultimate consumers (people like you and me) e. Reverse logistics e.i. Bringing goods back to the manufacturer because of defects or for recycling materials XV> Transportation Modes a. Railroad a.i. Cost
b.i.1.
a.ii. a.iii. a.iv.
a.v. a.vi.
a.i.1. medium percentage of domestic volume a.ii.1. 38% Speed a.iii.1. slow on-time dependability a.iv.1. medium a.iv.2. flexibility handling products a.iv.2.a. high frequency of shipments a.v.1. low reach a.vi.1. high
b. Trucks b.i. Cost b.i.1. high b.ii. percentage of domestic volume b.ii.1. 25% b.iii. Speed b.iii.1. fast b.iv. on-time dependability b.iv.1. high b.v. flexibility handling products b.v.1.a. medium b.vi. frequency of shipments b.vi.1. high b.vii. reach b.vii.1. highest c. Pipeline c.i. Cost c.i.1. low c.ii. percentage of domestic volume c.ii.1. 21% c.iii. Speed c.iii.1. medium c.iv. on-time dependability c.iv.1. highest c.v. flexibility handling products c.v.1. lowest c.vi. frequency of shipments c.vi.1. highest c.vii. reach c.vii.1. lowest d. Ships (water) d.i. Cost d.i.1. lowest
d.ii. percentage of domestic volume d.ii.1. 15 d.iii. Speed d.iii.1. slowest d.iv. on-time dependability d.iv.1. lowest d.v. flexibility handling products d.v.1. highest d.vi. frequency of shipments d.vi.1. lowest d.vii. reach d.vii.1. low e. airplane e.i. Cost e.i.1. highest e.ii. percentage of domestic volume e.ii.1. 1 e.iii. Speed e.iii.1. fastest e.iv. on-time dependability e.iv.1. low e.v. flexibility handling products e.v.1. low e.vi. frequency of shipments e.vi.1. medium e.vii. reach e.vii.1. medium XVI> intermodal shipping: a. uses multiple modes of transportation-highway, air,w ater, rail--to complete a single long-distance movement of freight b. services that specialize in intermodal shipping are known as intermodal marketing companies