chapter 10-marketing-channels-and-supply-chain-management
TRANSCRIPT
Explain why companies use distribution channels and the functions these channels perform.
Discuss how channel members interact and how they organize to perform the work of the channel.
Identify the major channel alternatives open to a company.
Explain how companies select, motivate, and evaluate channel members.
Discuss the nature and importance of physical distribution and integrated logistics management.
Chapter Objectives
The Nature of Distribution
Channels
Set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.
Why are Marketing Intermediaries used?
The use of intermediaries result from their greater efficiency in making goods available to target markets.
Offers the firm more than it can achieve on its own through the intermediaries:
Contacts
Experience
Specialization
Scale of operation
Intermediaries play an important role in matching supply and demand.
Producers produce narrow assortments, but consumers want broad assortments.
Intermediaries buy large quantities of many producers and break them down into the smaller quantities preferred by consumers.
Distribution Channel Functions
A distribution channel moves goods from producers to consumers. It overcomes the major time, place, and possession gaps that separate and services from those who would used them.
Members of the marketing channel: Information
Promotion
Establishing contact
Matching buyers with sellers
Negotiation
(Physical distribution, Financing, Risk-taking)
If the channel is functioning the way that it should be, the work of the channel should be divided so that the various functions can be assigned to the channel members who can perform them most efficiently and effectively to provide satisfactory assortments of goods to target consumers.
Number of Channel Levels
A channel level is a layer of middlemen that performs some work in bringing the product and its ownership closer to the final buyer.
DIRECT MARKETING CHANNEL
Where is there are no intermediary levels between manufacturer and consumer.
INDIRECT MARKETING CHANNEL
Where there can be numerous and a variety of intermediaries involved in bringing the good or service from the manufacturer to the consumer or business customer.
Business marketing channels are similar in their design except the intermediaries perform functions relative to the business market rather than consumer market.
Types of Flows: Physical Flow of products
Flow of ownership
Payment Flow
Information Flow
Promotion Flow
IT INCLUDES ALL THE ACTIVITIES
INVOLVED IN SELLING GOODS OR
SERVICES DIRECTLY TO FINAL
CONSUMER FOR THEIR PERSONAL, NON-BUSINESS USE.
RETAILING
A retailer is a business whose sales come primarily from retailing.
Manufacturer, wholesaler, and retailer can all do retailing.
Retailing can be dine in stores(store retailing) or out of a store (non-store retailing).
Direct mails, catalogues, telephone, TV home shopping shows, home and office parties, door-to-door, vending machines, Internet, etc.
Relative Prices
Pricing structure that is used by the retailers.
RETAIL ORGANIZATION
Independent, corporate, or contractual ownership organization
AMOUNT OF SERVICE
Self-service, limited service and full-service retailer.
PRODUCT LINE
Length and breadth of the product assortment.
RETAILERS CAN OFFER THREE LEVELS OF
SERVICES:
SELF-SERVICE RETAILER
– are retailer provide few or no services to
shoppers. Shoppers perform their own location.
a. Self-service is the basis of all discount
performance.
b. It is typically used by sellers of
convenience goods and nationally branded, fast
moving shopping goods.
LIMITED SERVICE RETAILER
-are retailers that provide only a limited number
if services to shoppers.
a. They carry more shopping goods about
which consumers need information.
b. Their increased operating cost result in
higher prices
L-SERVICE RETAILER
- Are retailers that provide a full range of services to shoppers.
a. These stores usually carry more specialty goods and slower-moving items.
b. Personnel assists customers in the buying process.
c. They provide many services which result in higher operating costs that are usually passed on to the customer as higher prices.
Retailers can also be classified based on the length and breadth of their product
assortments.
Specialty Store
Department Stores
Supermarkets
Convenience Stores
Superstores
SPECIALTY STORE-carry narrow product lines with a deep
assortment within that line. These stores seem to be flourishing because of the increasing use of market segmentation ,market targeting and product specialization.
DEPARTMENT STORE
- are retail organizations that carry a wide variety of product lines such as clothing, home furnishing, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers.
SUPERMARKETS-are large, low-cost,low-margin,high-volume, self-service stores that carry a wide variety of food, laundry, and household products.
CONVENIENCE STORE- Is a retail store located near a residential area, opens long hours, seven days a week and carries a limited line of high-turnover convenience goods.
SUPERSTORES- Are stores almost twice the size of regular supermarkets. They carry large assortment of routinely purchased food and nonfood items and offer such services as dry-cleaning, post-office, photo finishing, check cashing, bill paying, etc.
DISCOUNT STORE- Sells standard merchandise at lower prices by
accepting lower margins and selling higher volume.
A true discount store regularly sells its merchandise at lower prices, offering mostly national brands, not inferior goods.
Intense competition from other discounters and department stores have forced many discount retailers to “trade up’.
OFF-PRICE RETAILERS-buy at less than regular wholesale prices and sell at less than retail, usually carrying a changing and unstable collection of higher-quality merchandize.
Primary Types
Independent off-price retailers
Factory outlet
Warehouse clubs or wholesale clubs or membership warehouses
Classification of retailing-retail Organization
Corporate Chain
(two or more outlets commonly owned and controlled)
Voluntary Chain
(wholesaler-sponsored group of independent retailers)
Retailer Corporation
(a group of independent retailers that bands together to set up jointly owned
central wholesale operation)
Franchise Organization
(contractual association between a manufacturer, wholesaler, or service organization)
Merchandising Conglomerates
(combine several different retailing forms under central ownership)
PRODUCT ASSORTMENTBrand of merchandise merchandisingEvents product differentiationStrategiesSERVICE MIXKey tool of non-price competitionFor setting one store apart from one anotherSTORE’S ATMOSPHEREPhysical LayoutFeel that suits the target market and moves
customers to buy
2. A retailer’s price policy is a crucial positioning factor and must be decided in relation to target market, product and service assortment, and competition.
3. The promotion decision involves deciding among the normal promotion tools of advertising personal selling ,sales promotion, and public relations to reach customers
PROMOTION DECISION Using advertising Personal selling Sales promotion Public relationDirect marketing to reach customers
Place Decision
Location is the key to the retailer’s ability to attract customers. The cost of the right location are a significant part of the retailer’s overall expense consideration.
Most stores today cluster to increase their ability to pull in consumers. And give them the convenience of one-stop shopping.
Forms of Clustering
CENTRAL BUSINESS DISTRICT
- problems have occurred with this form for several years due to consumers moving to the suburbs. Some central business districts are making comebacks by using tactics that have successful for shopping malls.
SHOPPING CENTER
- this is a group of retail businesses planned, developed, owned, and managed as unit.A regional shopping center is the largest and
most dramatic shopping center. It generally contains between 40-200 store and attracts customers from a wide area.
A community shopping center contains between 15-40 retail stores.
The neighborhood shopping center generally contains between 5-15 stores and is close and convenient for consumers. These centers are also called strip-malls.
WHOLESALING
The activities involved in selling goods and services to those buying for resale or business use.
Wholesalers – are those engaged primarily in wholesaling activity.
1. SELLING AND PROMOTING
wholesalers help one another in reaching out to members of the channels
2. BUYING AND ASSORTMENT BUILDING
wholesalers save their customers much work
3. BULK-BREAKING
wholesalers break large lots into small quantities as s service for their customers.
4. WAREHOUSING
wholesalers hold inventories thereby reducing their customer’s risk.
5. TRANSPORTATION
wholesalers provide quick delivery
6.Financing
wholesalers finance inventories for their customers thereby moving the risk away from the manufacturing.
7. Risk-bearing
wholesalers absorb risk by taking title to the goods they posses
8.Market information
wholesalers give information about market condition to customers.
9.Management services and advice
wholesalers help their customers with the training function and show them how to attract display merchandise,promotemerchandise and establish inventory control systems.
Three major types of Wholesalers
1.Merchant wholesalers - independently ownedbusinesses that takes title to the merchandisethey handle.
1. full-service wholesalers
2. limited service wholesalers
2. Brokers and agents – don’t take title to thegoods and perform only a few functions.
3.Manufacturer’s sale branch and office-wholesaling by sellers or buyers themselvesrather than through independent wholesalers.
Wholesalers define their targets groups
by examining and classifying:
1. Size of customer
2. Type of customer
3. Need for service
4. By other means
Marketing Logistics (Physical Distribution)- involves the tasks of planning, implementing, andcontrolling the physical flow of materials and finalgoods from points of use to meet the needs ofcustomers at a profit.
List and briefly discuss the marketing channelfunctions to the right customers in the right place atthe right time.
It addresses:
- Outbound distribution
- Inbound distribution
- Reverse distribution
- Entire supply management
MAJOR LOGISTICS FUNCTIONS
1. ORDER PROCESSING- minimize cost of
attaining logistics objectives
2. WAREHOUSING- storage, distribution
automated
3. INVENTORY- when to order, how much to
order just-in-time.
4. TRANSPORTATION- carriers affects the
pricing of the products, delivery performance,and condition of the goods when they arrive.
Integrated Supply Chain Management
is the logistics concept that emphasizesteamwork, both inside the company andamong all the marketing channelorganizations, to maximize theperformance of the entire distributionsystem.
Integrated Logistics Management
Recognizes that providing better customerservice and trimming distribution costs requiresTeamwork, both inside the company and amongall the marketing channel organizations.
Involves
-cross-functional teamwork inside the company
- building channel partnership
- thirty-party logistics