chapter 12- distribution planning activities (2)

8/6/2019 Chapter 12- Distribution Planning Activities (2)

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Chapter 12- Distribution

Planning Activities


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Economic Discrepancies

Differences between the offerings of a businessand the requirements of a consumer.

4 parts: Types and quantity of products/services

Location and timing of production and consumption.

Ex: Advertisement in paper- get to store they are

sold out, you get told they didnt get theirshipment in from headquarters and more will becoming in next week.


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Economic Discrepancies-

Channels of Distribution or MarketingChannels- the routes products and services

follow, including the activities andparticipating organizations.

Channel Members- businesses thatparticipate in activities transferring goodsand services from the producer to the user.

Retailers (sell to consumers) and wholesalers(sell to other channel members). P 287


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Common types of Channels Producer directly to consumer (direct marketing)

Direct selling: salespeople- travel to businesses in

order to make personal presentations to importantcustomers.

Door-to-door selling: cosmetics (Avon, MaryKay) insurance, encyclopedias

Mail order, telephone, Online: ex. LL Bean, LandsEnd

Telemarketing: magazines, donations, phoneplans.


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Producers to consumers through

retailers Fewer salespeople will be needed because there

will be a smaller number of retail customers than

final consumers and retailers buy in largequantities.

The retailer specializes in marketing activities,which allows the producer to specialize in

manufacturing activities. Retailers offer: convenience, provide a variety ofproducts by different manufacturers (comparisonshopping)


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Producer to consumer through

wholesalers and retailers Wholesalers provide valuable services that

producers may not provide.

Sell to retailers in small quantities and can deliver

goods quickly Wholesalers offer credit terms to retailers and

provide help in planning promotions and salesstrategies.

Wholesalers are an important part of internationalmarketing today.

Pg. 292 merchant wholesaler, cast and carrywholesaler, rack jobber, specialty wholesaler,manufacturers agent.


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Integrated marketing channels

It is not unusual for businesses in a channel ofdistribution to have conflicts with each other.

One of the challenges in distribution planning is to

develop cooperative relationships among channelmembers.

Administered channel- a channel in which oneorganization takes a leadership position to benefit

all channel members. Channel integration- when one business owns the

organizations at other levels of the channel. Thisavoids conflicts that occur in other channels.


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Developing A Channel of

Distribution A producer must consider many factors in

deciding which channel or channels to

select:

Perish-ability of the product-highly perishable

articles require rapid and careful handling,

ex. Bread, flowers, ice cream-usually marketeddirectly to the consumer or through very few

channel members.


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A producer must consider many factors

in deciding which channel or channels toselect Need for the special handling of the

product-

if the product requires costly procedures or

equipment for handling, it is likely to pass

through as few channel members as possible.

Ex

: gasoline, natural gas, computers. More users means more channel members.


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A producer must consider many factors

in deciding which channel or channels toselect Number of types of products manufactured

marketing costs can be distributed over many

products. Ex. 1 product-sell to wholesaler; many products-sell

to retailers.

Financial strength and interests of the

producer large, successful companies are better able to

perform marketing activities.


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Distribution Methods Problems related to transportation

Types of products to be shipped

Size, shape and weight of goods (ex. Steel vs.glass)

Time needed for delivery (hours to weeks,months)

Cost- transportation charges, packaging,insurance, storing products before, during andafter delivery.


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Distribution planning- Is used by businesses to ensure that all important

factors are considered when deciding onappropriate distribution methods and procedures.

Railroads- over 1/3 of the volume of productsshipped in the US.

Low cost for moving heavy and bulky items longdistance. Rates based on quantity, distance, handling,value of product.

Products move slowly on long train routes because of

the need to drop off the cars and pick cars up. Furthermore, only a limited number of communities are

now served directly by rail freight.

Cost of rail freight shipments is cheapest when a fullcarload can be shipped at one time. (more than 1 co. in

a car.)


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Distribution planning Trucks:

Most frequently used for short-distance shipping. Essential to smaller communities and rural areas

that are not served by other methods.

Agriculture, mining and lumber are dependent ontrucks.

Also for long distance shipping

For products that need to be moved rapidly, in smallerquantities than can be economically shipped by rail, orwhere rail isnt accessible.

Piggyback service- a distribution method where trucktrailers are loaded and placed on railroad cars to beshipped close to their final destination.

Truck Rates are usually based on weight and distance(higher than railroads).


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Distribution planning Air

shipments Most rapid form of transportation, but rates are

high.Use for small, high value, perishable goods.

Packages and mail are moved regularly onpassenger airlines as well as through air parcelcompanies.

Now have special cargo planes for larger amts.

Regional airfreight terminals are being constructedso products can be removed rapidly into and out ofairports without interfering with passenger travel.


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Other transportation methods: Containerization- way of improving shipping

services products are packed in large shipping

containers at the factory and are then shippedusing a number of transportation methods before

being unpacked.

Containers can be easily loaded and unloaded

from trucks to rail cars, ships, and cargo planes,and back to trucks, this reduces the amount of

product handling and product damage. Pg. 298


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Product Handling- Products that are lost during distribution, arrive

late, or are damaged are of little value to

customers Each time a product is handled adds to the cost of

distribution, increases the amount of time neededfor distribution and increases the opportunity fordamage to occur.

Product- handling procedures used by businessinclude: improved packaging, efficient proceduresfor packing and unpacking, specific equipment forhandling and storing products.


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Product Handling- Tracking

products Businesses and customers want to know

where products are located and when they

will be delivered.

Bar coding is now used to track most

products during distribution. Bar codes are

product id labels containing a unique set ofvertical bars that can be read using

computer scanning equipment.


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Product Handling- Product

storage Producers and channel members may want

to accumulate a large quantity of products

to make shipping more efficient. Products will be stored until they are to be

distributed and sold. (warehouses)

The use of equipment in the warehouse hasreduced the cost of storage as well as theamount of product damage.


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Distribution centers Large wholesalers and retailers that handle a

variety of products and sell them through a

number of outlets have replaced the traditionalwarehouse.

Products are shipped from each manufacturer to the

distribution center in large quantities. They are then

repackaged into smaller quantities, combined withproducts from other manufacturers and shipped to a

store where they can be sold to consumers.


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Order Processing Planning must be done to ensure that

effective procedures are in place and

employees are well trained to complete

customer orders.

Orders can be place by mail, phone,

computers or fax.

chapter 12- distribution planning activities (2)

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