marketing 310 exam 3

Total Inventory Cost

-Cost of storage facilities -Handling costs -Cost of damage while in inventory -Cost of risks such as theft and fire -Cost of inventory becoming obsolete -Interest expense & opportunity cost

About 150 years ago, general stores—which carried anything they could sell in reasonable volume—were the main retailers in the United States.

But with the growing number of consumer products after the Civil War, general stores couldn't offer enough variety in all their traditional lines. So some stores began specializing in dry goods, apparel, furniture, or groceries.

Catalog wholesalers - sell through catalogs that may be distributed widely to smaller industrial customers or to retailers that might not be called on by other wholesalers.

Customers place orders at a website or by mail, e-mail, fax, or telephone. These wholesalers sell lines such as hardware, jewelry, sporting goods, and computers.

Private warehouses are storing facilities owned or leased by companies for their own use. Most manufacturers, wholesalers, and retailers have some storing facilities either in their main buildings or in a separate location. A sales manager often is responsible for managing a manufacturer's finished-goods warehouse, especially if regional sales branches aren't near the factory.

Firms use private warehouses when a large volume of goods must be stored regularly. Yet private warehouses can be expensive. If the need changes, the extra space may be hard, or impossible, to rent to others.

many shoppers are now webrooming—gathering information at an online store and then purchasing at the brick-and-mortar store.

Unfortunately, the only retailer making money on this shopping trip is the one the customer buys from, not the others from whom the customer gleaned information along the purchase journey

channel of distribution

any series of firms or individuals who participate in the flow of products from producer to final user or consumer

Pipelines are used primarily to move oil and natural gas. So pipelines are important both in the oil-producing and oil-consuming countries.

Only a few major cities in the United States, Canada, Mexico, and Latin America are more than 200 miles from a major pipeline system. However, the majority of the pipelines in the United States are located in the Southwest, connecting oil fields and refineries.

Order getters are concerned with establishing relationships with new customers and developing new business.

Order-getting means seeking possible buyers with a well-organized sales presentation designed to sell a good, service, or idea.

Vertical marketing systems are channel systems in which the whole channel focuses on the same target market at the end of the channel.

Such systems make sense, and are growing, because if the final customer doesn't buy the product, the whole channel suffers.

Auction companies provide a place where buyers and sellers can come together and bid to complete a transaction.

Traditionally they were important in certain lines—such as livestock, fur, tobacco, and used cars—where demand and supply conditions change rapidly.

When a company serves multiple target markets, it may choose to sell direct and through intermediaries.For example, a company like Autolite uses direct channels to sell its spark plugs to automakers like Ford. Yet it also sells to consumers through intermediaries like Pep Boys.

Traditionally, most firms targeting consumers relied on indirect channels, but that is changing.

Transporting is the marketing function of moving goods.q

Transportation makes products available when and where they need to be—at a cost. But the cost is less than the value added to products by moving them, or there is little reason to ship in the first place.

f the product is a really new idea, the promotion must build primary demand:

demand for the general product idea—not just for the company's own brand.

Even though most consumer products are sold through intermediaries, an increasing number of firms rely on direct marketing:

direct marketing is direct communication between a seller and an individual customer using a promotion method other than face-to-face personal selling. (ex: email promotion) sometimes direct marketing promotion is coupled with direct distribution from a producer to consumers. the term direct marketing is primarily concerned with the Promotion area, not Place decisions.

Effective blending of all of the firm's promotion efforts should produce integrated marketing communications:

integrated marketing communications are the intentional coordination of every communication from a firm to a target customer to convey a consistent and complete message.

total cost approach

involves evaluating each possible PD system and identifying all of the costs of each alternative

intensive distribution

is selling a product through all responsible and suitable wholesalers or retailers who will stock or sell the product. Intensive distribution is commonly needed for convenience products and business supplies—such as laser printer cartridges, ring binders, and copier paper—used by all offices

limited-function wholesalers

provide only some wholesaling functions

physical distribution concept

says that logistics should be treated as a single system intended to minimize the cost of distribution for a given customer service level

Licensing

selling the right to use some process, trademark, patent, or other right for a fee or royalty

exclusive distribution

selling through only one intermediary in a particular geographic area

selective distribution

selling through only those intermediaries who will give the product special attention A selective policy might be used to avoid selling to wholesalers or retailers that (1) place orders that are too small to justify making calls, (2) make too many returns or request too much service, (3) have a poor credit rating, or (4) are not in a position to do a satisfactory job.

Inventory

the amount of goods being stored

supply chain

the complete set of firms and facilities and logistics activities that are involved in procuring materials, transforming them into intermediate or finished products, and distributing them to customers.

storing allows mass producers to

achieve economies of scale

The AIDA model consists of four promotion jobs:

(1) to get Attention, (2) to hold Interest, (3) to arouse Desire, and (4) to obtain Action.

a well written job description helps a firm by

-determining training guidelines -creating performance expectations -narrowing down the list of job candidates

missionary salespeople

-help intermediaries train their salespeople -work for producers -develop goodwill and stimulate demand

factors bringing improvements to physical distribution practices

-improved technology -efficient new distribution centers -more competitive markets -coordination among firms

Benefits of Containerization

-increases protection of goods -simplified handling process

total cost approach considers physical distribution costs that otherwise might be ignored such as

-inventory carrying costs -cost of lost sale due to poor customer service

benefits of direct distribution

-it puts a firm in direct contact with its customers; it is more aware of changes in customer attitudes. -it is in a better position to adjust its marketing mix quickly because there is no need to convince other channel members to help. -website-based e-commerce systems and delivery services such as UPS and FedEx give many firms direct access to customers whom it would have been impossible to reach in the past. -even small, specialized firms may be able to establish a web page and draw customers from all over the world.

factors that affect physical distribution service levels

-procedures for handling returns -advanced information on product availability -accuracy and reliability in filling orders -damage in shipping, storing and handling

potential targets of sales promotion:

-whole sellers and retailers -a firms own employees -consumers

different ways to enter international markets based on increasing investment, risk and control of marketing (least to most risky)

1) exporting 2) licensing 3) management contracting 4) joint venture 5) direct investment

AIDA model in order:

1) get attention 2) hold interest 3) arouse desire 4) obtain action

Transporting costs limit the target markets a marketing manager can serve. Shipping costs increase delivered cost—and that's what really interests customers. Transport costs add little to the cost of products that are already valuable relative to their size and weight.

A case of medicine, for example, might be shipped to a drugstore at low cost. But transporting costs can be a large part of the total cost for heavy products of low value—such as many minerals and raw materials. You can imagine that shipping a massive roll of aluminum to a producer of soft-drink cans is an expensive proposition.

One reason for the dominance of large retailers is that many achieve economies of scale from a corporate chain.

A corporate chain is a firm that owns and manages more than one store—and often it's many. Chains—including Nordstrom's, Walmart, Kroger, 7-11, and Chipotle—have grown rapidly and now account for about half of all retail sales.

Firms can often gain the advantages of vertical integration without building a costly corporate channel.

A manager can develop administered or contractual channel systems instead.

Selling agents take over the whole marketing job of producers—not just the selling function.

A selling agent may handle the entire output of one or more producers, even competing producers, with almost complete control of pricing, selling, and advertising. In effect, the agent becomes each producer's marketing manager.

multichannel distribution: when a producer uses several competing channels to reach the same target market—perhaps using several intermediaries in addition to selling directly.

A single target market can buy a new Apple iPad at Apple's website, an Apple store, an online retailer, or a physical store such as Target or a college bookstore.

An advertising manager may handle publicity, but in larger firms there may be someone who manages public relations—communication with noncustomers, including the press, labor, public interest groups, stockholders, and the government.

A social media manager may be in charge of a company's social media (Facebook page, Twitter feed, LinkedIn page, etc.) and possibly its website.

Advertising managers manage their company's mass-selling effort—in television, newspapers, magazines, and other media. Their job is choosing the right media and developing the ads.

Advertising may be handled in-house, by departments existing within the firms, or it may be contracted to outside advertising agencies.

Agent wholesalers are wholesalers who do not own the products they sell. Their main purpose is to help in buying and selling.

Agent wholesalers normally specialize by customer type and by product or product line. But they usually provide even fewer functions than the limited-function wholesalers

The most expensive cargo transporting mode is airplane—but it is fast!

Airfreight rates are on average three times higher than trucking rates—but the greater speed may offset the added cost.

The physical distribution (PD) concept says that all transporting, storing, and product-handling activities of a business and a whole channel system should be coordinated as one system that seeks to minimize the cost of distribution for a given customer service level.

Both lower costs and better service help to increase customer value. This seems like common sense, but until recently most companies treated physical distribution functions as separate and unrelated activities.

Many companies that produce consumer products have websites where a consumer can place a direct order.

But for most consumer products this is still a small part of total sales. Most consumer products are sold through intermediaries

Some retailers operate from stores and others operate without a store—by selling online, on TV, with a printed catalog, from vending machines, or even in consumers' homes. Most retailers sell physical goods produced by someone else.

But in the case of service retailing—such as dry cleaning, fast food, tourist attractions, online bank accounts, or hair salons—the retailer is often the producer. Because they serve individual consumers, even the largest retailers face the challenge of handling many small transactions

In selecting a PD system, the total cost approach involves evaluating each possible PD system and identifying all of the costs of each alternative. This approach uses the tools of cost accounting and economics.

Costs that otherwise might be ignored—like inventory carrying costs—are considered. The possible costs of lost sales due to a lower customer service level may also be considered.

Producers typically specialize by product and therefore another discrepancy develop - discrepancy of assortment .

Discrepancy of assortment means the difference between the lines a typical producer makes and the assortment final consumers or users want. ex: Most golfers, for example, need more than golf balls. They want golf shoes, gloves, clubs, a bag, and, of course, a golf course to play on. And they usually don't want to shop for each item separately. So, again, there is a need for wholesalers and retailers to adjust these discrepancies

Department stores - Larger stores that are organized into many separate departments and offer many product lines.

Each department is like a separate limited-line store and handles a wide variety of shopping products, such as men's wear or housewares. They are usually strong in customer services, including credit, merchandise return, delivery, and sales help.

The basic difficulty in the communication process occurs during encoding and decoding.

Encoding is the source deciding what it wants to say and translating it into words or symbols that will have the same meaning to the receiver. Decoding is the receiver translating the message.

Sales promotion refers to promotion activities—other than advertising, publicity, and personal selling—that stimulate interest, trial, or purchase by final customers or others in the channel. Sales promotion may be aimed at consumers, at intermediaries, or at a firm's own employees.

Examples include contests and coupons aimed at consumers, trade shows or calendars for wholesalers or retailers, or sales contests and meetings aimed at a company's own sales force. Relative to other promotion methods, sales promotion can usually be implemented quickly and get results sooner. In fact, most sales promotion efforts are designed to produce immediate results.

Public warehouses are independent storing facilities. They can provide all the services that a company's own warehouse can provide. A company might choose a public warehouse if it doesn't have a regular need for space.

For example, Tonka Toys uses public warehouses because its business is seasonal. Tonka pays for the space only when it is used. Public warehouses are also useful for manufacturers that must maintain stocks in many locations, including foreign countries.

Horizontal conflicts occur between firms at the same level in a distribution channel.

For example, a bicycle store that keeps a complete line of bikes on display, has a knowledgeable sales staff, and lets customers take test rides isn't happy to find out that an online store with little inventory and no salespeople offers customers lower prices on the same models. The online retailer gets a free ride on the competing store's investments in inventory and sales staff.

Specialty wholesalers are service wholesalers that carry a very narrow range of products and offer more information and service than other service wholesalers.

For example, a firm that produces specialized lights for vehicles might rely on specialty wholesalers to help reach automakers in different countries

Rack jobbers specialize in hard-to-handle assortments of products that a retailer doesn't want to manage—and rack jobbers usually display the products on their own wire racks.

For example, a grocery store or mass-merchandiser might rely on a rack jobber to decide which paperback books or magazines it sells. The wholesaler knows which titles sell in the local area and applies that knowledge in many stores.

Vertical conflicts occur between firms at different levels in the channel of distribution. A vertical conflict may occur if a producer and a retailer disagree about how much promotion effort the retailer should give the producer's product.

For example, when GameStop started selling used video games, game publishers were concerned the move would steal sales from new games. Not only would revenue from new games decrease, but the game publishers would not earn any revenue on used game sales

In a franchise operation, the franchisor develops a good marketing strategy, and the retail franchise holders carry out the strategy in their own units. Each franchise holder benefits from its relationship with the larger company and its experience, buying power, promotion, and image. In return, the franchise holder signs a contract, agreeing to pay fees and commissions and strictly follow franchise rules designed to continue the successful strategy.

Franchise holders' sales account for about a third of all retail sales. Hampton Hotels, Anytime Fitness, Subway, and Supercuts are examples of franchises

A key advantage of Just-In-Time for business customers is that it reduces their PD costs—especially storing and handling costs.

However, if the customer doesn't have any backup inventory, there's no security blanket if a supplier's delivery truck gets stuck in traffic, there's an error in what's shipped, or there are any quality problems. Thus, a JIT system requires that a supplier have extremely high quality control in every PD activities.

Vertical integration has potential advantages—stable sources of supplies, better control of distribution and quality, greater buying power, and lower executive overhead. Provided that the discrepancies of quantity and assortment are not too great at each level in a channel, vertical integration can be profitable.

However, many managers have found that it's hard to be really good at running manufacturing, wholesaling, and retailing businesses that are very different from one another. Instead, they try to be more efficient at what they do best and focus on ways to get cooperation in the channel for the other activities.

Manufacturers who just take over some wholesaling activities are not considered wholesalers.

However, when they have manufacturers' sales branches—warehouses that producers set up at separate locations away from their factories—they're classified as wholesalers by the U.S. Census Bureau and by government agencies in many other countries.

Service firms often use direct channels.

If the service must be produced in the presence of customers, there may be little need for intermediaries.

The flexibility and speed of trucks make them better at moving small quantities of goods for shorter distances. They can travel on almost any road. They go where the rails can't. They are also reliable in meeting delivery schedules, which is an essential requirement for logistics systems that provide rapid replenishment of inventory after a sale.

In combination these factors explain why at least 75 percent of U.S. consumer products travel at least part of the way from producer to consumer by truck. And in countries with good highway systems, trucks can give extremely fast service. Trucks compete for high-value items. Trucks are essential for firms that deliver to people's homes—the so-called "last mile" for e-commerce. They will become even more critical as online sales and same-day delivery become important parts of some retailers' marketing strategies.

Sales managers are concerned with managing personal selling. Often the sales manager is responsible for building good distribution channels and implementing Place policies.

In smaller companies, the sales manager may also act as the marketing manager and be responsible for advertising and sales promotion.

Cash-and-carry wholesalers operate like service wholesalers—except that the customer must pay cash.

In the United States, big warehouse clubs have taken much of this business. But cash-and-carry operators are common in less-developed nations where very small retailers handle the bulk of retail transactions.

In light of our continuing focus on planning marketing strategies to reach objectives, the most sensible approach to budgeting promotion expenditures is the task method—basing the budget on the job to be done.

It helps a marketing manager to set priorities so that the money spent on promotion produces specific and desired results. In fact, this approach makes sense for any marketing expenditure, but here we'll focus on promotion.

Many people incorrectly believe that promotion money gets spent primarily on advertising—because advertising is all around them. But all the special sales promotions—coupons, sweepstakes, trade shows, and the like—add up to even more money.

In total, firms spend less money on advertising than on personal selling or sales promotion.

Research on how markets accept new ideas has led to the adoption curve model. The adoption curve shows when different groups accept ideas.

It emphasizes the relations among groups and shows that individuals in some groups act as leaders in accepting a new idea. Promotion efforts usually need to change over time to adjust to differences among the adopter groups.

Advertising is a primary form of mass selling. Advertising is any paid form of nonpersonal presentation of ideas, goods, or services by an identified sponsor.

It includes the use of traditional media such as magazines, newspapers, radio and TV, signs, and direct mail as well as new media such as the Internet. Marketing managers pay for advertising to be placed on specific media, but another form of mass selling doesn't involve paying media costs.

Promotion objectives must be clearly defined—because the right promotion blend depends on what the firm wants to accomplish.

It's helpful to think of three basic promotion objectives: informing, persuading, and reminding target customers about the company and its marketing mix

Mass selling is communicating with large numbers of potential customers at the same time.

It's less flexible than personal selling, but when the target market is large and scattered, mass selling can be less expensive.

Whenever Product includes a physical good, Place requires logistics decisions.

Logistics is the transporting, storing, and handling of goods in ways that match target customers' needs with a firm's marketing mix—both within individual firms and along a channel of distribution. Physical distribution (PD) is another common name for logistics.

A distribution center is a special kind of warehouse designed to speed the flow of goods and avoid unnecessary storing costs. Today, the distribution center concept is widely used by firms at all channel levels.

Many products buzz through a distribution center without ever tarrying on a shelf; workers and equipment immediately sort the products as they come in and then move them to an outgoing loading dock and the vehicle that will take them to their next stop. Technology is key to making distribution centers efficient.

Now most conventional retailers are single-line or limited-line stores—stores that specialize in certain lines of related products rather than a wide assortment.

Many specialize not only in a single line, such as clothing, but also in a limited line within the broader line. Within the clothing line, a retailer might carry only shoes, formal wear, or even neckties but offer depth in that limited line

Mass-merchandisers are large self-service stores with many departments that emphasize "soft goods" (housewares, clothing, and fabrics) and staples (like health and beauty aids) but still follow the discount house's emphasis on lower margins to get faster turnover.

Mass-merchandisers, such as Walmart and Target, have checkout counters in the front of the store and little sales help on the floor. Today, the average mass-merchandiser has nearly 60,000 square feet of floor space, but many new stores are 100,000 square feet or more. Mass-merchandisers grew rapidly—and they've become the primary place to shop for many frequently purchased consumer products

A manufacturers' agent sells similar products for several noncompeting producers—for a commission on what is actually sold. Such agents work almost as members of each company's sales force, but they're really independent wholesalers.

More than half of all agent wholesalers are manufacturers' agents. Their big plus is that they already call on some customers and can add another product line at relatively low cost—and at no cost to the producer until something sells!

Specialists often help provide information to bring buyers and sellers together. For example, most consumers don't know much about the wide variety of home and auto insurance policies available. A local independent insurance agent may help them decide which policy, and which insurance company, best fits their needs.

Most producers seek help from specialists when they first enter international markets. Specialists can provide crucial information about customer needs and insights into differences in the market environment.

accumulating (regrouping activity): involves collecting products from many small producers.

Much of the coffee that comes from Colombia is grown on small farms in the mountains. Accumulating the small crops into larger quantities is a way of getting the lowest transporting rate and making it more convenient for distant food processing companies to buy and handle it. Accumulating is especially important in less-developed countries and in other situations, like agricultural markets, where there are many small producers

Order takers sell to the regular or established customers, complete most sales transactions, and maintain relationships with their customers. After a customer becomes interested in a firm's products through an order getter, supporting salesperson, or through advertising or sales promotion, an order taker usually answers any final questions and completes the sale.

Order-taking is the routine completion of sales made regularly to target customers. It usually requires ongoing follow-up to make certain that the customer is totally satisfied.

Publicity is any unpaid form of nonpersonal presentation of ideas, goods, or services. Of course, publicity people are paid. But they try to attract attention to the firm and its offerings without having to pay media costs.

Publicity includes a wide range of different types of media: a company's website and the material it posts on the website, viral videos, word-of-mouth communication, a company's Facebook page, and its "tweets" on Twitter. It can also include coverage it receives in the press—for example when a movie is reviewed in the newspaper.

Customers don't care how a product was moved or stored or what some channel member had to do to provide it.

Rather, customers think in terms of the physical distribution customer service level—how rapidly and dependably a firm can deliver what they, the customers, want.

Personal selling involves direct spoken communication between sellers and potential customers. Customer service is a form of personal communication between a customer and seller to resolve a problem with a purchase.

Salespeople get immediate feedback, which helps them to adapt. Although some personal selling is included in most marketing mixes, it can be very expensive. So it's often desirable to combine personal selling with mass selling and sales promotion.

Wholesaling is concerned with the activities of those persons or establishments that sell to retailers and other merchants, or to industrial, institutional, and commercial users, but that do not sell in large amounts to final consumers.

So wholesalers are firms whose main function is providing wholesaling activities

retailing covers all the activities involved in the sale of products to final customers

Some retailers operate from stores and others operate without a store—by selling online, on TV, with a printed catalog, from vending machines, or even in consumers' homes

A specialty shop—a type of conventional limited-line store—is usually small and has a distinct "personality."

Specialty shops sell special types of shopping products, such as high-quality sporting goods, exclusive clothing, baked goods, or even antiques. They aim at a carefully defined target market by offering a unique product assortment, knowledgeable salesclerks, and better service.

Brokers bring buyers and sellers together. Brokers usually have a temporary relationship with the buyer and seller while a particular deal is negotiated. They are especially useful when buyers and sellers don't come into the market very often.

The broker's product is information about what buyers need and what supplies are available. If the transaction is completed, they earn a commission from whichever party hired them.

bulk breaking (regrouping activity): involves dividing larger quantities into smaller quantities as products get closer to the final market.

The bulk-breaking may involve several levels in the channel. Wholesalers may sell smaller quantities to other wholesalers or directly to retailers. Retailers continue breaking bulk as they sell individual items to their customers.

In the market growth stage, more competitors enter the market, and promotion emphasis shifts from building primary demand to stimulating selective demand: demand for a company's own brand.

The main job is to persuade customers to buy, and keep buying, the company's product

the mass-merchandising concept—which says that retailers should offer low prices to get faster turnover and greater sales volumes—by appealing to larger markets.

The mass-merchandising concept applies to many types of retailers, including both those that operate stores and those that sell online

Truck wholesalers Wholesalers that specialize in delivering products that they stock in their own trucks.

Their big advantage is that they promptly deliver perishable products that regular wholesalers prefer not to carry.

The wheel of retailing theory says that new types of retailers enter the market as low-status, low-margin, low-price operators and then, if successful, evolve into more conventional retailers offering more services with higher operating costs and higher prices.

Then they're threatened by new low-status, low-margin, low-price retailers—and the wheel turns again. Department stores, supermarkets, and mass-merchandisers went through this cycle. Some Internet sellers are on this path.

Regrouping activities adjust the quantities or assortments of products handled at each level in a channel of distribution.

There are four regrouping activities: -accumulating -bulk-breaking -sorting -assorting When one or more of these activities is needed, a marketing specialist may develop them to fill this need.

Export or import agents are basically manufacturers' agents who specialize in international trade.

These agent wholesalers operate in every country and help international firms adjust to unfamiliar market conditions in foreign countries

These discount houses offered "hard goods" (cameras, TVs, and appliances) at substantial price cuts to customers who would go to the discounter's low-rent store, pay cash, and take care of any service or repair problems themselves.

These retailers sold at 20 to 30 percent off the list price being charged by conventional retailers.

Some supermarkets and mass-merchandisers have moved toward becoming supercenters (hypermarkets)—very large stores that try to carry not only food and drug items but all goods and services that the consumer purchases routinely.

These superstores look a lot like a combination of the supermarkets, drugstores, and mass-merchandisers from which they have evolved, but the concept is different. A supercenter is trying to meet all the customer's routine needs at a low price.

Traditional channel systems: involve weak relationships In traditional channel systems, the various channel members make little or no effort to cooperate with one another.

They buy and sell from one another—and that's the extent of their relationship. Each channel member does only what it considers to be in its own best interest. It doesn't worry about other members of the channel. For example, Cooper Industries wants a wholesaler of electrical building supplies to sell Cooper products. But a wholesaler who works with different producers may not care whose products get sold. The wholesaler just wants happy customers and a good profit margin

In administered channel systems, the channel members informally agree to cooperate with one another.

They can agree to routinize ordering, share inventory and sales information over computer networks, standardize accounting, and coordinate promotion efforts.

The cost of physical handling is a major storing cost. Goods must be handled once when put into storage and again when removed to be sold. To reduce these costs, modern one-story buildings away from downtown traffic have replaced most old multistory warehouses.

They eliminate the need for elevators and permit the use of power-operated lift trucks, battery-operated motor scooters, roller-skating order pickers, electric hoists for heavy items, and hydraulic ramps to speed loading and unloading.

Merchant wholesalers own (take title to) the products they sell.

They often specialize by certain types of products or customers.

Some customers are multichannel shoppers who use different channels as they move through the purchase process.]

This can occur within the same retailer, like when a customer goes to Home Depot to buy an electronic light switch, and while standing at the shelf, pulls out their smartphone, opens the Home Depot site, and reads reviews of the product.

Direct investment: A parent firm has a division (or owns a separate subsidiary firm) in a foreign market.

This gives the parent firm complete control of marketing strategy planning. Direct investment is a big commitment and usually entails greater risks. Direct investment also helps a firm learn more about a new market most risky

Intermediaries who are close to their customers are often able to anticipate customer needs and forecast demand more accurately.

This information can help reduce inventory costs in the whole channel—and it may help the producer smooth out production.

Many firms are finding that they can cut inventory costs and still provide the desired customer service level—if they can reduce the time it takes to replace items that are sold.

This is one important reason that JIT has been widely adopted. The firms involved use EDI, the Internet, and similar computerized approaches to share information and speed up the order cycle and delivery process.

Some firms prefer to skip the distribution center altogether and ship products directly from where they are manufactured to retail stores.

This may move products more quickly, but usually at a higher cost.

containerization—grouping individual items into an economical shipping quantity and sealing them in protective containers for transit to the final destination.

This protects the products and simplifies handling during shipping. Some containers are as large as truck bodies.

Although each channel system should act as a unit, some firms are in a better position to take the lead in the relationship and in coordinating the whole channel effort. .

This situation calls for a channel captain—a manager who helps direct the activities of a whole channel and tries to avoid or solve channel conflicts

assorting (regrouping activity): putting together a variety of products to give a target market what it wants. This usually is done by those closest to the final consumer or user—retailers or wholesalers who try to supply a wide assortment of products for the convenience of their customers.

Thus, a wholesaler selling Yazoo tractors and mowers to golf courses might also carry Pennington grass seed and Scott fertilizer.

Water transportation is the slowest shipping mode, but it is usually the lowest-cost way of shipping heavy freight.

Water transportation is very important for international shipments and often the only practical approach. This explains why port cities such as Boston, New York City, Rotterdam, Osaka, and Singapore are important centers for international trade.

Multichannel shopping can cause problems for retailers.

When consumers go to a brick-and-mortar store to inspect a product (a showroom) and then purchase from an online retailer with a lower price, this practice is called showrooming

In contractual channel systems, the channel members agree by contract to cooperate with one another.

With both of these systems, the members retain some of the flexibility of a traditional channel system.

General merchandise wholesalers are service wholesalers that carry a wide variety of nonperishable items such as hardware, electrical supplies, furniture, drugs, cosmetics, and automobile equipment.

With their broad line of convenience and shopping products, they serve hardware stores, drugstores, and small department stores. Mill supply houses operate in a similar way, but they carry a broad variety of accessories and supplies to serve the needs of manufacturers.

Service wholesalers are merchant wholesalers that provide all the wholesaling functions.

Within this basic group are three types: (1) general merchandise, (2) single-line, and (3) specialty.

Chains can buy in larger quantities and earn lower prices, they get operational efficiencies from running many stores, and they can apply advertising and other promotion costs over many stores.

You can expect chains to continue to grow and take business from independent stores.

A combination export manager

a blend of manufacturers' agent and selling agent—handling the entire export function for several producers of similar but noncompeting lines

corporate chain

a company that processes and operates multiple retailers

joint venture

a domestic firm enters into a partnership with a foreign firm

franchise operation

a retail arrangement in which one bigger entity creates a plan for its smaller, related retailers to execute

Electronic Data Interchange (EDI)

a standard format for the electronic exchange of information between supply chain participants

Railroads are still the workhorse of the U.S. transportation system. They carry more freight over more miles than any other mode. However, they account for less than 10 percent of transport revenues. They carry heavy and bulky goods—such as coal, steel, and chemicals—over long distances at relatively low cost.

because railroad freight usually moves more slowly than truck shipments, it is not as well suited for perishable items or those in urgent demand. Railroads are most efficient at handling full carloads of goods. Less-than-carload (LCL) shipments take a lot of handling, which means they usually move more slowly and at a higher price per pound than carload shipments

scrambled merchandising

carrying any product lines they think they can sell profitably

Most firms focus on getting products to their customers. But some marketing managers must also plan for reverse channels:

channels used to retrieve products that customers no longer want. The need for reverse channels may arise in a variety of different situations. ex: Toy companies, automobile firms, drug companies, and others sometimes have to recall products because of safety problems

There are three types of vertical marketing systems

corporate, administered, and contractual

a firm that consistently delivers customers goods quickly and accurately exhibits a high __________

customer service level

sorting (regrouping activity): means separating products into grades and qualities desired by different target markets.

for example, an investment firm might offer its customers shares in a mutual fund made up only of stocks for companies that pay regular dividends. Similarly, a wholesaler that specializes in serving convenience stores may focus on smaller packages of frequently used products.

Single-line (or general-line) wholesalers are service wholesalers that carry a narrower line of merchandise than general merchandise wholesalers.

for example, they might carry only food, apparel, or certain types of industrial tools or supplies. In consumer products, they serve the single- and limited-line stores. In business products, they cover a wider geographic area and offer more specialized service.

Pulling

getting customers to ask intermediaries for the product.

cooperative chains

groups founded by retailers who advertise together and operate purchasing groups

Ideal market exposure

makes a product available widely enough to satisfy target customers' needs but not exceed them. too much marketing exposure only increases total cost of marketing

There are three types of supporting salespeople:

missionary salespeople, technical specialists, and customer service reps.

basic sales tasks:

order-getting, order-taking, and supporting

Marketing managers can choose from several basic types of promotion:

personal selling, mass selling, sales promotion, and publicity

discrepancy of quantity

the difference between the quantity of products it is economical for a producer to make and the quantity final users or consumers normally want ex: most manufacturers of golf balls produce large quantities—perhaps 200,000 to 500,000 in a given time period. The average golfer, however, wants only a few balls at a time. Adjusting for this discrepancy usually requires intermediaries—wholesalers and retailers.

Storing

the marketing function of holding goods so they're available when they're needed. storing allows producers and intermediaries to keep stocks at convenient locations, ready to meet customers' needs. In fact, storing is one of the major activities of some intermediaries.

management contracting

the seller provides only management and marketing skills - others own the production and distribution facilities

Drop-shippers - Wholesalers that own (take title to) the products they sell but do not actually handle, stock, or deliver them.

these wholesalers are mainly involved in selling. They get orders and pass them on to producers. Then the producer ships the order directly to the customer. Drop-shippers commonly sell bulky products (like lumber) for which additional handling would be expensive and possibly damaging.

how do supermarkets cut costs?

they require customers to serve themselves

Pushing (a product through a channel)

using normal promotion effort—personal selling, advertising, and sales promotion—to help sell the whole marketing mix to possible channel members.

two basic conflicts in channels of distribution:

vertical conflicts and horizontal conflicts