MKT 300 Ch. 10: Place and Development of Channel Systems

What is the financial benefit of the fact that Intermediaries who are close to their customers are often able to anticipate customer needs and forecast demand more accurately?

This information can reduce inventory costs in the whole channel and helps the producer smooth out production

Deciding whether to sell directly, indirectly, or both requires an understanding of What?

Discrepancies and separations

The difference between the lines a typically producer makes and the assortment final consumers or users want

Discrepancy of Assortment

The difference between the quantity of product it is economical for a producer to make and the quantity final users or consumers normally want

Discrepancy of Quantity

A special kind of warehouse designed to speed the flow of goods and avoid unnecessary storing costs

Distribution Center

Why does it make sense that many business products are sold DTC?

In business markets there are fewer transactions, orders are larger, and customers may be concentrated in one geographic area

The amount of goods being stored

Inventory

When do service firms not need intermediaries?

If the service must be produced in the presence of customers, there may be little need for intermediaries (e.g. hairstylist or accountant)

When can specialization not make a channel more efficient?

If the specialists are so independent that the channel doesn't work smoothly

The growth of website-based e-commerce systems and delivery services such as UPS and FedEx which give many firms direct access to customers whom they couldn't reach before (lowers the cost for direct distribution) and consumers growing increasingly comfortable purchase products online have led to what trend?

A growing number of consumer products are being sold DTC

Why do many firms firms prefer to distribute directly to the final consumer?

Because they want to control the whole marketing job and They think they can serve target customers at a lower cost or do the work more effectively than intermediaries

Collecting products from many small producers

Accumulating

Many wholesalers and retailers who operate from internet websites focus on which grouping activity?

Accumulating

What does it mean that all members of a channel system should have a shared Product-Market Commitment

All members are focusing on the same target market at the end of the channel and sharing various marketing functions in appropriate ways

An intermediary helping producers service customer needs better at a lower cost is the most important reason for using what kind of channel?

An indirect channel

Putting together a variety of products to give a target market what it wants. Usually done by those closest to the final consumer or user

Assorting

Why might widespread distribution not be needed for specialty goods?

Because customers will search for specialty goods

Why does that fact that different channels serve different target markets minimizes conflict?

Because each offers a different marketing mix to a different target market

Why is conflict common in the traditional channel system?

Because members of traditional channel systems often have different objectives and different ideas about how things should be done

Why are distribution costs often very low for digital products?

Because they can travel over the internet at little or no cost

Involves dividing larger quantities into smaller quantities as products get closer to the final market

Bulk-Breaking

How might Intermediaries further reduce a producer's need for working capital?

By buying the producer's output and carry it in inventory until it's sold

How can a firm with unproven goods demonstrate demand for its products?

By using direct distribution first

Why is it a beneficial for a firm to be in direct contact with its customers?

By working directly with customers, the company generates data, information, and knowledge about its market An intermediary may choose to keep this information to itself and for the company to obtain similar information it may require costly marketing research, which may also take longer to acquire

A manager who helps direct the activities of a whole channel and tries to avoid of solve channel conflicts

Channel Captain

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

Channel Of Distribution

Offering different products through different channels, dropping product lines and treating channel partners fairly are away to minimize what?

Channel conflict

Grouping individual items into an economical shipping quantity and sealing them in protective container for transit to the final destination

Containerization

· Some intermediaries play a critical role by providing __________ to customers at the end of the channel

Credit

What kind of distribution includes the benefit of putting a firm in direct contact with its customers?

Direct Distribution

What kind of distribution would a producer choose if it wants to maintain control of the marketing mix?

Direct Distribution

Direct communication between a seller and an individual customer using a promotion method other than face-to-face personal selling

Direct Marketing

Are most business products sold through intermediaries or direct to consumer?

Direct to consumer

An approach that puts information in a standardized format easily shared between different computer systems

Electronic Data Interchange (EDI)

Selling through only one intermediary in a particular geographic area

Exclusive Distribution

True or false: You shouldn't have intermediaries because it's the status quo

False, eliminating intermediaries might create other opportunities

True or false: service firms use indirect channels

False, service terms use direct channels

What is this an example of: Logitech uses emails to communicate directly with customers who purchase their products through retailers

Firms that use direct marketing promotion but distribute their products through intermediaries

What kind of goods should have outlets that provide information - knowledgeable sales people who can provide insights about different brands and models and online stores with videos or information?

Heterogeneous shipping goods

What kind of goods favor low-cost retailers based on the fact that customers focus mostly on low prices?

Homogeneous Shopping Goods

Conflict between two competing retailers is an example of what?

Horizontal Channel Conflict

Conflict that occurs between firms at the same level in a distribution channel

Horizontal Channel Conflict

What is this an example of: a bicycle stores 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

Horizontal Channel Conflict

Exposure that makes a product available widely enough to satisfy target customers' needs but not exceed

Ideal Market Exposure

Selling a product through all responsible and suitable wholesalers or retailers who will stock or sell the product

Intensive Distribution

What is usually required for adjusting for discrepancy of quantity and assortment?

Intermediaries

Who can be specialists who provide information to bring buyers and sellers together?

Intermediaries

Why might intermediaries that have the best contacts with the target market be hesitant to add unproven vendors or new products?

Intermediaries stock what they believe customers want to buy, adding unproven goods can be risky

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

Licensing

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

Logistics

What is the implication of the fact that · several different product classes may be involved if different market segments view a product in different ways?

Marketing managers may need to develop several strategies, each with its own Place Arrangements

Occurs when a producer uses several competing channels to reach the same target market perhaps using several intermediaries in addition to selling directly

Multichannel Distribution

Do direct marketing and direct distribution always go hand in hand?

No

Is selling direct an either/or decision?

No not necessarily, when a company serves multiple target markets, it might choose to sell direct through intermediaries

Does using DTC (rather than an intermediary) always lower prices?

No not necessarily. Sometimes customers prefer to buy from intermediaries, or the intermediary performs necessary activities more effectively or for a lower cost

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

Physical Distribution Concept

How rapidly and dependably a firm can deliver what they, the customers, want

Physical Distribution Customer Service Level

A distribution service in which loaded truck trailers, or other sealed containers, are carried by rail to destinations from which they can be taken by truck to their final destination

Piggyback Service

Making goods and services available in the right quantities and locations, when customers want them.

Place

Which of the four P's is hardest to change?

Place

Storing facilities owned or leased by companies for their own use

Private Warehouses

In what kind of channel system has the producer has elected the target market and developed the product, set the price structure, invested in the consumer and channel promotion, and developed the Place setup?

Producer led channel system

What helps us decide how much market exposure we'll need in each geographic area?

Product Classes

The term direct marketing is primarily concerned with which if the 4 P's?

Promotion

Independent storing facilities

Public Warehouses

Actions that Adjust the quantities or assortments of products handled at each level in a channel of distribution

Regrouping activities

Channels used to retrieve products that customers no longer want

Reverse Channels

Selling through only those intermediaries who give the product special attention

Selective Distribution

Separating products into grades and qualities desired by different target markets

Sorting

What kind of assorting strategy is this an example of: a wholesaler that specializes in serving convenience stores may focus on smaller packages of frequently used products

Sorting

The marketing function of holding goods so they've available when they're needed

Storing

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

Supply Chain

What creates discrepancy of assortment?

The fact that producers typically specialize by product

Who usually does assorting?

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

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

Total Cost Approach

Channel systems where the various channel members make little or no effort to cooperate with one another and only considers whats in their own best interest

Traditional Channel Systems

The marketing function of moving goods

Transporting

True or false: The marketing manager must also consider Place objectives in relation to the product life cycle

True

True or false: Most producers seek help from specialists when they first enter international markets

True!

What kind of goods should be sold at locations where other, related products are available?

Unsought products

Dollar Shave Club selling razors directly to customers on a subscription model is an example of start up businesses doing what?

Using a DTC business model to disrupt markets

Conflict that occurs between firms at different levels in the channel of distribution

Vertical Channel Conflict

What is this an example of: When a producer wants to maximize the number of units sold while a retailer seeks to maximize profits. A producer could offer a discount to a retailer hoping that the retailer will pass the price cut on to customers, leading to increased sales. However, the retailers may decide to buy more but keep prices at the same level

Vertical Channel Conflict

What are the two basic kinds of conflict in channels of distribution?

Vertical Channel Conflict and Horizontal Channel Conflict

Acquiring firms at different levels of channel activity

Vertical Integration

Channel Systems in which the whole channel focuses on the same target market at the end of the channel

Vertical Marketing Systems

When is widespread distribution needed geographically?

When customers are spread over a large area

When are a number of place variations often required?

When different target markets have different needs

What kind of situation calls for a channel captain?

When some firms are in a better position to take the lead in the relationship and in coordinating the whole channel efforts

When might producers take the lead in channel relationships?

When the producer is large, dominates a category, or wields a powerful brand name

What is one of the most basic place decisions producers must make?

Whether to handle the whole distribution job themselves, or use wholesalers, retailers, and other specialists

Why might producers choose direct distribution if it wants to maintain control of the marketing mix?

Wholesalers and retailers often carry competing brands and make decisions that are in their own interests which may not be aligned with the interests of an individual producer

How is distribution effected for convenience products based on the notion that customers won't spend much time shopping for convenience products?

Widespread distribution is needed to make products available when need strikes

A company with limited financial resources or that wants to retain flexibility may want to avoid that investment by doing what?

Working with established intermediaries

Do digital products (intangible) need to be distributed?

Yes, even without a physical form, distribution remains an important marketing strategy decision for firms with digital products

What are the four grouping activities?

accumulating, bulk-breaking, sorting, and assorting

Are consumer products generally sold through intermediaries or DTC?

generally intermediaries, but this is changing

What might a firm have to do if there are not suitable intermediaries?

might have to go direct

Why is place the hardest of the P's to change?

o It can often take time and money to develop effective working relationships with others in the channel o Legal contracts with channel partners may limit changes o Hard to move retail stores and wholesale facilities once they are set up

True or False: Virtual products often face the same discrepancies and separations as tangible goods.

true