Chapter 15 - Distributing Products

air transportation

Air transportation is a critical factor in many industries, carrying everything from small packages to luxury cars and elephants. FedEx and UPS have used air transportation to expand into global markets. The air freight industry is starting to focus on global distribution.

wholesaler

- marketing intermediary that sells to other organizations, such as retailers, manufacturers, and hospitals. - Apart of the B2B system.

marketing intermediaries

- organizations that assist in moving goods and services from producers to businesses (B2B) and from businesses to consumers. - Called intermediaries because they are in the middle of a series of organizations that join together to help distribute goods from producers to consumers.

direct selling

- reaches consumers in their homes or workplaces. - Many businesses use direct selling to sell cosmetics, household goods, lingerie, clothes, and candles at house parties they sponsor.

wholesale sale

- sale of goods and services to businesses and institutions, like schools or hospitals, for use in the business, or wholesalers or retailers for reale. Wholesalers make business-to-business sales.

cash-and-carry wholesalers

- wholesalers that serve mostly smaller retailers with a limited assortment of products - retailers went to such wholesalers and paid cash, and carried the goods back to their stores

There are three forms of contractual systems:

Franchise systems: the franchisee agrees to all the rules, regulations, and procedures established by the franchiser. (mcdonalds, planet fitness) Wholesaler: Each store signs an agreement to use the same name, participate in chain promotions, and cooperate as a unified system of stores. Ex. Ace hardware Retail cooperatives: retailers agree to focus their purchases on one wholesaler, but cooperate retailers could also purchase a wholesale organization to ensure better service.

Why have marketing intermediaries at all?

Intermediaries perform certain tasks, such as transporting, storing, selling, advertising, and relationship building - faster and more cheaply than most manufacturers could.

social commerce examples

Peer-to-peer sales platforms (eBay, etsy, amazon marketplace) Social network shops: facebook marketplace Group buyings: groupon Peer recommendations: amazon, yelp User curated shopping: (fancy, lyst, styloko) crowdfunding/sourcing: threadless, kickstarter, vote on designing products Social shopping: fab, fancy, includes chat forums to discuss/exchange advice

Retail Intermediaries

Perhaps the most useful marketing intermediaries, as far as you are concerned, are retailers. Retail organizations employ nearly 42 million people and are one of the major employers of marketing graduates.

pipelines

Pipelines primarily transport water, petroleum products, coal (has to be crushed and mixed with water first).

supply chain order

Suppliers' Plant→ Manufacturers→ Wholesalers→ Retailers→ Consumers Supply chains include: Farmers, minors, suppliers of all kinds (parts, equipment, supplies), manufacturers, wholesalers, and retailers.

trains for transportation

The largest percentage of goods in the United States (by volume) is shipped by rail. Railroad shipment is best for bulky items such as coal, wheat, automobiles, and heavy equipment. They offer relatively energy-efficient way to move goods and could experience significant gains especially if fuel prices rise.

freight forwarder

an organization that puts many small shipments together to create a single large shipment that can be transported cost-effectively to the final destination. Used by smaller manufacturer or marketers--good rates and service Known as less-than-carload shipments (LCL)

retailer

an organization that sells to ultimate consumers

channel distribution

consists of a whole set of marketing intermediaries, such as agents, brokers, wholesalers, and retailers, that join together to transport and store goods in their path (or channel) from producers to consumers.

online retailing

consists of selling goods and services to ultimate consumers online

administered distribution system

distribution system in which producers manage all of the marketing functions at the retail level

Retail Distribution Strategy Intensive Distribution

distribution that puts products into as many retail outlets as possible Vending machines (candy, gum)

Retail Distribution Strategy selective distribution

distribution that sends products to only a preferred group of retailers in an area. Appliances, furniture, and clothing

Retail Distribution Strategy exclusive distribution

distribution that sends products to only one retail outlet in a given geographic area. Luxury auto manufacturers, producers of specialty goods (skydiving equipment)

possession utility

doing whatever is necessary to transform ownership from one party to another, including providing credit Ex. delivery, installation, guarantees, and follow-up service.

logistics

getting goods to consumers efficiently the planning, implementing, and controlling of 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.

storage warehouse

holds products for a relatively long time

merchant wholesalers

independently owned firms that take title to the goods they handle.

container-on-flatcar (COFC)

intermodal shipping containers are widely used in place of truck trailers, and can be stacked two high on specially designed railcars

agents/brokers

marketing intermediaries who bring buyers and sellers together and assist in negotiating an exchange but don't take title to the goods, that is, at no point do they own the goods

materials handling

movement of goods within a warehouse from warehouses to the factory floor, and from the factory floor to various workstations. Factory processes change raw materials and parts and other inputs into outputs.

Water Transportation

When sending goods overseas, often the least expensive way is by ship. Water transportation is not appropriate for goods that need to be delivered quickly.

contractual distribution system

a distribution system in which members are bound to cooperate through contractual agreement This happens when a manufacturer can't buy retail stores, it can try to get retailers to sign a contract to cooperate with it.

social commerce

a form of electronic commerce that involves using social media, online media that supports social media

direct marketing:

activity that directly links manufacturers or intermediaries with the ultimate consumer. Include direct mail, catalog sales, and telemarketing as well as online marketing. This has become popular because shopping from home or work is more convenient for consumers than going to stores. Ex. L.L.Bean

service utility

adding value by providing fast, friendly service during and after the sale and by teaching customers how to best use products over time.

place utility

adding value to products by having them where people want them. Ex. 7/11 stores

time utility

adding value to products by making them available when they are needed. Ex. 24 hour convnient stores.

information utility

adding value to products by opening two-way flows of information between marketing participants. Ex. newspapers, salespeople, libraries, websites, and government publications.

supply chain

all the linked activities various organizations must perform to move goods and services from the sources of raw materials to ultimate consumers A _____________is longer than a channel of distribution because it includes links from suppliers to manufacturers, whereas the channel of distribution begins with manufacturers.

distribution warehouse

used to gather and redistribute products

intermodal shipping

uses multiple modes of transportation including highway, air, water, and rail to complete a single long-distance movement of freight.

Supply Chain Management

process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all the organizations in the supply chain; managing the return of such goods if necessary; and recycling materials when appropriate.

retail sale

sale of goods and services to consume for their personal use

Radio frequency identification (RFID)

tags merchandise so that it can be tracked from its arrival on the supplier's docks to its exit through the retailer's door.(walmart, target use)

- Channels of distribution help ensure communication flows and the flow of money and title to goods. - They help ensure that the right quantity and assortment of goods will be available when and where needed.

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Logistics describes how companies perform the 7 R's: Getting the product to the right: Place Customer At the right time In the right quantity Right condition At the right price

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Logistics is as much about the movement of information as it is about the movement of goods. Customer wants and needs must flow through the system all the way to suppliers and must do so in real time.

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Railroads joined with trucking firms to create a shipping process called trailer on flat car (TOFC) or piggybacking. A truck trailer is detached from the cab, loaded onto a railroad flatcar, and taken to a destination where it is offloaded, attached to a truck, and driven to the customers' plant.

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Shipping by air is often prohibitively expensive, which sometimes narrows the choice to moving goods by ship. As transportation and distribution have grown more complex, marketers have responded by developing more sophisticated systems. To better manage customs problems, for instance, many turn to web-based trade compliance systems.

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supply chains are called value chains when systems are so effective and efficient. Some companies are not as efficient because they struggle with high distribution costs, including the cost of disruptions, inefficient truck routes, and excess inventory.

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brick and click stores

- Brick and mortar stores that add online outlets are sometimes called brick and click stored because they allow customers to choose which shopping technique suits them best. - Some brick and click stores offer their customers the option of saving on shipping costs by picking up their online purchases in a store, hoping they'll buy more while they're there.

Three basic points about intermediaries

- Marketing intermediaries can be eliminated, but their activities can't - Intermediary organizations have survived because they perform marketing functions faster and more cheaply than other can. - Intermediaries add costs to products, but these costs are usually more than offset by the values they create.

multi-level marketing

- The main attraction of __________________ or employees, other than the potential for making money, is the low cost of entry. - ex. Ex. Avon, Thirty-One, AdvoCare

non-store retailing

- Vending machines carry the benefit of location and are placed where people want convenience items. - Carts and kiosks have lower overhead costs than stores do, so they can offer lower prices on items such as t-shirts, purses, watches, and cell phones. - They dispense coupons and helpful product information - Pop-up stores are temporary outlets that remain open for a short period of time in small spaces and offer items not found in traditional stores.

corporate distribution system

- distribution system in which all of the organizations in the channel of distribution are owned by one firm. - Sherwin-Williams engages in the manufacture, distribution, and sale of its products.

Agents and brokers bring buyers and sellers together and assist in negotiating an exchange. They never own the products, carry inventory, provide credit, or assume risks. Agents and brokers earn commissions or fees based on a percentage of the sales revenues. Agents often maintain long-term relationships with the people they represent, whereas brokers are usually hired on a temporary basis. Agents who represent producers are either manufacturers' agents or sales agents. As long as they do not carry competing products, they can represent several manufacturers in a specific territory. Brokers have no continuous relationship with the buyer or seller. Once they negotiate a contract between the parties, their relationship ends.

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reverse logistics

brings goods back to the manufacturers because of defects or for recycling materials.

inbound logistics

brings raw materials, packaging, other goods and services, and information from suppliers to producers.

full-service wholesalers

perform all the distribution functions. They provide a sales force to sell the goods, maintain inventory, communicate advertising deals, arrange the transportation of goods, and provide capital and market information.

limited-function wholesalers

perform select functions, but try to do them especially well. Ex. rack jobbers, cash-and-carry wholesalers and drop shippers.

outbound logistics

the flow of finished products and information to business buyers and consumers like you and me.

third party logistics

the use of outside firms to help move goods from here to there. The 3PL that have superior capability in business intelligence and are proactively sharing that knowledge are the ones who will grow in the future.

Form Utility

the value seen by a consumer in finished products. - ex. a farmer who separates the wheat from the chaff and the processor who turns the wheat to flour are creating a floor utility.

utility

the want-satisfying ability, or value, that organizations add to goods or services by making them more useful or accessible to consumers than they were before.

rack jobbers

wholesalers that furnish racks or shelves full of merchandise to retailers, display products, and sell on consignment.

drop shippers

wholesalers that solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer. (coal, lumber, chemicals)