Marketing Chapter 15

Types of distribution channels

direct channel channels using marketing intermediaries dual distribution reverse channels

Reverse Channels

firms should not ignore reverse channels -designed to return goods to producer purhase new tire and find charge for dispposing old tires -gained increased importance with rising prices for raw materials increasing availabilyt of recying facilites and move toward sustabtiablity -handle product recalls and repairs -appliance manufac might send recall notices increased availability of recycling facilities increased environmental sustainability rising price of raw materials

air freight goods

flowers, medical testing kits, gourmet food sent to customers

Example of goods ; water carriers

fuel oil coal chemicals minerals and petroleum proeducts, automobiles, electornics clothing, toys ,

oceangoing supertankers

like the size of footall fields at full capcity ships carry a lot of stuff incur low costs compared with rates of other tranporation cost. Transit time is often logner than other options

Compares modes of transportation

look at table in book page 328 speed: truck is fastest depending in meeting schedule- truck pipeline air frequency of shipments-truck pipeline high availablity in different locations: truck extensive flexibility in handling- water very high rail high cost truck high air very high

example of goods handled by railraods

lumber iron steel coal automobiles gain and chemcials plus containerized loads of finished products such as electronics clothing and furniture

Downstream Management

management of finished product storage, outbound logistics, marketing and sales, and customer service.

upstream management

management of raw materials, inbound logistics, and warehouse and storage facilities

Intermodal operations

ntermodal operations: utilizing a combination of transport modes to improve customer service and achieve cost advantages - Piggyback: rail and highway carriers - Birdyback: air and highway carriers - Fishyback: water and air carriers provide advant to firms depndign on scenario mangers seek to maximize effiency across available oprtions to save both cost and time.

Intensity factors

number or percentage of intermediares usually retailers through which a manu distributes its goods in a particular market - optimal distribution should ensure adequate market converage for a product -varies depending on goals of firms distribtuion intensity varies along a continuum iwth threee categories

pipelines goods

oil, diesel, jet fuel, kerosene and natural gas

Two important concepts infleunce many materials handling choices

unitizing containerization

From the perspective of the proudcer supply chain management takes place in two directions

upstream and downsteam

Selective distribution

when a firm choose only a limited number of retailers in a market area to handle its line -by limiting, reduce total marketing costs while establishing strong workign relationships -retailers agree with company rules -protect company brand

Selecting distribution channels factors

- Market - Product - Organizational - Competitive - Intensity

Distribution channel

-the individuals and organizations who manage the flow of product from producers to consumers A firm must analyze channels with regard to consumer needs to determine the most appropriate channel(s) for its goods and services. -also called marketing channels -brings buyers and sellers together to complete transactions -consist of individual organizations who manage the flow of product form producers to consumers. -een the best product product would not see light of day wihtout a plan for makign prdouct available -no single channel best serves the needs of every company instead of searching for the best channels for all products, a firm must analyze channels in light fo consuemr NEEDS to detemine most appropriate channel or channels for firms goods and services -column in vertical line and integrate and take over ad somoeone put on computer and bypass intermediaries that fine but just becuase you eliminate a channel doesnt mean you take away the task that has to be performed-if you cut out someone has to do it

Short and long distribution channels

A short distribution channel involves few intermediaries . - Examples: business market products, service firms •haircuts manicures and dental cleanings all operate through short channels A long distribution channel involves several intermediaries working in succession to move goods from producers to consumers.

air freight

Air freight is the shipment and transfer of goods through an air carrier. • Provides a number of benefits to shippers: - Products can be delivered to remote or hard-to-reach locations. - Time sensitive material can more easily be shipped "express" via air. - Smaller and mid-sized companies can participate more easily in international trade. - Airport controls provide a higher level of security. • Goods most often handled by air freight: flowers, medical testing kits, and gourmet food products sent directly to consumers

Direct Channel

Carries goods directcly from a producer to the ultimate user -simplest and shortest distribution channel is a direct channel -important option for goods requiring extensive demonstrations for persuading customers to buy -can utilize more than one direct channel -example-bose sells audio eqipment direclty to consumers online and through its own physical retail stores. In both cases, they bypass the use of other distribution partners to sell their products -cna be supplemented with direct selling from producer to consumer

Function of intermediates

Facilitate the exchange process lower cost of logistics increase sales and marketing infrastructure

Protective packaging and materials handling

How the firm packages and efficiently handles goods in the factory, warehouse, and transport terminals logistic mangers arrange and cotnrol actiivtes fo rmoving proudcts iwhtin plants compose materials handing system two imporatnt concepts that inflecne many mateiral handign choices 1 unitizing 2containerization

distribution varies along a continuum with three general categories of distribution intensity

Intensive selective exclusive distribtuion

Key priorities of warehousing and storage

Inventory control, protective packaging and materials handling and warehousing

Pipelines

More than 2.5 million miles of pipeline crisscross the United States transporting energy products. • Offer low maintenance and dependable methods of transportation, but have limitations: - Have fewer locations than water carriers - Able to accommodate shipments of only a small number of products - Offer a relatively slow method of transportation • Goods most often handled by pipelines: oil, diesel fuel, jet fuel, kerosene, natural gas oil pipelines carry commites: like crude oil and refine prouducts like jet fuel or gasoline although pipelines offer low maintencen a number of characterics limit applicaiton. fewer locations, accomodate shipemnts of only small number of products represent a relatively slow method of transporation

Distribution channels using marketing intermediaries

Producer-retailer-consumer producer-wholesaler-retailer-consumer Producer-agent(broker)-wholesaler-retailer-consumer

Market factors

Products are intended for consumer or business market end-users . - Business market purchasers usually prefer to deal directly with manufacturers.(expect for routine supplies or small accessory items) - Consumers mainly make their purchases from retailers. • sell products that serve both bus users and consumers through more than one channel Other market factors affect channel choice : - Market's needs - Geographic location - Average order size direct channell offers laternative to concentrated market with a small number of buyers in serving geogrpahyilly scatttered area, distirbito through interemdiess makes sense example: farm equipment manu is targetting a defined but relatively small number of buyers. They are more likely to utilize direct channels or choose intermediares who specilze but dont sell to firms, would be a pooor choice

Inventory control

Quantity of inventory the firm maintains at each location -critical because companies need to maintain enough inventory to meet customer demands without incurring costs for carrying excess inventory -jit-keeping invnetory levelw under ocntrol where companeis keep low invenotyr and rely on suppliers to quickly deliver parts when needed. precise demand forecasting example 1: downside of too much inv: lfs could stock 10000 boxes of each prouct howeer producing requires lot of money example 2: downside if too little inventory: lfs decide varry very lettle, if recieve large order only find otu theat raw material if sold out

modes of transportation

Railraods motor carriers water carriers pipelines air freight

railroads

Railroads control the largest share of the freight business as measured by ton-miles. - Ton-mile: shipping activity required to move 1 ton of freight 1 mile • Rail provides the most efficient way to move bulky commodities over long distances . • Goods most often handled by railroads: lumber, iron, steel, coal, automobiles, grain, chemicals generally transport huge quanttiites of coal chemcial grain non mettalic minterals wood product and automobiles

Warehousing

The distribution system's location of stock and the number of warehouses the firm maintains products flow thorugh two types of warehouses storage and distribution storage warehouse holds goods for moderate to longer periods of in an attmep to balance supply and demand distribution warehouse assmebles nad redistirbtes godos keeping them moving as much as possible -many distribtuion hold for less than 24 hours -managers have save transportaion costs by making central distribtuion centres or breaking down large shipments and deliver to cusomrers many internet users use break bulk distrbution centers -improve cusotmer service cut idstbution cost through automation two cateoires of costs infleucne this choice on loaction and number of storage facilites warehousing and materials handling costs delivery costs form warehouses to customer ogistics managers can cut costs by: - Developing central distribution centers - Automating warehouse systems

Motor carriers

Trucks haul more than 10.5 billion tons of freight each year. - Deliver to areas railroads can't reach - Provide fast and consistent service for both large and small shipments • Technology has improved the efficiency of trucking . - Example: in-truck computers that allow last-minute changes in scheduling and delivery • Goods most often handled by motor carriers: clothing, furniture, fixtures, lumber, plastics, food, machinery now trakc fleets by satellite communications systems

Direct selling

a marketing tactic in which a producer establishes direct sales contact with its products final users direct selling is an important opption for goods requiring extensive demsonstrations for persuading customers to buy. direct channel is supplemented with this producer to consumer

Sales agent

a third-party person or company who represents the producer to wholesalers and retailers - A contracted sales force with expertise in a particular market or geography - Particularly important for smaller firms essentially a contracted sales force with expertise in a particular market or geography -important for smaller firms who cannot afford a full time sales staff or going into new markets sales agent dont buy or take title to the proudct, but serve as go between for producers and distirbution partners several configurations producer-retailer-consumer producer-wholesaler-retailer-consumer producer-sales agent-wholesaler-retailer-consumer

Supply chain

also known as value chain -the complete sequence of suppliers and activities that contirbute to the creation and delivery of goods and services -begins with raw materials inputs for manu a rpdouct then procees to actual product activirtes the fianl link in the supply chain is the movement from finished proucts through customers -activities specfically related to the physical movement and management of raw materials or products are called logistics-associated with trucking and trans but could include warehousing Also is known as the value chain • The supply chain: - Begins with raw material inputs for manufacturing a product - Proceeds to actual production activities - Ends with the movement of finished products through the distribution channel to customers • Logistics: activities related to the physical movement and management of raw materials or products not all memebrs of supply chain considered memeber of distribution channel - businss look for optimize fucntion of each activity to manage supply chain Upstream management Raw materials -quality availability ethical sourcing Inbound logistics -timliness -reliability warehouse and storage -safety security inventory -control product -quality control -safety -fair labor practices -spped -cost Next-Downstream management finished product storage -safety -security -inventory control outbound logisitcs -timliness -reliability marketing and sales -brand consistency -targeted effort customer serve -accessibilyt -streamline returns process

Entreprise resource planning system

an integrated software package that consolidtaes data from among the firms units -two thrids of users are manu concern with product issues -logisitical cost control: to reducce logisitical costs, business rexamine each linik in supply chain to identify activires that do not add vlaue to cusotmers cut costs and boost efficiency

Marketing intermediary(channels using marketing intermediaries)

an organization that operates between producers and consumers to help bring the product to market -or the middleman there are three primary types of marketing intermediariese wholesalers retailers and agents

Lower cost of logistics

by using intermediaries, manufacturer does not need to incur the cost of buying or leasing a network of its own warehouses to inventory product or operate its own fleet of vehicles to deliver product. instead it can partner with logisitics company to ship product or a wholesaler who cna inventory and deliver product to retailers. If unified wanted to bring its western family branded dairy products to market internationally, it could rely on establish logisitiscs providers like maersk

Example of goods most often handled by different modes of transpor: motor carriers

clothign, furniture, fixtures, lumber, plastic, food, leather and machinery

Organizational facors

companeis with strong financial managemetn and marketing resources feel less need for help from intermediaries. -affects channel -hire own sales force -high sales volume spreads selling cotsover a large number of itesm small firm with fewer resources may do better with the aid of intermediaries -single product firms often view direct selling as unaffordable A firm with a broad product line can usually market directly to retailers or business users. • A small firm with fewer resources may need intermediaries . - Direct selling is often unaffordable for single-product firms. © 2019 Cengage. All rights reserved.

Vertical integration example

corporate contractual vms administered vms

Channels using marketing intermediaries

direct channels not practice some products serve markets in different areas of country or world or have large numbers of end users other categories rely heavily on repeat purchases -producer have find more efficient less expesnive less itme consuming alternatives to direct channel by using market intermdiary marketing intermediary: an organization that operates between producers and consumers to help bring the product to market - More efficient, less expensive, and less time-consuming than direct channels • wholesalers: marketing intermediary who takes title to the goods, stores them in warehouses, and distributes them to retailers, other distributors, and sometimes end consumers • sales agent: a third-party person or company who represents the producer to wholesalers and retailers - A contracted sales force with expertise in a particular market or geography - Particularly important for smaller firms © 2019 Cengage. All rights reserved.

vertical conflict

disagreements among channel memebrs at different levels retailers may develop private brands to compete with producers brands or may make own retail

Horizontal conflict

disagreemnts among channel memebers at the same level such as two or more wholesalers or retailers ex- retailer previously exclusive seller upset if manu begins to sell product to other retailers -lead to price competition among sellers

Intensive

distribute through all available retailers in a trade area -Suits items with wide appeal across broad groups of consumers -dove practices intensive distirbution for many of its products you can pick up one of its chocloate bars or ice cream products just about anywhere

Bargelines

efficiently transport bulky low unit value commmodites such as grain. large ships also operate on grate lakes transporting stuff like iron ore.

Unitizing

palletiziing, combing as many packages as possible into each load that moves within or outside a facility. managers prefer to handle on pallets lash materials in palce iwth steel banks -requires minimal lbao rot move minimizes damage Promotes efficient materials handling because each package requires minimal labor to move • Minimizes damage and pilferage

Vertical integration

producer assumes control over functions that were previously handled by an intermediary Example -Apple decided to open its own retail stores in addition to distributing its products through other retailers.

Facilitate the exchange process

producer can cut costs of buying and selling to multiple customers by using an intermdiary ex-if unified chose to develop facilitate and maintain direct contacts for its golden creme branded products with all its millions of customers around the country. -would would go out of business unified partners with retailers to act as intermediaries recucing the number of contacts that uni needs to make in order to reach same number of customers look at graph

Increase sales and marketing infrastructure

provide cost effective sales and marketing services to manufacters as well instead of hiring thousand of sales reps to reach retailers and consumers across the us -work with large sales and marketing firms that have an existing sales force -partners with large retailers like walmart who have thousands of locations and service millions of existing customers on a daily basis

Common method for carrying supply chain

radio frequency identificaiton enterprise resource planning system

Dual Distribution

refers to the movement of products through two or more channels to reach the firms target market example- nordstrom three pronged distribution system, selling through stores catalogs and online. -adopt a dual distribution by maximize their firms coverage in the marketplace or to increase the cost effectivenss of firms marketing efforts look at pic in book

Three primary types of intermediaries

retailers wholesalers and agent wholesaler ownes product retailers own product agents and broker do not take title agents have a longer relationsip between buyers and seller sand brokers have a shorter

competitive factors

sometimes choose distribution channels to avoid competitiors or compete -bus that exlore ew distribution must be careful to not upset channel intemediares horizontal conflict: disagreements among channel members at the same level, such as two or more wholesalers or retailers - vertical conflict: disagreements among channel members at different levels • The answer to channel conflict is effective cooperation among channel members . - Best achieved when all channel members regard themselves as equal components of the same organization

Retailers

specialize in selling product to consumers by opening stores, hiring sales staff, marketing to generate consumer traffic, and displaying merchandise in ways that encourage purchasing

Wholesaler

take title to the goods store them in warehouses and distribute them to retailers others distributors and sometimes end consumers

Comtainerization

the process of combining several unitzed loads into a single well protected load -a cointiner of oil rig parts high speed run train parts loaded onto ship -reduces time required ot laod ships and limits damage Reduces loading/unloading time • Limits in-transit damage to freight

radio frequency identificaiton

tiny chip with identification info is placed on an item, That chip can then be read by a radio frequency scanner from a distrance making tracking easier -widely used in tollway pass transmitter -zip through withotu stopping -embedd in employee id cards

Exclusive

when a producer sells to only a small number of retailers or grants exclusive rights to a wholesaler or retailer to sell its products in a specific geographi region -automobile good example -jaguar car dealer May sacrifice some market coverage • Often develop and maintain an image of product quality and prestige • Limits marketing costs limits costs becuase deals with smaller number of acocutns distribution producers and retailers coopeate closely in decisions concerning ad and promotion inventory carreid by retialers and prices example: kenneth cole wnats to maintain brand by oly woriking with retialers that cna agree to company rules for pricing and product display

Water carriers

wo types of transport methods move products over water: - Inland or barge lines • Transport bulky, low-unit-value commodities - Oceangoing deepwater ships • Costs are low compared with the rates for other modes of transportation. • Transit time is often longer than other options. • Goods most often handled by water carriers: fuel, oil, chemicals; automobiles, electronics, clothing, toys from foreign manufacturers

Products Factors

• Products characteristics guide the selection of the optimal distribution channel strategy . - Perishable goods move through short distribution channels to reduce storage time. • Examples: fresh fruit and vegetables, milk - Products with low unit costs usually travel through long channels to gain the widest distribution possible. • Examples: canned dog food, bars of soap, gum while far more poeple visit walmart stores than car dealerships in a given week, it is unlikely that the car manufacturer would try to sell through walmart as its not the right venue for a product of that size and price guide the selection of the optimal distribution channel strategy . - Perishable goods move through short distribution channels to reduce storage time. • Examples: fresh fruit and vegetables, milk - Products with low unit costs usually travel through long channels to gain the widest distribution possible. • Examples: canned dog food, bars of soap, gum