3 Distribution Channels and Market Coverage Channel of distribution (marketing channel)A sequence of marketing organizations that directs a product from the producer to the ultimate userMiddleman (marketing intermediary)A marketing organization that links a producer and user within a marketing channelMerchant middleman—takes title to products by buying themFunctional middleman—helps in the transfer of ownership of products but does not take title to the productsRetailer—buys from producers or other middlemen and sells to consumersWholesaler middleman—sells products to other firms
4 Channels for Consumer Products Producer to consumer (direct channel)No intermediariesUsed by all services and by a few consumer goodsProducers can control quality and price, do not have to pay for intermediaries, and can be close to their customersExamples: Dell Computer, Mary Kay Cosmetics
5 Channels for Consumer Products (cont.) Producer to retailer to consumerProducers sell directly to retailers when retailers (e.g., Walmart) can buy in large quantitiesMost often used for bulky products for which additional handling would increase selling costs, and for perishable or high-fashion products that must reach consumers quickly
6 Channels for Consumer Products (cont.) Producer to wholesaler to retailer to consumerThe traditional channelUsed when a producer’s products are carried by so many retailers that the producer cannot deal with them all
7 Channels for Consumer Products (cont.) Producer to agent to wholesaler to retailer to consumerAgents—functional middlemen that do not take title to products and are compensated by commissions paid to the producersOften used for inexpensive, frequently purchased items, for seasonal products, and by producers that do not have their own sales forces
8 Channels for Consumer Products (cont.) A manufacturer may use multiple channelsTo reach different market segmentsWhen the same product is sold to consumers and businessesTo increase sales or capture a larger market share
13 Level of Market Coverage Intensity of market coverageIntensive distributionThe use of all available outlets for a product to saturate the marketSelective distributionThe use of only a portion of the available outlets for a product in each geographic areaExclusive distributionThe use of only a single retail outlet for a product in a larger geographic area
14 Partnering Through Supply-Chain Management Long-term partnership among channel members working together to create a distribution system that reduces inefficiencies, costs, and redundancies while creating a competitive advantage and satisfying customersCategory managementThe retailer asks a supplier how to stock the shelvesTechnologyHas enhanced implementation of supply-chain management
15 Marketing Intermediaries: Wholesalers Justifications for marketing intermediariesIntermediaries perform essential marketing servicesManufacturers would be burdened with additional record keeping and maintaining contact with numerous retailersCosts for distribution would not decrease and could possibly increase due to the marketing inefficiencies of producers
16 Types of Wholesalers Merchant wholesalers Middlemen that purchase goods in large quantities and then sell them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial usersOperate in one or more warehouses where they receive, take title to, and store goodsThese wholesalers are sometimes called distributors or jobbersFull-service wholesalersGeneral merchandise wholesalerLimited-line wholesalerSpecialty-line wholesalerLimited-service wholesalers
17 Types of Wholesalers (cont.) Commission merchants, agents, and brokersFunctional middlemen that do not take title to productsPerform some marketing activitiesPaid a commission (percentage of sales price)Commission merchantCarries merchandise and negotiates sales for manufacturersAgentExpedites exchanges, represents a buyer or a seller, and is often hired permanently on a commission basisBrokerSpecializes in a particular commodity, represents a buyer or a seller, and is likely to be hired on a temporary basis
18 Types of Wholesalers (cont.) Manufacturer’s sales branchMerchant wholesaler owned by a manufacturerCarries inventory, extends credit, delivers goods, helps in promoting productsCustomers are retailers, other wholesalers, and industrial purchasersManufacturer’s sales officeSales agent owned by a manufacturerSells goods manufactured by its own firm and also others that complement its own product line
19 Marketing Intermediaries: Retailers The final link between producers and consumersApprox. 2.6 million retail firms in the U.S.90 percent have sales of less than $1 million
20 The Ten Largest Retail Firms in the United States
21 Classes of In-Store Retailers Independent retailerA firm that operates only one retail outletChain retailerA company that operates more than one retail outletDepartment storeA retail store that:employs twenty-five or more personssells at least home furnishing, appliances, family apparel, and household linens and dry goods, each in a different part of the storeDiscount storeA self-service, general-merchandise outlet that sells products at lower-than-usual prices
22 Classes of In-Store Retailers (cont.) Catalog showroomA retail outlet that displays well-known brands and sells them at discount prices through catalogs within the storeWarehouse showroomA retail facility in a large, low-cost building with large on-premises inventories and minimal serviceConvenience storeA small food store that sells a limited variety of products but remains open well beyond normal business hours
23 Classes of In-Store Retailers (cont.) SupermarketA large self-service store that sells primarily food and household productsSuperstoreA large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product linesWarehouse clubA large-scale members-only establishment that combines features of cash-and-carry wholesaling with discount retailing
24 Classes of In-Store Retailers (cont.) Traditional specialty storeA store that carries a narrow product mix with deep product linesOff-price retailerA store that buys manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discountsCategory killerA very large specialty store that concentrates on a single product line and competes on the basis of low prices and product availability
25 Kinds of Nonstore Retailing A type of retailing whereby consumers purchase products without visiting a storeDirect sellingThe marketing of products to consumers through face-to-face sales presentations at home or in the workplaceDirect marketingThe use of the telephone, Internet, and nonpersonal media to introduce products to customers, who can then purchase them via mail, telephone, or the Internet
26 Kinds of Nonstore Retailing (cont.) Catalog marketingAn organization provides a catalog from which customers make selections and place orders by mail, telephone, or the InternetDirect-response marketingA seller advertises a product and makes it available, usually for a short time period, through mail, telephone, or online ordersTelemarketingThe performance of marketing-related activities by telephone
27 Kinds of Nonstore Retailing (cont.) Television home shoppingProducts are presented to television viewers, who can buy them by calling a toll-free number and paying by credit cardOnline retailingMakes products available to buyers through computer connectionsAutomatic vendingThe use of machines to dispense products
28 Types of Shopping Centers A self-contained retail facility constructed by independent owners and consisting of various storesLifestyle shopping centerHas an open-air configuration and is occupied by upscale national chain specialty storesNeighborhood shopping centerConsists of several small convenience and specialty storesCommunity shopping centerIncludes one or two department stores and some specialty stores, along with convenience storesRegional shopping centerContains large department stores, numerous specialty stores, restaurants, movie theaters, and sometimes hotels
29 Physical Distribution All those activities concerned with the efficient movement of products from the producer to the ultimate userInventory managementOrder processingWarehousingMaterials handlingTransportation
30 Physical Distribution (cont.) Inventory managementThe process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stock-out costsHolding costs—the costs of storing products until they are purchased or shipped to customersStock-out costs—the costs of sales lost when items are not in inventory when neededTechnology and software help manage inventoryEfficiency is crucial for firms using just-in-time (JIT) approachOrder processingActivities involved in receiving and filling customers’ purchase orders
31 Physical Distribution (cont.) WarehousingThe set of activities involved in receiving and storing goods and preparing them for reshipmentReceiving goodsIdentifying goodsSorting goodsDispatching goods to storageHolding goodsRecalling, picking, and assembling goodsDispatching shipmentsTypes of warehousesPrivate warehouses—owned and operated by a firmPublic warehouses—offer their services to all firms
32 Physical Distribution (cont.) Materials handlingThe physical handling of goods, in warehouses as well as during transportationTransportationThe shipment of products to customersCarrier—a firm that offers transportation servicesCommon carriers—services available for hire to all shippersContract carriers—available for hire by one or several shippers; not available to the general publicPrivate carriers—owned and operated by the shipperFreight forwarders—agents who facilitate the transportation process for shippers by handling the details of the processRailroads—in terms of total freight carried, these are America’s most important mode of transportation
33 Physical Distribution (cont.) TransportationTrucksTremendous expansion since creation of national highwaysOften favored for offering door-to-door service, less stringent packaging requirements, and flexible schedulesAirplanesFastest but most expensiveUsed to ship high-value or perishable goodsWaterwaysSlowest but least expensiveUsed mainly for bulky, nonperishable goodsUse limited to cities located on navigable waterwaysPipelinesused primarily to carry petroleum and natural gas
35 Class ExerciseWhich channel(s) of distribution would you use for the following products? Why?A new reduced-fat candy barFine china that costs $550 for a setA set of encyclopedias that costs $750A line of jeans that sells between $30 and $50 a pair
36 What Is Integrated Marketing Communications? Coordination of promotion efforts to ensure maximal informational and persuasive impact on customersResults in a consistent message to customers, long-term customer relationships, and the efficient use of promotional resourcesMass media advertising has given way to targeted promotional tools (e.g., cable TV, direct mail, and the Internet)The overall cost of marketing communications has risen significantly, pressuring managers to make the most efficient use of marketing resources
37 The Promotion Mix: An Overview Commonly the object of two misconceptionsPromotional activities make up the entire field of marketingPromotional activities are unnecessary and cause higher pricesRole of promotionTo facilitate exchanges directly or indirectly by informing individuals, groups, or organizations and influencing them to accept a firm’s products or to have more positive feelings about the firmConvey product and service information directly to target market segmentsProvide information to interest groups, regulatory agencies, investors, and the general publicTo maintain positive relationships between a company and various groups in the marketing environment
38 The Promotion Mix: An Overview (cont.) The particular combination of promotion methods a firm uses to reach a target marketAdvertisingA paid non-personal message communicated to a select audience through a mass mediumPersonal sellingPersonal communication aimed at informing customers and persuading them to buy a firm’s productsSales promotionThe use of activities or materials as direct inducements to customers or salespersonsPublic relationsCommunication activities used to create and maintain favorable relations between an organization and various public groups, both internal and external
40 Types of advertising by purpose Primary-demand advertisingUsed to increase demand for all brands of a product in a specific industryInstitutional advertisingDesigned to enhance a firm’s image or build its reputation
41 Advertising (cont.)Advertising Age is the industry’s preeminent source of marketing, advertising, and media news, information, and analysis.
42 Debate Issue: Is It Appropriate for Marketers to Advertise to Children? YesChildren have billions of dollars in discretionary income and spend almost all of it.Children buy regularly.Children are heavily influenced by television advertising.Children directly influence more than $40 billion in adult purchases each year..NoTelevision advertising alters one’s sense of reality, making children more prone to “need gratification” and more susceptible to peer pressure.Most purchase decisions are made by parents.On certain issues, children are easily deceived.
43 Major Steps in Developing an Advertising Campaign Identify and analyze the target audience.Define the advertising objectives.Create the advertising platform.Determine the advertising appropriation.Develop the media plan.Create the advertising message.Execute the campaign.Evaluate advertising effectiveness.
45 Advertising AgenciesIndependent firms that plan, produce, and place advertising for their clientsLarge agencies also help with sales promotion and public relationsMedia usually pay a commission to agenciesFirms may use both in-house advertising departments and an independent agency
46 The most adaptable promotion method Personal SellingThe most adaptable promotion methodThe most expensive promotion methodKinds of salespersonsOrder getterResponsible for creative selling: selling a firm’s products to new customers and increasing sales to current customersOrder takerHandles repeat sales in ways that maintain positive relationships with customers
47 Kinds of Salespersons Kinds of salespersons Sales support personnel Employees who aid in selling but are more involved in locating prospects, educating customers, building goodwill for the firm, and providing follow-up serviceMissionary salespersonsVisit retailers to persuade them to buy the manufacturer’s productsTrade salespersonsAssist customers in promoting products, especially in retail storesTechnical salespersonsAssist current customers in technical matters
49 Sales PromotionActivities or materials that are direct inducements to customers or salespersonsSales promotion objectivesTo attract new customersTo encourage trial of a new productTo invigorate the sales of a mature brandTo boost sales to current customersTo reinforce advertisingTo increase traffic in retail storesTo steady irregular sales patternsTo build up reseller inventoriesTo neutralize competitive promotional effortsTo improve shelf space and displays
50 Sales Promotion Methods Consumer sales promotion methodDesigned to attract consumers to particular retail stores and to motivate them to purchase certain new or established productsTrade sales promotion methodDesigned to encourage wholesalers and retailers to stock and actively promote a manufacturer’s productFactors influencing the choice of sales promotion methodObjectives of the sales promotional effortProduct characteristicsTarget market profileDistribution channelsAvailability of resellersCompetitive and regulatory forces in the environment
51 Sales Promotion Methods (cont.) RebateA return of part of the purchase price of a productCouponReduces the retail price of a particular item by a stated amount at the time of purchaseSampleA free product given to customers to encourage trial and purchasePremiumA gift a producer offers to a customer in return for buying its productFrequent-user incentivesA program that rewards customers who engage in repeat (frequent) purchases
52 Sales Promotion Methods (cont.) Point-of-purchase displaysPromotional material in the retail store designed to inform customers and encourage purchasesTrade showsIndustry-wide exhibits at which many sellers display their productsBuying allowanceA temporary price reduction to resellers for purchasing specified quantities of a productCooperative advertisingA manufacturer agrees to pay a certain amount of the retailer’s media cost for advertising the manufacturer’s product
53 Types of Public-Relations Tools A broad set of communication activities used to create and maintain favorable relationships between an organization and various public groups, both internal and externalCustomers, employees, stockholders, suppliers, educators, the media, government officials, society in generalTypes of public-relations toolsWritten and spoken communicationsBrochures, newsletters, company magazines, annual reports, news releases, corporate-identity materials, speechesEvent sponsorshipSpecial events such as concerts and charity functions that the firm underwrites wholly or partially
54 PublicityPublicityCommunication in news-story form about an organization, its products, or bothNews releaseFeature articleCaptioned photographPress conference
55 The Uses of Public Relations To promote people, places, activities, ideasTo enhance the reputation of the organization by increasing awareness of company products and activitiesTo create specific positive company images
56 Chapter Quiz A women’s apparel manufacturer most likely will use intensive distribution.selective distribution.exclusive distribution.high-style distribution.popular-style distribution.
57 Chapter Quiz Category management is a producer deciding which category to concentrate on for the next season.a retailer asking the supplier in a particular category how to stock the shelves.when suppliers tell the manufacturer which category to produce more of.when Home Depot decides which category sells the best and decides to concentrate on that category of goods.the combined efforts of producers and wholesalers to manage the wholesaler’s inventory.
58 Chapter QuizWhich activity combines inventory management, order processing, warehousing, material handling, and transportation?MarketingMerchandisingWarehousingPhysical distributionTransporting
59 Chapter Quiz Salespeople may be identified as experts, order makers, and support personnel.order preparers, order trackers, and order receivers.order getters, order takers, and support personnel.order getters, order makers, and order receivers.order getters, order dictators, and support personnel.
60 Chapter Quiz The first step in the personal selling process is product display.prospecting.approaching the prospect.organizing the sales pitch.making the presentation.