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Chapter 14 Direct Marketing and Marketing Resellers: Retailers and Wholesalers.

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Presentation on theme: "Chapter 14 Direct Marketing and Marketing Resellers: Retailers and Wholesalers."— Presentation transcript:

1 Chapter 14 Direct Marketing and Marketing Resellers: Retailers and Wholesalers

2 14-2 Chapter Objectives 1.Explain the wheel of retailing. 2.Explain how retailers select target markets. 3.Show how the elements of the marketing mix apply to retailing strategy. 4.Explain the concepts of retail convergence and scrambled merchandising. 5.Identify the functions performed by wholesaling intermediaries. 6.Outline the major types of independent wholesaling intermediaries and the situations appropriate for each. 7.Compare the basic types of direct marketing and non- store retailing. 8.Explain how much the Internet has altered the wholesaling, retailing, and direct marketing environments.

3 14-3 Retailing Evolution of Retailing Evolution of Retailing Traced to trading posts such as the Hudson Bay Company and peddlers First Retail Institution in the U.S. was the General Store Supermarkets appeared in the early 1930s Discount stores arrived in the 1950s Convenience food stores emerged in the 1960s The 1980s saw the first off-price retailers

4 14-4 Wheel of Retailing Wheel of Retailing Hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current retailers, while maintaining profits through reduction of services Once established, more services are introduced and prices rise It then becomes vulnerable to new, lower price competitors

5 14-5 High-end strategy High prices Excellent facilities and services Upscale consumers Low-end strategy Low prices Limited facilities and services Price-sensitive consumers Medium strategy Moderate prices Improved facilities Broader base of value- and service-conscious consumers Wheel of Retailing

6 14-6 Retailing Strategy A retailer develops a marketing strategy based on the firm’s goals and strategic plans Two fundamental steps:  Selecting a target market  Developing a retailing mix to satisfy the chosen target market Retail image: Consumers’ perceptions of a store and the shopping experience it provides

7 14-7

8 14-8 Selecting a Target Market Selecting a Target Market Retailers analyze demographic, geographic, and psychographic profiles to segment and select potential markets

9 14-9 Merchandising Strategy Merchandising Strategy Planograms: Diagrams of how to exhibit selections of merchandise within a store Category management: Retailing strategy which views each product category as an individual profit center, and the retailer manages the performance and growth of the entire category

10 14-10 Target’s Exclusively designed products are part of Target’s merchandising strategy

11 14-11 The Battle for Shelf Space The Battle for Shelf Space Stockkeeping unit (SKU): specific product offering within a product line that is used to identify items within the line Slotting allowances: fees paid by manufacturers to secure shelf space from retailers for their products

12 14-12 Customer Service Strategy Customer Service Strategy Retailers must decide on the variety of services they make available for shoppers  Examples include gift wrapping, bridal registry, return privileges, electronic shopping, and delivery and installation  Objectives are to enhance shopper comfort and attract and retain customers

13 14-13 Pricing Strategy Pricing Strategy Markup: The amount a retailer adds to a product’s cost to determine its selling price  Determined by the services the retailer performs and the inventory turnover rate Markdown: The amount by which a retailer reduces a product’s original selling price

14 14-14 Marshall’s Marshall’s Promoting its low price strategy

15 14-15 Location/Distribution Strategy Location/Distribution Strategy Planned shopping center: A group of retail stores planned, coordinated, and marketed as a single unit Four types of planned shopping centers:  Neighborhood – “strip mall”  Community – Washington Square  Regional – Mall of America  Power – stand-alone stores, single trading area  Lifestyle – Bridgeport  Company Outlets - Woodburn

16 14-16 Mall of America Mall of America Combining shopping with entertainment Mall of America is one of the most visited destinations in the United States, attracting more visitors annually than Disney World, Graceland and the Grand Canyon combined.

17 14-17 Promotional Strategy Promotional Strategy Retailers use a variety of promotional techniques to establish store images and communicate information about their stores Selling up: retailing selling technique in which salespeople try to persuade customers to buy higher-priced items than originally intended Suggestive selling: involves salespeople attempting to broaden a customer’s original purchase by adding related items, promotional products, and/or holiday or seasonal merchandise

18 14-18 Store Atmospherics Store Atmospherics Physical characteristics and amenities that attract customers and satisfy their shopping needs Disney Stores borrow from their theme parks to create a familiar shopping environment.

19 14-19 Types of Retailers Retailers can be categorized by: Form of ownership Shopping effort expended by customer Services provided to customers Product lines Location of retail transactions

20 14-20

21 14-21 Classification of Retailers by Form of Ownership Classification of Retailers by Form of Ownership Chain stores Independent Retailers Cooperatives  Ace helps independent retailers compete with chains

22 14-22 Classification by Shopping Effort Classification by Shopping Effort: Classification system based on the reasons why consumers shop at particular retail outlets Retail stores can be classified as:  Convenience retailers [7/11]  Shopping stores [REI]  Specialty retailers [Nordstrom]

23 14-23 Pier 1 Imports Pier 1 Imports A shopping store

24 14-24 The North Face The North Face A specialty retailer featuring outdoor clothing and equipment Their products are also sold at other specialty stores

25 14-25 Classifying by Services Provided Classifying by Services Provided Self-service Store (e.g., Kmart) Self-selection Store (e.g., Winn-Dixie or Kroger grocery stores) Full-service Retailers (e.g., Dillard’s or Macy’s)

26 14-26 Classifying by Product Lines Classifying by Product Lines: This classification system groups stores by the product lines they carry. Specialty store: A retailer that typically handles only part of a single product line Specialty retailers carry their particular products in considerable variety

27 14-27 Lady Foot Locker -- A specialty store

28 14-28 Limited-line store Limited-line store: A retailer that offers a large assortment within a single product line, or within a few related product lines IKEA home furnishings and Levitz furniture Category killers: retailers that combine huge selection and low prices within a single product line  Home Depot and Office Depot

29 14-29 Lowe’s Lowe’s A category killer which competes with the likes of Home Depot

30 14-30 General merchandise retailers General merchandise retailers carry a wide variety of product lines, and stock them all in some depth Variety store Variety store: retailer that offers an extensive range and assortment of low- priced merchandise Department store Department store: large store that offers a variety of merchandise, such as men’s and women’s clothing, appliances, linens, and furniture

31 14-31 Sears Sears The classic department store offering clothing, appliances, hardware, etc.

32 14-32 Mass merchandiser Mass merchandiser: store that stocks a wider line of goods than a department store, usually without the same depth of assortment within each line  Discount house  Off-price retailers  Outlet malls  Hypermarket  Supercenters  Showroom and Warehouse Retailers

33 14-33 Kmart Kmart Discount mass merchandiser selling prestigious brand names

34 14-34 T.J. Maxx T.J. Maxx An off-price retailer

35 14-35 Classification of Retail Transactions by Location Non-store retailing –, 800# sales Retail Convergence: The coming together of shoppers, goods, and prices, resulting in the blurring of distinctions between types of retailer and the merchandise mix they offer. [Similar merchandise available from multiple types of retail outlets.] Scrambled Merchandising Scrambled Merchandising: concept in which a retailer combines dissimilar product lines in an attempt to boost sales volume. [Walgreens sells groceries, develops photos, sells Hallmark cards and gift items]

36 14-36 Wholesaling Intermediaries Includes not only wholesalers who assume title to the goods they handle, but also agents and brokers, who conduct wholesaling activities without taking title of the goods. Functions of Wholesaling Intermediaries Functions of Wholesaling Intermediaries Creating Utility Creating Utility  Time utility  Place utility  Ownership/possession utility

37 14-37 Providing Services Providing Services  Wholesalers commonly provide marketing services that reflect the basic marketing functions of buying, selling, storing, transporting, providing market information, financing, and risk taking  Plumbing wholesaler providing selling service

38 14-38

39 14-39 Lowering Costs by Limiting Contacts Lowering Costs by Limiting Contacts Intermediaries that represent multiple suppliers cut buying and selling costs and reduce transaction time Firms can increase transaction efficiency by only having to contact one or two intermediaries, rather than hundreds of individual suppliers

40 14-40

41 14-41 Types of Wholesaling Intermediaries Types of Wholesaling Intermediaries

42 14-42 Manufacturer-Owned Facilities Manufacturer-Owned Facilities Sales branch – carries inventory and takes customer orders Sales office – no inventory, manages sales reps Trade fair – “Trade Show”, in food industry, FMI, NRA Merchandise mart- large grouping of permanent showrooms, mainly wholesaling, Chicago Merchandise Mart

43 14-43 Independent Wholesaling Intermediaries Independent Wholesaling Intermediaries Merchant wholesaler: An independently owned intermediary that takes title to the goods it sells  Rack Jobbers – specialized lines of merchandise [M&M Mars]  Cash-and-Carry Wholesalers [“Cash & Carry in Portland]  Truck Wholesalers [Frito Lay]  Drop Shippers – take title, don’t handle [coal and lumber]  Mail Order Wholesalers [McMaster Carr]

44 14-44 Table 14.2 – P.466 Table 14.2 – P.466 Comparison of the Types of Merchant Wholesalers and Their Services

45 14-45 Agents and Brokers Agents and Brokers: A second group of independent intermediaries who may or may not take possession of the goods, but never take title. They include: Commission merchants [producers’ agents – agriculture] Auction houses [used cars] Brokers [don’t control pricing or promotional funding, operate in specific territories - food industry] Selling agents [controls total marketing programs, textile industry] Manufacturer’s agents [independent reps, sell non-competing products, may have marketing responsibilities, paid commission]

46 14-46 Table 14.3 Table 14.3 Services Provided by Agents and Brokers

47 14-47 Retailer-Owned Cooperatives and Buying Offices Retailer-Owned Cooperatives and Buying Offices Retailers sometimes assume numerous wholesaling functions to reduce costs or provide special services Independent retailers sometimes band together to form buying groups to save through quantity purchases Large chains often establish centralized buying offices to negotiate large-scale purchases directly with manufacturers

48 14-48 Direct Marketing and Other Nonstore Retailing Direct Mail Direct Mail is a major component of direct marketing It comes in many forms, ranging from sales letters to video cassettes Direct Selling Direct Selling completely bypasses retailers and wholesalers Manufacturers set up their own channels to sell their products directly to consumers

49 14-49 Direct-Response Retailer Direct-Response Retailer Customers can order merchandise by mail or telephone, by visiting a mail-order desk in a retail store, by computer or by fax The Retailer then ships the merchandise to the customer’s home or to a local store for pickup Telemarketing Telemarketing refers to direct marketing conducted entirely by telephone It is the most frequently used form of direct marketing

50 14-50 Internet Retailing Internet Retailing Many retailers operate from virtual storefronts on the World Wide Web, usually maintaining little or no inventory, ordering directly from vendors to fill customer orders received via Automatic Merchandising Automatic Merchandising Retailing through vending machines About $25 billion worth of convenience goods are sold to Americans through 4.7 million vending machines

51 14-51 End of Chapter Fourteen

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