1. In our last lecture # 16 – we covered: 32. The Marketing Mix: Product and Price Lecture 17: 33. The Marketing Mix: Promotion 34. The Marketing Mix: Distribution

2. Promotional Mix Promotion LAP 1

3. Objectives A.Describe the elements of the promotional mix. B.Explain factors affecting the selection of a promotional mix.

4. Objective A Describe the elements of the promotional mix.

5. Purposes of Promotion To tell consumers about a company’s … Goods Services Services Images Images Ideas

6. Purposes of Promotion To persuade consumers to buy

7. Promotion’s Recipe for Success: Mix various communication activities together and serve to potential customers until desired outcome is achieved.

8. The Top 5 Airlines! Traveler MagazineFlynn The bikes the pros use. 25% Off Coupon AdvertisingAdvertising Personal sellingPersonal selling PublicityPublicity Sales promotionSales promotion Communication Techniques

9. The Combination, or Blend, of Marketing Communication Channels Is Called the...

11. Advertising Any paid form of nonpersonal presentation of ideas, images, goods, or services The most visible element of the promotional mix

12. The New Barchetta Actual cost of advertisement is quite high.Actual cost of advertisement is quite high. Since many people receive the message, the per contact cost is very low.Since many people receive the message, the per contact cost is very low.

13. Goods Services Images Ideas The Vet for Your Pet At Techco, we’re friendly to our customers and the environment. Say No to Drugs. Diamonds from Desmond’s Jewelers are a girl’s best friend.

14. Advertising Messages can be delivered by: TelevisionTelevision RadioRadio NewspapersNewspapers MagazinesMagazines Direct mailDirect mail Outdoor advertisementsOutdoor advertisements DirectoriesDirectories The InternetThe Internet

15. Personal Selling Determines client needs/wants and responds through planned, personalized communication that influences purchase decisions and enhances future business opportunities Are you planning on replacing all of your computers at once? My budget won’t allow me to replace them all at once, but I want them to be compatible. You might want to consider leasing computers. You can get free service and upgrade to a newer model whenever you want!

16. Selling Advantages Immediate feedbackImmediate feedback FlexibilityFlexibility I like the sound of this stereo, but I think it’s a little large for my dorm room. We do carry a bookshelf model with similar sound quality. Selling Disadvantage On a per contact basis, selling is the most expensive form of promotion.

17. Publicity Any nonpersonal presentation of ideas, goods, or services that is not paid for by the company or individual which benefits from or is harmed by itAny nonpersonal presentation of ideas, goods, or services that is not paid for by the company or individual which benefits from or is harmed by it Many consumers pay close attention to publicity.Many consumers pay close attention to publicity. –Feel publicity has more credibility because it is not a commercial message –View publicity as news Example: Mention of a company’s charitable activities in print or broadcast media

18. Ways the Internet Can Be Used as a Source of Publicity A company web site can be used to obtain and display positive feedback. “Tae-Bo has really changed my life. I’ve lost weight, toned-up, and feel better than ever.” -Susie Wells, CA

19. Ways the Internet Can Be Used as a Source of Publicity A business’s goods, services, or web site might be mentioned in an Internet newsgroup. OnlineNews.com Car shopping on the web Buying a car on the web just got easier! Autobytel.com will help you get the financing, pick out the model, color and extras. Then they provide a quote from a local dealer. All at the touch of a keypad.

20. Ways the Internet Can Be Used as a Source of Publicity A company might agree to provide a link to another business’s web site in exchange for the same consideration. LINK TO ACME.COM

21. Sales Promotion Promotional activities other than advertising, personal selling, and publicity which stimulate purchasesPromotional activities other than advertising, personal selling, and publicity which stimulate purchases Sales promotion activities include:Sales promotion activities include: Visual merchandising or displays Coupons Product demonstrations Instant rebates Free samples Fashion shows Contests Novelty items Trade shows Exhibits

22. Importance of the Promotional Mix Plays a key role in obtaining and keeping customersPlays a key role in obtaining and keeping customers Enables businesses to communicate effectively with customersEnables businesses to communicate effectively with customers Informs consumers about goods/services and persuades them to buyInforms consumers about goods/services and persuades them to buy

23. Objective B Explain factors affecting the selection of a promotional mix.

24. Marketers Try To Create the Ideal Blend of Promotional Activities for Their Businesses. Must decide which methods will best reach potential customers and communicate desired message Advertising Personal selling Publicity Sales promotion Hard to determine effectiveness of the different promotional methods No magic formula that marketers use to help design promotional mix

25. Factors Affecting the Selection of a Promotional Mix Product’s target market Good, service, image, or idea Distribution channels Product’s company Must be carefully analyzed before marketers decide when and where to invest promotional funds

26. Good, Service, Image, or Idea Convenience goods Shopping goods Specialty goods Type of product

27. Good, Service, Image, or Idea Product nature Products which are high-tech, require demonstration, are expensive, or require installation should be promoted through personal selling. This computer is perfect for you. It has all the software pre-installed and a left-handed mouse! Inexpensive and self-service products can rely on advertising and sales promotion. SALE! 10% OFF on all small appliances HARRY’S HARDWARE

28. Introductory Growth Maturity Declining Good, Service, Image, or Idea Stage of life cycle When you are on-the-go… …it’s Breakfast-To-Go Each pocket provides you a delicious breakfast in just two minutes! New and Improved!

29. Product’s Target Market vs. ConsumerMarketIndustrialMarket Type of Consumer Type of Consumer Advertising Sales Promotion Publicity Personal Selling Number of Consumers Few Consumers ManyConsumers Geographical Location CloseTogether Spread Over a Wide Area

30. Distribution Channel The promotional mix selection is affected by the path that a product takes. INTERMEDIARY BLVD.DIRECT AVE. Requires personal selling Requires personal selling and advertising

31. Businesses often rely on previous use of promotional methods. Product’s Company 196020001980 Historical Perspective 19701990 Think small. Less flower.More power.

32. Product’s Company Available Funds Wal-Mart started as one small store in Arkansas. In Wal-Mart’s early years, local newspaper advertising and personal selling were all that the small company could afford. Today, the Wal-Mart corporation has increased its promotional mix to include television, radio, newspapers, special sales bulletins, and a Wal-Mart web site in order to promote its national network. Example:

33. Product’s Company Tony’s Pizza Kids eat free! Ange’s Pizza Free kids’ meals! Competing businesses use similar promotional mixes and tend to follow the leader. Competition

35. Promotional Mix Chapter 17.1

36. What is promotion? Any form of communication a business or organization uses to inform, persuade, or remind people about its products.

37. The Promotional Mix is a combination of the different types of promotion.

38. Two types of promotion Product Promotion –Type of promotion that a business uses to convince potential customers to buy products from them and not their competitors. Institutional Promotion –Type of promotion that a business uses to create a favorable image for itself.

39. Four basic types of promotion…. Personal selling Advertising Sales promotion Public relations

40. What is the largest form of promotion? Personal Selling! –This type of promotion requires contact with potential buyers

41. Advertising…. Any paid form of non- personal presentation and promotion of ideas, goods, or services by an identified sponsor. Advertise here!

42. All marketing activities, other than personal selling, advertising, and public relations is called…. Sales Promotion

43. Public Relations Any activity designed to create a favorable image toward a business, its products or its policies.

44. A specific kind of public relations that involves placing positive and newsworthy information about a business, its products, or its policies in the media is called….. Publicity

45. Advantage… –It is free! Disadvantage….. –Its contents cannot be controlled by the business

46. Principal function of publicity… Building an image

47. What do they do? Advertising –Creates awareness of a business’s product Public Relations –Creates a favorable image for the business itself Sales Promotion –Efforts stimulate sales Personal Selling –Builds on all of the other efforts by helping customers complete the sale

48. Marketing Department Establishes a promotion budget Allocates resources Coordinates the campaign Determines the right promotional mix for the company McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward." McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward." McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward." McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward." McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward." McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward." McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward." McDonald's Press Release 08/31/2005 McDonald's Names Mary Dillon as Global Chief Marketing OfficerMcDonald's Names Mary Dillon as Global Chief Marketing Officer OAK BROOK, IL -- McDonald's Corporation today announced that Mary Dillon has been named Executive Vice President and Global Chief Marketing Officer for the company, succeeding Larry Light, who will retire at the end of this year. Dillon, 44, is currently President of Quaker Foods, a Chicago-based division of PepsiCo Corporation. She will assume her global responsibilities as McDonald's marketing leader effective October 3rd, reporting to Mike Roberts, McDonald's President and Chief Operating Officer. In making the announcement, Jim Skinner, McDonald's Chief Executive Officer, said, "Mary Dillon is an extremely talented executive who brings a remarkable combination of marketing and general management expertise to McDonald's. Mary will add energetic leadership and creative thinking to a global marketing team that continues to deepen relationships with our customers. Mike and I are very confident that Mary has both the skills and the determination to lead our global marketing and brand management to an important new level." In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."In accepting the post, Dillon said, "This is one of the best marketing jobs in the world, and I am excited and immensely proud to join this world-class team that touches millions of consumers every day. I would like to begin this new role by thanking Larry Light and the entire marketing team for building a tradition of customer relevancy at McDonald's. I willwork to continue this record of marketing leadership and build brand strength going forward."

49. Push Policy Promotion policy used only with the next partner in the distribution channel. Manufacturers PUSH a product to the retailers for sale….

50. Pull Policy Promotion policy designed to create consumer interest When a product is consumer driven or PUSHED into a store….

53. Distribution Management Prepared by: Ma. Anna Corina G. Kagaoan Instructor College of Business and Accountancy

54. Objectives This chapter will enable you: To understand the role of distribution management in the marketing mix; To understand why distribution channels are required at all; To study how distribution channels add value to the marketing mix; and To get a brief introduction to distribution channel strategy.

55. Preview Marketing – identifying customer’s needs and satisfying them while generating profit. Marketer analyzes the market, segments it, selects a target market and positions his products to offer differential advantage to the customers. Marketers satisfy the needs of the target market in a better way (in other words they position the products to offer differential advantage) through a proper mix of Product, Price, Promotion and Place – called Marketing mix or 4Ps of Marketing.

56. Preview Product – A Good, Service or an Idea that is provided to satisfy the need and all the activities required to plan the product. Price – Money (or something of utility) required to exchange the product. Promotion – All activities required to inform and persuade the customers. Place – All activities required to make the product available where they are needed.

57. Distribution Management Distribution management deals with the Place part of the marketing mix. One major aspect of the distribution management process is the role and relevance of distribution channels in helping the “place” aspect of the marketing mix, which provides place, time and possession utility to the customer.

58. Distribution Management Distribution management ensures that: a product is made available to a consumer at a retail shop close to his residence, thus, providing the “place” utility; a product is available at the retail counter at a chosen time of the consumer, thus, providing the “time” quality; a consumer can pay for a product and take it home whereby he becomes the owner of it, thus, the “possession” utility has also been provided for.

59. Major Role of an Intermediary Place Utility Time Utility Possession Utility Fig. 1. Major Role of an Intermediary

60. Distribution Management Definition Management of all activities which facilitates movement and co-ordination of supply and demand in creation of time and place utility in goods. Art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operationally ready condition for their entire lives. Broad range of activities concerned with the efficient movement of finished products from the end of the production line to the consumer and it also includes the movement of raw materials from the source of supply to the beginning of the production line.

61. Need for Distribution Management A company could reach the ultimate consumer by several routes: Direct from the company if it runs a house-to-house campaign; Direct from the company if it has put up a stall in a consumer product exhibition to promote its products;

62. Need for Distribution Management The company deliver the product in bulk to a Carrying and Forwarding Agent (C&FA) or a distribution center, which breaks bulk and gives it to distributors. The distributor sells convenient lot sizes to the retailers from where the consumer buys it; and The distributor could sell the product to a wholesaler who then sells it to the retailer from where the consumer buys it.

63. Need for Distribution Management The channels or set of intermediaries help the process of “exchange” of the product or service at a certain margin to themselves. Intermediaries help in the smooth flow of goods and services. Intervention is necessary as there is a difference between the assortment of goods and services generated by the producer and the assortment demanded by the consumer. Consumers usually desire only a limited quantity of a wide variety of goods.

64. Need for Distribution Management Distribution channels are required as the companies by themselves cannot directly reach and sell the products to their millions of consumers. Marketing channel decisions play an important role of long- term importance of ensuring the presence and success of a company in the marketplace. Presence ensures that the product gets wide distribution and it reaches out to the maximum number of customers and prospects.

65. Functions of Intermediaries To accumulate the right kind of goods, aggregating and sorting to meet consumer needs at the point of purchase; To believe in routine and simplified transactions and work with a large number of products (at the wholesaler and retailer level), so that distribution costs could get minimized; To provide information both to the sellers and the buyers to help them manage their business better.

66. Functions of Intermediaries To buy a large variety of goods and can compare costs and prices and make the right recommendations to their customers; To be aware of the environment in which they operate and hence isolate the companies from the direct impact of these local conditions; and To reduce the number of touch points. The company will not be able to meet the demands of thousands of its consumers directly and hence needs intermediation.

67. Role of an Intermediary Intermediary Large number of Consumers Company 2Company 1Company 3 Fig. 2. Role of an Intermediary

68. Are Intermediaries Necessary? Not always, as sometimes the commitment of the intermediary and his need for an excellent distribution effort may not be of the same intensity as that of the company. In case of technically complicated products, the company may want to handle the distribution themselves. Cost is a major consideration for a company wanting to handle the distribution function by itself. Distribution is a specialized function best left to experts— wholesalers and retailers. Cost efficiency and effectiveness of indirect distribution is higher than in the case of direct distribution.

69. A Combination Works Better Most companies use a combination of direct and indirect distribution. Choice of combination and contribution of each set is determined by: Nature of the company and its products; Nature and dispersal of company customers; Business goals of the company; Market expectation of credit; Company’s capabilities and strength; Speed with which a company wants to increase its sales and coverage of the market; Nature of competition and how it operates; and Company’s market shares. Small companies may not get the interest of channel members.

70. Discrepancy and Distribution Channels Discrepancy Character SpatialTemporalBreak bulkAssortmentFinancial support Helps reduce the distance between the producer and the consumer Helps speed up in the meeting the requiremen t of the consumer Reduces the large quantities into acceptable lot sizes for the consumer Provides variety to the consumer to choose from Helps fund the activities of reaching the product to the consumer Table 1. Role of Distribution Channels

71. How Distribution Adds Value The distribution function using the network of the channel partners add value to the selling function by providing time, place, and possession utility to the consumer. For providing the possession utility, the channels simplify the transactions by maintaining contacts with their upstream partners (C&FA or company)—closer to the producer. Downstream channels involved are the distributors, wholesalers and retailers—closer to the consumers. Downstream channel partners do transactions like order taking, order communication, order processing, delivery of goods, and collection of payments. Service associated with products are done by channels.

72. Distribution Channel Strategy Fig. 3. Evolution of a Distribution Strategy Corporate Strategy Marketing Strategy Distribution Strategy

73. Distribution Channel Strategy Corporate Strategy. Spells out the overall strategy and direction. Marketing Strategy. Part of the overall business plan of the company and corporate strategy. Outlines how the overall strategy is achieved using company products and its distribution network. Distribution Strategy. Forms a critical part of the marketing strategy which cannot be frequently changed as it requires building a network based on sound, and long-term relationships. Part of it involves organizing and managing the distribution function.

74. Distribution Strategy Factors Defining customer service levels. What the customer is most interested in and hence requires extra care in defining. Defining the distribution objectives to achieve these service levels. Outlining the steps or activities required to achieve the distribution channel objectives. Deciding on the structure of the network to implement these activities to achieve the distribution objectives. Clearly defines policy and procedure for the network to carry out its daily activities to achieve the objectives. Stating the key performance indicators (KPIs). To check if the strategy is working well. Understanding the critical success factors (CSFs) to make the distribution strategy effective.

75. Customer Service Levels Nature of the industry in which the company is operating, its products and services, its market share and the nature of competition help define the level of customer service the firm can promise its customers. Affordability also dictates service level. Companies could even think of categorizing their customer into A, B and C (Pareto’s Law) to decide different levels of service. Extent of competition could also decide level of service to be provided—number of distributors servicing the market, frequency of visits to the customers both by the channel partners and the company sales personnel, ready availability of stocks to service the market, etc.

76. Setting Distribution Objectives Distribution objectives clearly spell out what is expected out of the network in ensuring the desired level of customer service to meet the expectations of its customers. Expectations could only be in terms of the time, place, and possession utilities as well as the period of credit which the company may be willing to offer its customers.

77. Set of Activities Defines the manner in which the company and its channel partners go about taking into action the customer service objectives. Performed by the company sales personnel and channel partners. Some steps could be: Periodic sales forecasts by geography. Arranging for dispatch of the products from the plants or C&Fas to a point closest to the market. Developing beat plans for market coverage. Developing journey and beat plans for service engineers. Market visits to sell products. Collection of sales proceeds. Carrying out promotional activities. Calling regularly on A category customers to build long-term relationships.

78. The Distribution Organization Determines who will do what. Helps define structure to support the entire strategy. Decision points are: Extent of in-company (own sales team) and outsourcing (use of channel partners). Inventory planning, dispatches, credit management and collection are done by the salespeople and logistics of the company. Affordability factors—own sales team functioning may mean higher fixed costs whereas a bigger outsourced network may mean higher variable costs if the volume goes up. Channel partners are compensated based on percentage of sales value. It indirectly affects the margins of the company.

79. The Distribution Organization More decision points: Selecting the channel partners including C&Fas and distributors, stockists or agents. Channel that cannot easily be changed. Setting clear objectives for each channel partners and systems to monitor activities and measure performance. Ensuring the correct and agreed level of financial investments by channel partners in the company business—size of warehouse distributors should have, number of vans to cover market, number of sales and back office people he has to employ, beat plans, and amount of credit he is expected to give in the market.

80. Policy and Procedure Company sales personnel and channel partners should understand what is expected of them and discharge roles and responsibilities faithfully. Operating manuals are very important to clearly define policy and implementation guidelines. It is an important tool to manage the distribution organization. It may also include: System for redressal of complaints from channel partners; System for settling disputes; Additional payments or incentives to channel members—difficult territories or for covering rural areas; and Coverage of institutional business and service levels to be extended.

81. Key Performance Indicators (KPIs) Agreed on measurement criteria with channel partners. Some popular KPIs include: Consistent achievement of targets by product groups, period, and territories; Achievement of market shares; Achievement of profitability; Zero complaints from customers; No stock returns; Ability to handle emergencies and sudden spurs in demand; Balanced sales achievements rather than period sales skews; Market coverage with ready stocks; Excellent management of accounts receivables; Minimize sales losses on account of stock-outs; and Minimize damage to products.

82. Critical Success Factors (CSFs) Top management should be involved in formulating of strategies. Some CSFs are: Clear, transparent and unambiguous policy and procedure; Serious commitment of the channel partners; Fair dealing of the company with all its partners; Clearly defined customer service policy; High levels of integrity to be demonstrated by channel members; Equitable distribution in case of shortage of product; and Compensation to channel partners on special promotional activity should be prompt and not delayed.

83. Scope of Distribution Management Channels of Distribution Retailing Wholesaling and Physical Distribution

86. Global Marketing, R & D

87. Global Marketing and R&D  Among different countries, why and how: –It makes sense to vary the attributes of products –Distribution strategy may vary –Advertising and promotion strategies may vary –Pricing strategy may vary  How globalization affects new-product development

88. “A powerful force drives the world toward a converging commonality, and that force is technology” (Prof. Ted Levitt, HBS) Levitt, 1983

89. Globalization of Markets?  Levitt’s “Converging commonality” has not happened universally  Consumer product tastes converged less than industrial product specifications  Media, communications means have –made consumers world-wide more aware of their mutual preferences –have contributed to creation of world brands –have caused market segments to emerge across some national markets--inter-market segments

90. Market Segmentation  The process of identifying groups of consumers whose purchasing behavior is unique in important ways –Is based on demography, geography, social-cultural factors, psychological factors –Allows firms to adjust marketing mix to meet the needs of separate market segments  Marketing mix variables: product-price-place (distribution)-promotion

91. Market Segmentation Across National Markets  Standardization: companies may –Offer same products –Adjust balance of marketing mix to market segments with similar needs across countries  Adaptation: companies may –Offer different products –Adjust balance of marketing mix to market segments with differing needs across countries

92. Marketing Strategy  Standardization (Global Integration Pressures) –Efficiencies through integrated R&D, production, marketing –Control implications  Adaptation (Local Responsiveness Pressures) –Buyer behavior (cultural, economic influence, brand perception--country of origin idea) –Laws, regulations –Local environment needs –Responsiveness to local condition shifts  Implications on marketing mix

93. International Marketing Mix: Product  Product: a bundle of attributes – Hamburger: meat type, taste, texture, size – Automobile: power, design, quality, performance, comfort, size/capacity  Attributes need to be adapted to a greater or lesser extent to satisfy – Consumer preferences/tastes due to culture – Economic development levels affect consumer behavior – National product/technical standards state mandated

94.  Optimal channel a company chooses to deliver the product  The most locally responsive element of marketing mix because distribution channels vary dramatically across countries –Retail system: concentrated- fragmented –Channel length: long, short –Channel exclusivity International Marketing Mix: Place

96. International Marketing Mix: Promotion  How firm communicates the product attributes / benefits to customers  Barriers to international communication –Cultural barriers –Source effects (country of origin effects) –Noise levels  Standardized advertising strategy possible; standardized advertising strategy execution more difficult (culture, laws)

97. International Marketing Mix: Promotion  Push vs pull strategies –Push strategy: personal selling emphasis Industrial products; complex new products Short distribution channels Few print or electronic media –Pull strategy: mass media advertising emphasis Consumer goods Long distribution channels Marketing message may be carried via print / electronic media

98. International Marketing Mix: Price  Price discrimination: demand elasticity  Strategic pricing –Predatory (quick share-of-market focus): lower prices to drive competitors out, then raise prices –Multipoint pricing: pricing in one market may have an impact in another market; subsidize low pricing in one market from profits in another – Experience curve: use aggressive pricing to build volume and move firm down experience curve (lower marginal costs)  Regulatory issues: antidumping, monopoly restriction

100. New Product Development  New product development – High risk / high return – Technological innovation – Creative destruction  Location of R&D – Disperse R&D to trend/technology leading markets High investment on basic and applied research Strong underlying demand; affluent consumers Intense competition

101.  Integrate R&D, marketing and Production  Ensure: – Product development driven by customer needs – New products can be manufactured efficiently/effectively – Time to market is minimized  Plan clearly: goals, milestones, budgets New Product Development

102.  Use cross-functional, multinationally diverse teams  Span: initial concept development to market introduction  Team composition critical – Assign heavyweight project manager High status in organization; high power and authority Dedicated to fullest possible extent to project – Team should have representative from each function  Physical co-location – When appropriate? – Build team culture – Communication and conflict resolution processes New Product Development

103. Strategic Analysis Why do organizations decide to enter international business? Passive entry:  Follow customers overseas  Respond to enquiries from overseas  Competition is in overseas markets  Seek profitable growth  Sell capacity “as is”

104. Strategic Analysis  Eventually one or more of key distributors become a candidate for acquisition (FDI)  Foreign regional development organizations actively recruit FDI  Competitive pressures force examination of local assembly or production nearer to key international markets  Major international customers demand local support

105. Strategic Analysis  Organization acquires companies that are complimentary to existing businesses  Continued growth requires regional management, development, distribution, technical and customer support

106. Strategic Analysis  Issues involved in conducting international business become “significant”  Demands for organization’s resources increases: Management Cash Product adaptation or unique development Customer support

107. Strategic Analysis  Eventually, these demands force the active planning of international business by the organization – Active strategy

108. Strategic Analysis  SWOT  Strength and Weaknesses – decisions made and controlled by management  Opportunities and Threats – business environment – events that are likely to occur

109. Marketing Mix (4 Ps)  Product  Promotion  Pricing  Place (Distribution) – the most important for international business entry

110. Marketing Mix (4 Ps)  Place (Distribution) – the most important for international business entry: Incoterms determine where title to goods changes Transportation to international freight carrier, freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk

111. Marketing Mix (4 Ps)  Product – usually controlled by the exporter, initially the least impacted element of the marketing mix  However, “localization” often required: approvals and certificates packaging & labeling measures, etc

112. Marketing Mix (4 Ps)  Promotion – success at home leads to interest from potential importers, licensors, joint venture partners  Local knowledge essential on initial entries: Integrated market communication Trade and consumer sales promotion Sales management Trade shows

113. Marketing Mix (4 Ps)  Pricing : What tasks need to be performed to get the product from place of manufacture to foreign customers?  The remainder of the marketing mix needs to be determined in order to set prices

114. Export Pricing Policy Issues  Channel length: longer channels than domestic markets, may drive up end user prices  Price influence: distribution partners negotiate for the lowest possible “landed cost”  Price-setting authority: How much pricing authority should be given to distributors or to subsidiaries?

115. Dumping  WTO: Sale of an imported product at ‘less than fair value’ and causes ‘material injury to a domestic industry’.  US: An unfair trade practice that results in injury, destruction, or the prevention of the establishment of an American industry.  US considers dumping when price is >5% below home market price or,  Price is below cost of production

116. Grey Marketing  Grey (or parallel marketing)  Products are imported outside of the established distribution channel – undercutting the authorized channel pricing  Usually results from high imported prices

117. THANK YOU