Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Chapter 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Distribution Planning 5.1 Channel of Distribution 5.2 Supply Chain Management 5.3 Distribution Logistics 2 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. 5.1 Channel of Distribution Goals Explain the functions of the channel of distribution and channel members. Identify various distribution channel options. 3 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. 5.1 Channel of Distribution Terms Distribution – the methods used by businesses to get their products to customers channel of distribution – the path on which products and services flow from the producer to the final consumer direct channel – distribution method by which producers sell directly to final consumers indirect channel – distribution methods that involves intermediaries, or individuals and businesses that move a product from the producer to the consumer Kiosk – a small, free standing booth containing a computer or display screen that distributes product information CHAPTER 5 4

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. The Function of Distribution Channels Channel members Producers – manufacturers that make products and sells them to other businesses or consumers Retailers – businesses that sell products directly to consumers Wholesalers – businesses that buy products from producers and then sells the products to other businesses, often retailer Transportation companies – businesses that move products Warehouses – storage facilities used to store products Agents and brokers – businesses that work to bring producers and buyers together in exchange for a fee Consumers – final end user of a product 5 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. The Function of Distribution Channels Distribution channels at work Products are moved through the channel of distribution to meet consumer needs and demand in the most efficient way. Distribution channels provide efficiency Having numerous distribution channels make it easier and more efficient for consumers to purchase the products they want CHAPTER 5 6

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Check Point Who are the participants in the channel of distribution? Participants include producers, retailers, wholesalers, transportation, companies, warehouses, agents and brokers, and consumers CHAPTER 5 7

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Channel Options Direct and indirect channels direct channel – distribution method by which producers sell directly to final consumers indirect channel – distribution methods that involves intermediaries, or individuals and businesses that move a product from the producer to the consumer 8 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Channel Options Selection of distribution channels – several factors must be considered when deciding upon a direct channel or an indirect channel of distribution Indirect channels are typically used for the distribution of consumer products Direct channels are commonly used for business and industrial products Multiple and nontraditional channels as used to market the same product to several target markets CHAPTER 5 9

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Check Point What is the difference between a direct channel and an indirect channel of distribution? Direct channel involves only the producer and the consumer Indirect channels include intermediaries such as wholesalers, retailers, and agents CHAPTER 5 10

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. 5.2 Supply Chain Management Goals Describe the processes involved in supply chain management. Identify factors that can influence supply chain decisions. 11 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. 5.2 Supply Chain Management Terms supply chain – all of the businesses involved in the flow of products, services, resources and information from the producer to the consumer business-to-business marketing – B2B – the process by which businesses purchase products or services from other businesses purchase order – a form listing the types, quantities, and prices of products ordered 12 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Terms Invoice-an itemized bill for products and services that states the terms or payment electronic data interchange (EDI) – the electronic exchange of information between the purchaser and supplier point-of-sale (POS) system – a computerized system that updates inventory records as each sale occurs Imports – products and services purchased from another country Exports – products and services sold to another country CHAPTER 5 13

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Check Point What activities are involved in supply chain management? Activities include purchasing materials, processing orders, managing and controlling inventory, warehousing and shipping, and managing supply chain risks. CHAPTER 5 14

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Supply Chain Activities Purchasing materials – a variety of products and services are needed for a business to be successful Processing orders – customer’s order sets the supply chain in motion Managing and controlling inventory – business’s must maintain an adequate level of inventory Warehousing and shipping – where products are stored until a customer wants them Managing supply chain risks – all potential risks must be identified. 15 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Supply Chain Management Considerations International markets – buying and selling products in international markets Outsourcing – occurs when the manufacturer or supplier hires a third party to perform specific supply chain Digital distribution – products distributed electronically through the internet or a satellite transmission Eco-friendly practices – efforts to protect the environment 16 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Check Point What factors influence supply chain decisions? Influential factors include international markets, outsourcing, digital distribution and eco-friendly practices. CHAPTER 5 17

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. 5.3 Distribution Logistics Goals Define logistics and explain its role in distribution. Explain the importance of product storage, handling, and packaging in the distribution process. 18 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Terms Logistics – the physical distribution process that involves transporting, storing and delivering products throughout the supply chain Warehouse – a building designed to store large quantities of products safely distribution center – a large facility that offers a variety of supply chain services to help move a product to the marketplace more efficiently CHAPTER 5 19

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Moving the Product Modes of transportation Railroads Trucks Airplanes Ships and boats Pipelines Transportation considerations Cost Travel time Reliability Capability Accessibility Traceability CHAPTER 5 20

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Product Storage, Handling, and Packaging Warehouses Distribution centers Packaging 21 CHAPTER 5

Advertising and Sales Promotion ©2013 Cengage Learning. All Rights Reserved. Check Point What role does logistics play in the supply chain? Logistics is the management of the physical distribution process, which includes transportation, storage, and delivery of products throughout the supply chain. Why are product storage, handling, and packaging important components of the distribution process? Businesses need storage facilities to hold products until they need to be moved to the next channel member. Packaging protects products when they are stored and moved. CHAPTER 5 22