1. MGT301 Principles of Marketing
Lecture-31

2. Summary of Lecture-30

3. Retailing and Wholesaling

4. Today’s Topics
Review 3rd P (Place)

6. Place….Distribution Channel….Marketing Channel

7. Simple Marketing System
Communication
Product/Service
Producer/Seller
Consumer
Money
Feedback

8. Right Place
Right Cost
Right Product
Right Time
Right Condition

9. Manufacturer Customer Manufacturer Customer Manufacturer Customer
20 Contacts

10. Wholesaling Intermediary
Manufacturer
Customer
Manufacturer
Wholesaling Intermediary
Customer
Manufacturer
Customer
Manufacturer
Customer
Manufacturer
9 Contacts

11. How Channel Members Add Value?
Channel members add value by bridging the major time, place and possession gaps that separate goods and services from those who would use them.

12. Distribution Channel Functions
This CTR relates to the material on pp
Risk Taking
Information
Financing
Promotion
Distribution Channel Functions
Information. This function involves gathering and distributing marketing research and intelligence about the environment for planning purposes.
Discussion Note: The use of scanner technology has dramatically changed this function in the last few years.
Promotion. This involves developing and spreading persuasive communications about an offer.
Contact. Contact involves finding and communicating with prospective buyers.
Matching. This function consists of shaping and fitting the offer to the buyer’s needs by manufacturing, grading, assembling, and packaging.
Negotiation. This involves reaching an agreement on price and other terms.
Physical Distribution. This function consists of the transporting and storing of goods.
Financing. This function addresses the acquiring and using of funds to cover the costs of channel work.
Risk Taking. This function assumes the risk of carrying out the channel work.
Discussion Note: Students often assume business is risk-free. You might expand upon the link between risk and value-added services as the justification for profits.
Physical
Distribution
Contact
Negotiation
Matching

13. M W J R Direct In-Direct C  Channel 1 Channel 2 Channel 3 Channel 4
Channel Levels and Channel Conflict
This CTR corresponds to Figure 12-2 (A) on p. 355 and relates to the material on pp M W J R C 
Direct
Channel 1
Channel Levels
Distribution channels can be described by the number of channel levels involved. A channel level is defined as each of the marketing intermediaries that perform some work in bringing the product and its ownership closer to the final buyer. Distribution channels can be categorized broadly as:
Direct Marketing Channel. This is a marketing channel that has no intermediary levels. The company sells directly to final consumers.
Discussion Note: The company may not be the actual producer. Land’s End only makes a small fraction of its clothes but coordinates the sale and ships from its warehouses. Dell Computer assembles its computers on site but from component parts made elsewhere.
Indirect Marketing Channels. These contain one or more intermediary levels.
Channel 2
In-Direct
Channel 3
Channel 4

14. Marketing Channels for Consumer Goods
Producer
Consumer
Producer
Retailer
Consumer
Producer
Wholesaler
Retailer
Consumer
Producer
Agent/
Broker
Wholesaler
Retailer
Consumer

15. Marketing Channels for Business Goods
Producer
Business
User
Producer
Agent/
Broker
Business
User
Producer
Wholesaler
Business
User
Producer
Agent/
Broker
Wholesaler
Business
User

16. Evaluation of Channel Alternatives
Economic Criteria
-Potential sales, costs and profits of channels
Control Criteria
-Amount of control company has over sales efforts
Adaptive Criteria
-flexibility of channel to adapt to changing situations

17. Channel Management Decisions
Selecting
Channel Management Decisions
Channel Management Decisions
This CTR relates to the material on pp
Motivating
Channel Management Decisions
Selecting Channel Members. Choosing middlemen will vary in difficulty be product and producer. Very large and well known companies often have more qualified middlemen seeking to carry their products than the company can effectively use. Some new products will be resisted by existing channels and may require adopting new channel members to carry the line.
Motivating Channel Members. Channel members must be motivated to perform. Positive motivators come from high margins, special deals, premiums, cooperative advertising allowances, display allowances, and sales contests. Negative motivators may include threatening margins, delaying delivery, or ending the relationship. Long term cooperation is enhanced by distribution programming which involves building a planned, professionally managed, VMS that meets al channel member needs.
Evaluating Channel Members. Assessing channel members requires regular measurement of performance against established criteria such as sales quotas, inventory levels, customer delivery time, training, and overall customer service for each channel member. Effective channel management rewards superior performance and seeks to improve substandard performance in a cooperative professional partnership. Channel member replacement should be used as a last resort with sincere efforts to improve performance have not succeeded.
FEEDBACK
Evaluating

18. The channel will be most effective when..
Each member is assigned tasks it can do best.
All members cooperate to attain overall channel goals and satisfy the target market.

19. Conventional Distribution Channel vs. Vertical Marketing Systems

20. Conventional Marketing Channel Vertical Marketing Channel
Manufacturer
Manufacturer
Wholesaler
Wholesaler
Retailer
Retailer
Consumer
Consumer

21. Logistic Management Channels of distribution Two different
perspectives

22. (Physical distribution)
Channels of
distribution
Two different
perspectives
Logistics
(Physical distribution)

23. Push Strategy Pull Strategy
Producer
Interme-
diaries
End users
Marketing
activities
Demand
Demand
Push Strategy
Marketing activities
Producer
Interme-
diaries
End users
Demand
Demand
Pull Strategy

24. Marketing Logistics and Supply Chain Management

25. Functions of Logistics Systems

26. Transportation Water, Truck, Rail, Pipeline & Air
Logistics Systems
This CTR relates to the material on pp
Instructor’s Note: Transportation is covered separately on the following CTR.
Costs
Minimize Costs of
Attaining Logistics
Objectives
Order Processing
Submitted
Processed
Shipped
Nature of Logistics Systems
Costs. Distribution costs stem from factors other than just size. How products are transported, stored, sorted, inventoried, ordered, and tracked can all affect distribution costs over and above the sheer volume being distributed. Modern facilities utilizing technology to help innovate what it means to physically distribute goods both save on costs and become a viable promotional tool in providing customer service.
Order Processing. Processing orders is an area of distribution that benefits from the application of computer technology. Innovative applications of hardware and software can streamline order processing by connecting the salesperson with dispatchers and warehouses.
Warehousing. Storage of products to best meet demand requires decisions on stocking locations, estimation of time to be stored and distinguishing between storage warehouse needs and distribution centers utilizing automation to move goods quickly.
Inventory. The cost of holding inventory requires developing accurate knowledge on when to order and how much to order to meet demand but not overburden inventory processing capacity.
Warehousing
Storage
Distribution
Logistics
Functions
Transportation Water, Truck, Rail, Pipeline & Air
Inventory
When to order
How much to order
Just-in-time

27. Customer Service Concept
Customer service is the ability of logistics management to satisfy users in terms of:
- time
- dependability
- communication
- convenience

28. Companies today place greater emphasis on logistics because…..
Effective logistics is becoming a key to winning and keeping customers.
Logistics is a major cost element for most companies.

29. The explosion in product variety has created a need for improved logistics management.
Information technology has created opportunities for major gains in distribution efficiency.

30. Classification of Retailing
Retailing and Wholesaling

31. Amount of Service Product Line Relative Prices Retail Organizations
Self-Service, Limited-Service and
Full-Service Retailer
Product Line
Length and Breadth of the Product
Assortment
Relative Prices
Pricing Structure that is Used
by the Retailer
Retail Organizations
Independent, Corporate, or Contractual
Ownership Organization

32. Nonstore Retailing

33. Catalogs - from clothing to computers
Mail Order
Catalogs - from clothing to computers
Direct Mail - brochure offering a product
or service at one point in time.
Direct Selling
Door-to-Door Sales - declining in U.S.
Parties & Networks - presentations
Telemarketing - over the phone
Automatic Vending
Best suited to inexpensive merchandise
and food and beverages.
Direct Response Television
Home Shopping Networks - TV channels
that sell products

34. What is Wholesaling?
All the activities involved in selling goods and services to those buying for resale or business use.
Wholesaler - those firms engaged primarily in wholesaling activity.

35. Customer Expectations for Wholesaling

36. Suppliers’ Logistics Systems
Accuracy
Easy
Inquiry
and
Order
Reliable
Delivery
On-time
Error-Free
Invoicing
Post-Sales
Support
Easy Claims
Handling

37. Warehouse and Materials-Handling
Functions of
Materials
Handling
Receive goods into
warehouse
Dispatch the goods to
temporary storage
Recall, select, or pick the goods for shipment
Identify, sort, and label goods

38. Types of Wholesalers

39. They Don’t Take Title to Wholesaling by Sellers
Brokers/ Agents
They Don’t Take Title to
the Goods, and They
Perform Only a Few
Functions.
Merchant
Wholesaler
Independently Owned
Business that Takes
Title to the
Merchandise
it Handles.
Manufacturers’
Sales Branches
and Offices
Wholesaling by Sellers
or Buyers Themselves
Rather Than Through
Independent
Wholesalers.

40. Right Place
Right Cost
Right Product
Right Time
Right Condition

41. Compete on value (not just price.) Save customers time and energy.
Make shopping fun.

42. Enough for Place. . .

43. Summary

44. Next….

45. MGT301 Principles of Marketing
Lecture-31