Transcript Chapter 10

Part 3: The marketing mix
Chapter 10: Managing distribution
channels
Step 5: Design the marketing strategy
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
10–1
When we finish this lecture you should
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Appreciate how product class influences place objectives
Understand why some organisations use direct channels of
distribution
Recognise how, and why, marketing specialists develop more
effective channel systems
Understand how to obtain cooperation and avoid conflict in
channel systems
Know how channels in vertical marketing systems shift and
share functions to meet customer needs
Recognise the differences between intensive, selective and
exclusive distribution
Appreciate when, and where, the various kinds of distribution
intermediaries are most useful to channel management
Understand how these intermediaries plan their own
marketing strategies and what progressive intermediaries are
doing to modernise their operations and marketing strategies
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
10–2
Place decisions in the marketing mix
• Place—Making goods and services available in the
right quantities and at the right locations—when
customers want them
• Channel of distribution (Chapter 10)—A series of
organisations or individuals participating in the flow
of products from producer to final user or
consumer
• Physical distribution (Chapter 11)—Focuses on the
physical flow of the product, facilities needed for
storing and transportation, and customer service
levels to satisfy customers
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
10–3
Figure 10.1 Strategy decision areas in place
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Channels of distribution
• Direct distribution (producer to customer) is
common when
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The customer is a business or organisation (rather than a
final consumer)
Aggressive personal selling is required and/or when
customers need special technical service
The product is primarily a service rather than a physical
good
Working with intermediaries would be difficult to maintain
control of the marketing mix
The producer can perform marketing functions more
efficiently (economically) by itself
Web site based e-commerce
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Channels of distribution (continued)
• Indirect distribution occurs when the producer uses
intermediaries to reach consumers or end users
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Consumers are dispersed geographically
New companies with limited financial resources or
companies that want to retain flexibility can avoid
investment in technology required for direct distribution
Intermediaries play a critical role in providing credit to
customers at the end of channel
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Channel specialists adjust
discrepancies
• Discrepancies of quantity and assortment
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Discrepancies of quantity—Difference between the
quantity of products it is economical to produce and the
quantity or products customers want
Discrepancies of assortment—Difference between the
product lines a producer makes and the assortment of
products that customers want
• Regrouping activities reduce discrepancies—
Accumulating, bulk-breaking, sorting and assorting
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Indirect channels of distribution
• Traditional channel system—A channel in which the
various channel members make little or no effort to
cooperate with each other
• Managing channel conflict—A channel captain is a
manager who helps direct the activities of the
whole channel
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Tries to avoid, or resolve, conflicts
May be either a producer or an intermediary
Guides the whole channel to compete better with other
channels by effectively allocating functions and
developing a common product-market commitment
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Indirect channels of distribution
(continued)
• A vertical marketing system exists when the whole
channel focuses on the same target market at the
end of the channel
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Corporate channel systems involve corporate ownership
along the channel, and they often involve vertical
integration
Administered channel systems exist when channel
members have an informal agreement to cooperate with
each other
Contractual channel systems exist when channel members
agree, by contract, to cooperate with each other
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10–9
Figure 10.2 How channel functions may be shared
in different channel systems
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
10–10
Figure 10.3 Characteristics of traditional channel
systems and vertical marketing systems
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
10–11
Ideal market exposure
• Ideal market exposure—makes a product available
widely enough to satisfy target customers’ needs—
excessive exposure only increases the total cost of
marketing
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Level of market exposure
Exclusive
Selective
Intensive
Selling through
only one
intermediary in
a particular
geographic
region
Selling through
only those
intermediaries
who will give
the product
special
attention
Selling through
all responsible
and suitable
wholesalers
and retailers
who will stock
and/or sell the
product
Few
Number of intermediaries
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Many
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Selective distribution
• Sell only through intermediaries who will give the
product special attention
• Avoid dealing with intermediaries that
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Have poor credit standing
Make too many returns
Require too much service
Place only small orders
Cannot or will not do a satisfactory job
• Becoming more popular
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Less expensive than intensive distribution
Gets better cooperation among intermediaries
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Complex channel systems
• Dual distribution occurs when a producer uses
several competing channels to reach the same
target market—perhaps using several
intermediaries in addition to selling directly itself
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Figure 10.4 An example of dual distribution by a
publisher of computer books
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Complex channel systems
(continued)
• Reverse channels are channels used to retrieve
products that customers no longer want. Examples
of situations include
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Recall of unsafe products
Return of products from incorrectly filled orders
Return of products that are under warranty
Return of products that a customer orders in error
Return of products to be recycled (bottles, and so on)
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Types of wholesalers
• Producers’ sales branches
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Warehouses at locations separate from producers’ factories
operating as wholesalers
Few in number but handle large proportion of total turnover
• Merchant wholesalers
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Wholesalers who take title to the products they sell
Most common form of wholesalers
• Agent intermediaries
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Wholesalers who do not take title to the products they sell
Main purpose is to help in the buying and selling process
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Figure 10.5 Types of wholesalers
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Figure 10.6 Merchant wholesalers and their
functions
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Figure 10.7 Agent intermediaries and their
functions
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Retailing
• Retailing covers all of the activities involved in the
sale of products to final consumers
• Small businesses and large chains must revise their
marketing strategies continually in response to
major changes in the retail environment
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Sociocultural
Economic
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Retail strategy planning
• Consumer retail selection
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Economic needs
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Location (convenience, parking, safety and stores nearby)
Product selection (width and depth of assortment, and
quality)
Special services (home delivery, special orders and gift
wrapping)
Helpful salespeople (courteous, knowledgeable and fast
checkout service)
Fairness in dealing (honesty and return privileges)
Price (value offered and special discounts)
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Retail strategy planning (continued)
• Consumer retail selection
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Emotional needs
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To boost their ego
A social outing
To mix with similar people (social class and culture)
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Types of retailers
• Conventional retailers
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Single and limited line
Department stores
Specialty shops
• Mass-merchandising retailers
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Supermarkets
Discount stores
Mass merchandisers
• Convenience outlets
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Convenience stores
Automatic vending
Telephone, TV and direct-mail retailing
Door-to-door direct selling
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Types of retailers (continued)
• Chains and franchises
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Corporate chains—Several stores owned and managed by
the same company
Independent chains
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Cooperative chains—Retail-sponsored groups that run by
buying organisation and joint promotion
Voluntary chains—Wholesale-sponsored groups that work
with ‘independent’ retailers
Franchise operations—The franchisor develops a good
marketing strategy and the retail franchise holders
(franchisees) carry out the strategy in their own locations
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Figure 10.8 A three-dimensional view of the
market for retail facilities and the probable
position of some present offerings
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Internet retailing
• Advantages
More information available more quickly
– Product demonstration is possible
– Availability of particular product/service found quickly and easily
– Comparison-shopping is easy
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• Disadvantages
Cannot touch or carefully inspect a product
– Difficult to ‘sift’ through information if not exactly sure of
requirements
– Much irrelevant clutter
– Delivery and return costs must be considered
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Figure 10.10 Some illustrative differences
between online and in-store shopping
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Examples of scrambled
merchandising
• Photo processing at pharmacies
• Snack foods at service stations
• Hardware at supermarkets
• Greeting cards at convenience stores
• Home computers at discount stores
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The future of wholesaling and
retailing
• Increased in-home shopping mostly for basics
• More and better information
• Shopping on the Internet may necessitate
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New marketing functions being provided by suppliers
New types of intermediaries developing
Physical distribution specialists developing
• Closer relationships with customers
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Customer databases will allow more targeted marketing
offers
• Possibly a change in traditional retailing to a more
social experience
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What we will be doing in the next
chapter
• In the following chapter we will be discussing
marketing logistics, including
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Why logistics (physical distribution) is an important part
of place and marketing planning
Why the level of customer service is a marketing strategy
variable
Transportation, inventory and warehousing
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PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
10–32