Transcript Powerpoint-Chapter 13

Foundations of
Business 3e
Pride, Hughes, &
Kapoor
Distributing and Promoting Products
Chapter
13
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 13 | Slide 2
Distribution Channels and Market Coverage

Channel of distribution (marketing channel)
• A sequence of marketing organizations that directs
a product from the producer to the ultimate user

Middleman (marketing intermediary)
• A marketing organization that links a producer
and user within a marketing channel
–
Merchant middleman—takes title to products by buying them
–
Functional middleman—helps in the transfer of ownership of
products but does not take title to the products
–
Retailer—buys from producers or other middlemen and sells
to consumers
–
Wholesaler middleman—sells products to other firms
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Chapter 13 | Slide 3
Channels for Consumer Products

Producer to consumer (direct channel)
• No intermediaries
• Used by all services and by a few consumer goods
• Producers can control quality and price, do not have
to pay for intermediaries, and can be close to their
customers
• Examples: Dell Computer, Mary Kay Cosmetics
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Chapter 13 | Slide 4
Channels for Consumer Products (cont.)

Producer to retailer to consumer
• Producers sell directly to retailers when retailers (e.g.,
Walmart) can buy in large quantities
• Most often used for bulky products for which
additional handling would increase selling costs,
and for perishable or high-fashion products that
must reach consumers quickly
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Chapter 13 | Slide 5
Channels for Consumer Products (cont.)

Producer to wholesaler to retailer
to consumer
• The traditional channel
• Used when a producer’s products are carried by
so many retailers that the producer cannot deal
with them all
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Chapter 13 | Slide 6
Channels for Consumer Products (cont.)

Producer to agent to wholesaler to retailer
to consumer
• Agents—functional middlemen that do not take title
to products and are compensated by commissions
paid to the producers
• Often used for inexpensive, frequently purchased
items, for seasonal products, and by producers that
do not have their own sales forces
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Chapter 13 | Slide 7
Channels for Consumer Products (cont.)

A manufacturer may use multiple channels
• To reach different market segments
–
When the same product is sold to consumers and
businesses
• To increase sales or capture a larger market share
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Chapter 13 | Slide 8
Distribution Channels
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Chapter 13 | Slide 9
Channels for Business Products

Producer to business user
• Usually used for heavy machinery, airplanes, major
equipment
• Allows the producer to provide expert and timely
services to customers
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Chapter 13 | Slide 10
Channels for Business Products (cont.)

Producer to agent middleman to
business user
• Usually used for operating supplies, accessory
equipment, small tools, standardized parts
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Chapter 13 | Slide 11
Channels for Business Products (cont.)
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Chapter 13 | Slide 12
Level of Market Coverage

Intensity of market coverage
• Intensive distribution
– The use of all available outlets for a product to
saturate the market
• Selective distribution
– The use of only a portion of the available outlets for a
product in each geographic area
• Exclusive distribution
– The use of only a single retail outlet for a product in a
larger geographic area
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Chapter 13 | Slide 13
Partnering Through Supply-Chain Management

Supply-chain management
• Long-term partnership among channel members
working together to create a distribution system that
reduces inefficiencies, costs, and redundancies
while creating a competitive advantage and
satisfying customers
• Category management
– The retailer asks a supplier how to stock the shelves
• Technology
– Has enhanced implementation of supply-chain
management
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Chapter 13 | Slide 14
Marketing Intermediaries: Wholesalers

Justifications for marketing intermediaries
• Intermediaries perform essential marketing services
• Manufacturers would be burdened with additional
record keeping and maintaining contact with
numerous retailers
• Costs for distribution would not decrease and could
possibly increase due to the marketing inefficiencies
of producers
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Chapter 13 | Slide 15
Types of Wholesalers

Merchant wholesalers
• Middlemen that purchase goods in large quantities and
then sell them to other wholesalers or retailers and to
institutional, farm, government, professional, or
industrial users
• Operate in one or more warehouses where they
receive, take title to, and store goods
• These wholesalers are sometimes called distributors
or jobbers
• Full-service wholesalers
–
–
–
General merchandise wholesaler
Limited-line wholesaler
Specialty-line wholesaler
• Limited-service wholesalers
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Chapter 13 | Slide 16
Types of Wholesalers (cont.)

Commission merchants, agents, and brokers
• Functional middlemen that do not take title to
products
• Perform some marketing activities
• Paid a commission (percentage of sales price)
• Commission merchant
–
Carries merchandise and negotiates sales for manufacturers
• Agent
–
Expedites exchanges, represents a buyer or a seller, and is often
hired permanently on a commission basis
• Broker
–
Specializes in a particular commodity, represents a buyer or a
seller, and is likely to be hired on a temporary basis
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Chapter 13 | Slide 17
Types of Wholesalers (cont.)

Manufacturer’s sales branch
• Merchant wholesaler owned by a manufacturer
• Carries inventory, extends credit, delivers goods,
helps in promoting products
• Customers are retailers, other wholesalers, and
industrial purchasers

Manufacturer’s sales office
• Sales agent owned by a manufacturer
• Sells goods manufactured by its own firm and also
others that complement its own product line
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Chapter 13 | Slide 18
Marketing Intermediaries: Retailers

Retailers
• The final link between producers and consumers

Approx. 2.6 million retail firms in the U.S.

90 percent have sales of less than $1 million
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Chapter 13 | Slide 19
The Ten Largest Retail Firms in the United States
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Chapter 13 | Slide 20
Classes of In-Store Retailers

Independent retailer
• A firm that operates only one retail outlet

Chain retailer
• A company that operates more than one retail outlet

Department store
• A retail store that:
– employs twenty-five or more persons
– sells at least home furnishing, appliances, family apparel,
and household linens and dry goods, each in a different
part of the store

Discount store
• A self-service, general-merchandise outlet that sells
products at lower-than-usual prices
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Chapter 13 | Slide 21
Classes of In-Store Retailers (cont.)

Catalog showroom
• A retail outlet that displays well-known brands and
sells them at discount prices through catalogs within
the store

Warehouse showroom
• A retail facility in a large, low-cost building with large
on-premises inventories and minimal service

Convenience store
• A small food store that sells a limited variety of
products but remains open well beyond normal
business hours
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Chapter 13 | Slide 22
Classes of In-Store Retailers (cont.)

Supermarket
• A large self-service store that sells primarily food
and household products

Superstore
• A large retail store that carries not only food and
nonfood products ordinarily found in supermarkets
but also additional product lines

Warehouse club
• A large-scale members-only establishment that
combines features of cash-and-carry wholesaling
with discount retailing
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Chapter 13 | Slide 23
Classes of In-Store Retailers (cont.)

Traditional specialty store
• A store that carries a narrow product mix with deep
product lines

Off-price retailer
• A store that buys manufacturers’ seconds, overruns,
returns, and off-season merchandise for resale to
consumers at deep discounts

Category killer
• A very large specialty store that concentrates on a
single product line and competes on the basis of low
prices and product availability
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Chapter 13 | Slide 24
Kinds of Nonstore Retailing

A type of retailing whereby consumers
purchase products without visiting a store
• Direct selling
–
The marketing of products to consumers
through face-to-face sales presentations at
home or in the workplace
• Direct marketing
–
The use of the telephone, Internet, and
nonpersonal media to introduce products to
customers, who can then purchase them via
mail, telephone, or the Internet
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Chapter 13 | Slide 25
Kinds of Nonstore Retailing (cont.)

Catalog marketing
• An organization provides a catalog from which
customers make selections and place orders by
mail, telephone, or the Internet

Direct-response marketing
• A seller advertises a product and makes it available,
usually for a short time period, through mail,
telephone, or online orders

Telemarketing
• The performance of marketing-related activities by
telephone
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Chapter 13 | Slide 26
Kinds of Nonstore Retailing (cont.)

Television home shopping
• Products are presented to television viewers, who
can buy them by calling a toll-free number and
paying by credit card

Online retailing
• Makes products available to buyers through
computer connections

Automatic vending
• The use of machines to dispense products
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Chapter 13 | Slide 27
Types of Shopping Centers

A self-contained retail facility constructed
by independent owners and consisting of
various stores
• Lifestyle shopping center
–
Has an open-air configuration and is occupied by upscale national
chain specialty stores
• Neighborhood shopping center
–
Consists of several small convenience and specialty stores
• Community shopping center
–
Includes one or two department stores and some specialty stores,
along with convenience stores
• Regional shopping center
–
Contains large department stores, numerous specialty stores,
restaurants, movie theaters, and sometimes hotels
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Chapter 13 | Slide 28
Physical Distribution

All those activities concerned with the
efficient movement of products from the
producer to the ultimate user
•
•
•
•
•
Inventory management
Order processing
Warehousing
Materials handling
Transportation
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Chapter 13 | Slide 29
Physical Distribution (cont.)

Inventory management
• The process of managing inventories in such a way as
to minimize inventory costs, including both holding costs
and potential stock-out costs
–
Holding costs—the costs of storing products until they are
purchased or shipped to customers
– Stock-out costs—the costs of sales lost when items are not in
inventory when needed
• Technology and software help manage inventory
• Efficiency is crucial for firms using just-in-time
(JIT) approach

Order processing
• Activities involved in receiving and filling customers’
purchase orders
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Chapter 13 | Slide 30
Physical Distribution (cont.)

Warehousing
• The set of activities involved in receiving and storing
goods and preparing them for reshipment
– Receiving goods
– Identifying goods
– Sorting goods
– Dispatching goods to storage
– Holding goods
– Recalling, picking, and assembling goods
– Dispatching shipments
• Types of warehouses
–
Private warehouses—owned and operated by a firm
– Public warehouses—offer their services to all firms
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Chapter 13 | Slide 31
Physical Distribution (cont.)

Materials handling
• The physical handling of goods, in warehouses as well
as during transportation

Transportation
• The shipment of products to customers
• Carrier—a firm that offers transportation services
– Common carriers—services available for hire to all shippers
– Contract carriers—available for hire by one or several
shippers; not available to the general public
– Private carriers—owned and operated by the shipper
• Freight forwarders—agents who facilitate the transportation
process for shippers by handling the details of the process
• Railroads—in terms of total freight carried, these are America’s
most important mode of transportation
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Chapter 13 | Slide 32
Physical Distribution (cont.)

Transportation
• Trucks
–
Tremendous expansion since creation of national highways
– Often favored for offering door-to-door service, less stringent
packaging requirements, and flexible schedules
• Airplanes
–
Fastest but most expensive
– Used to ship high-value or perishable goods
• Waterways
– Slowest but least expensive
– Used mainly for bulky, nonperishable goods
– Use limited to cities located on navigable waterways
• Pipelines
–
used primarily to carry petroleum and natural gas
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Chapter 13 | Slide 33
Characteristics of Transportation Modes
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Chapter 13 | Slide 34
Class Exercise

Which channel(s) of distribution would you
use for the following products? Why?
•
•
•
•
A new reduced-fat candy bar
Fine china that costs $550 for a set
A set of encyclopedias that costs $750
A line of jeans that sells between $30 and $50 a pair
© 2013 South-Western, a part of Cengage Learning. All rights reserved.
Chapter 13 | Slide 35
What Is Integrated Marketing Communications?

Coordination of promotion efforts to ensure
maximal informational and persuasive impact on
customers

Results in a consistent message to customers,
long-term customer relationships, and the efficient
use of promotional resources
− Mass media advertising has given way to targeted
promotional tools (e.g., cable TV, direct mail, and the
Internet)
− The overall cost of marketing communications has risen
significantly, pressuring managers to make the most
efficient use of marketing resources
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Chapter 13 | Slide 36
The Promotion Mix: An Overview

Promotion
• Commonly the object of two misconceptions
– Promotional activities make up the entire field of marketing
– Promotional activities are unnecessary and cause higher prices

Role of promotion
• To facilitate exchanges directly or indirectly by informing
individuals, groups, or organizations and influencing them to
accept a firm’s products or to have more positive feelings about
the firm
–
Convey product and service information directly to target
market segments
– Provide information to interest groups, regulatory agencies,
investors, and the general public
• To maintain positive relationships between a company
and various groups in the marketing environment
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Chapter 13 | Slide 37
The Promotion Mix: An Overview (cont.)

The particular combination of promotion methods
a firm uses to reach a target market
• Advertising
–
A paid non-personal message communicated to a select
audience through a mass medium
• Personal selling
–
Personal communication aimed at informing customers and
persuading them to buy a firm’s products
• Sales promotion
–
The use of activities or materials as direct inducements to
customers or salespersons
• Public relations
–
Communication activities used to create and maintain favorable
relations between an organization and various public groups,
both internal and external
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Chapter 13 | Slide 38
Possible Elements of a Promotion Mix
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Chapter 13 | Slide 39
Advertising

Types of advertising by purpose
• Primary-demand advertising
– Used to increase demand for all brands of a product in
a specific industry
• Institutional advertising
– Designed to enhance a firm’s image or build its
reputation
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Chapter 13 | Slide 40
Advertising (cont.)

Advertising Age is the industry’s preeminent
source of marketing, advertising, and media news,
information, and analysis.
http://www.adage.com
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Chapter 13 | Slide 41
Debate Issue: Is It Appropriate for
Marketers to Advertise to Children?
Yes
• Children have billions of
dollars in discretionary
income and spend almost
all of it.
• Children buy regularly.
• Children are heavily
influenced by television
advertising.
• Children directly influence
more than $40 billion in
adult purchases each
year..
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No
• Television advertising
alters one’s sense of
reality, making children
more prone to “need
gratification” and more
susceptible to peer
pressure.
• Most purchase decisions
are made by parents.
• On certain issues, children
are easily deceived.
Chapter 13 | Slide 42
Major Steps in Developing an
Advertising Campaign
1.
Identify and analyze the target audience.
2.
Define the advertising objectives.
3.
Create the advertising platform.
4.
Determine the advertising appropriation.
5.
Develop the media plan.
6.
Create the advertising message.
7.
Execute the campaign.
8.
Evaluate advertising effectiveness.
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Chapter 13 | Slide 43
Who Spends the Most on Advertising?
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Chapter 13 | Slide 44
Advertising Agencies

Independent firms that plan, produce, and place
advertising for their clients

Large agencies also help with sales promotion
and public relations

Media usually pay a commission to agencies

Firms may use both in-house advertising
departments and an independent agency
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Chapter 13 | Slide 45
Personal Selling

The most adaptable promotion method

The most expensive promotion method

Kinds of salespersons
• Order getter
– Responsible for creative selling: selling a firm’s
products to new customers and increasing sales to
current customers
• Order taker
– Handles repeat sales in ways that maintain positive
relationships with customers
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Chapter 13 | Slide 46
Kinds of Salespersons

Kinds of salespersons
• Sales support personnel
– Employees who aid in selling but are more involved in
locating prospects, educating customers, building goodwill
for the firm, and providing follow-up service
–
Missionary salespersons
–
–
Trade salespersons
–
–
Visit retailers to persuade them to buy the
manufacturer’s products
Assist customers in promoting products, especially in
retail stores
Technical salespersons
–
Assist current customers in technical matters
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Chapter 13 | Slide 47

The Six Steps of the
Personal-Selling
Process
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Chapter 13 | Slide 48
Sales Promotion


Activities or materials that are direct
inducements to customers or salespersons
Sales promotion objectives
• To attract new customers
• To encourage trial of a new product
• To invigorate the sales of a mature brand
• To boost sales to current customers
• To reinforce advertising
• To increase traffic in retail stores
• To steady irregular sales patterns
• To build up reseller inventories
• To neutralize competitive promotional efforts
• To improve shelf space and displays
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Chapter 13 | Slide 49
Sales Promotion Methods

Consumer sales promotion method
• Designed to attract consumers to particular retail stores
and to motivate them to purchase certain new or
established products

Trade sales promotion method
•

Designed to encourage wholesalers and retailers to stock and
actively promote a manufacturer’s product
Factors influencing the choice of sales
promotion method
•
•
•
•
•
•
Objectives of the sales promotional effort
Product characteristics
Target market profile
Distribution channels
Availability of resellers
Competitive and regulatory forces in the environment
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Chapter 13 | Slide 50
Sales Promotion Methods (cont.)

Rebate
• A return of part of the purchase price of a product

Coupon
• Reduces the retail price of a particular item by a stated amount
at the time of purchase

Sample
• A free product given to customers to encourage trial and
purchase

Premium
• A gift a producer offers to a customer in return for buying its
product

Frequent-user incentives
• A program that rewards customers who engage in repeat
(frequent) purchases
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Chapter 13 | Slide 51
Sales Promotion Methods (cont.)

Point-of-purchase displays
• Promotional material in the retail store designed to inform
customers and encourage purchases

Trade shows
• Industry-wide exhibits at which many sellers display their
products

Buying allowance
• A temporary price reduction to resellers for purchasing
specified quantities of a product

Cooperative advertising
• A manufacturer agrees to pay a certain amount of the retailer’s
media cost for advertising the manufacturer’s product
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Chapter 13 | Slide 52
Types of Public-Relations Tools

A broad set of communication activities used to
create and maintain favorable relationships
between an organization and various public groups,
both internal and external
• Customers, employees, stockholders, suppliers,
educators, the media, government officials, society
in general

Types of public-relations tools
• Written and spoken communications
–
Brochures, newsletters, company magazines, annual reports,
news releases, corporate-identity materials, speeches
• Event sponsorship
–
Special events such as concerts and charity functions that the firm
underwrites wholly or partially
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Chapter 13 | Slide 53
Publicity

Publicity
• Communication in news-story form about an
organization, its products, or both
–
News release
– Feature article
– Captioned photograph
– Press conference
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Chapter 13 | Slide 54
The Uses of Public Relations

To promote people, places, activities, ideas

To enhance the reputation of the organization
by increasing awareness of company products
and activities

To create specific positive company images
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Chapter 13 | Slide 55
Chapter Quiz
1. A women’s apparel manufacturer most likely
will use
A.
B.
C.
D.
E.
intensive distribution.
selective distribution.
exclusive distribution.
high-style distribution.
popular-style distribution.
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Chapter 13 | Slide 56
Chapter Quiz
2. Category management is
A.
a producer deciding which category to
concentrate on for the next season.
B.
a retailer asking the supplier in a particular
category how to stock the shelves.
C.
when suppliers tell the manufacturer which
category to produce more of.
D.
when Home Depot decides which category sells
the best and decides to concentrate on that
category of goods.
E.
the combined efforts of producers and wholesalers
to manage the wholesaler’s inventory.
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Chapter 13 | Slide 57
Chapter Quiz
3. Which activity combines inventory management,
order processing, warehousing, material
handling, and transportation?
A.
B.
C.
D.
E.
Marketing
Merchandising
Warehousing
Physical distribution
Transporting
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Chapter 13 | Slide 58
Chapter Quiz
4. Salespeople may be identified as
A. experts, order makers, and support personnel.
B. order preparers, order trackers, and order receivers.
C. order getters, order takers, and support personnel.
D. order getters, order makers, and order receivers.
E. order getters, order dictators, and support personnel.
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Chapter 13 | Slide 59
Chapter Quiz
5. The first step in the personal selling
process is
A.
B.
C.
D.
E.
product display.
prospecting.
approaching the prospect.
organizing the sales pitch.
making the presentation.
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Chapter 13 | Slide 60