Transcript Chapter 3 Effects of IT on Strategy and Competition

Part 4
PRODUCT AND PRICE
DECISIONS
Dr. Chen, Principle of Marketing
10: Product, Branding, and
Packing Concepts
11: Business Markets and Buying
Behavior
12: Developing and Managing
Prices
13: Marketing Channels and
Supply-Chain Management
14: Retailing, Direct Marketing,
and Wholesaling
Dr. Chen, Principle of Marketing
Chapter 13
Marketing Channels and
Supply-Chain Management
Professor Jason C. H. Chen, Ph.D.
School of Business Administration
Gonzaga University
Spokane, WA 99258
[email protected]
Dr. Chen, Principle of Marketing
Marketing Applications
Dr. Chen, Principle of Marketing
4
 1. Keurig is the North American leader in single-cup
coffee brewing. Introduced in 1998, the Keurig system
uses self-contained coffee K-Cups, which allow users to
brew one cup of coffee or other hot beverage in about one
minute. After the K-Cup is pierced with a nozzle, hot water
is forced through its contents and filter and into a mug
below. ….
 Describe the different channels used to distribute
Keurig’s K-Cups in terms of customer characteristics,
competition, and characteristics of the intermediaries.
How would you define the intensity of market coverage?
Does it make sense? Are there any strategic issues in
managing these marketing channels?
 (p.392)
Dr. Chen, Principle of Marketing
5
 Answers should include the following points.
 Some of the different channels used by Keurig to distribute its
K-Cups are dual distribution, strategic channel alliance, and
selective distribution. Students should compare the attributes
associated with each channel (supermarkets, big box stores,
specialty stores, coffee websites, Green Mountain website).
 Customer characteristics will be slightly different for each
channel; for example, customers shopping at big box stores
may be looking for a low price while customer shopping at
specialty stores may be looking for quality or brand-name
coffees.
 Competition will also differ, although all channels are
competing with coffee shops like Starbucks. The
characteristics of the intermediaries will also vary, especially
if Green Mountain sells to customers directly.
Dr. Chen, Principle of Marketing
6
 Answers (cont.)
 Intensity of coverage refers to the number and kinds of
outlets in which a product will be sold. The intensity of
coverage for Keurig’s K-Cups is good as the cups are sold in
many places such as supermarkets, selected big box stores,
specialty stores, and department stores.
 They are also found online at specialty coffee websites and
Keurig and Green Mountain Coffee Roasters e-commerce
stores. Some may believe that covering so many channels is a
good decision while other may believe that Green Mountain
may be creating too much competition with itself.

 Students may say that there are strategic issues like channel
conflict, disagreements on objectives and policies,
environmental issues, arguments on channel leadership, etc.
Dr. Chen, Principle of Marketing
7
 3. Marketers can select from three major levels of
marketing coverage when determining the number and
kinds of outlets in which to sell a product: intensive,
selective, or exclusive distribution. Characteristics of the
product and its target market determine the intensity of
coverage a product should receive. Indicate the intensity
level best suited for the following products, and explain
why it is appropriate.
 a. Personal computers
 b. Deodorant
 c. Canon digital cameras
 d. Nike athletic shoes
Dr. Chen, Principle of Marketing
8
 Ans: Intensive distribution uses all available outlets for
distributing a product and is appropriate for most convenience
products.
 Selective distribution uses only some available outlets in an area
to distribute a product and is appropriate for shopping products
and durable goods. Selective distribution is also desirable when a
special effort, such as customer service from a channel member,
is important to customers.
 Exclusive distribution uses only one outlet in a relatively large
geographic area and is suitable for products purchased
infrequently, consumed over a long period of time, or requiring
service or information to fit them to buyers’ needs.
selective
 a. Personal computers ____________
 b.
 c.
 d.
intensive
Deodorant ___________
selective
Canon digital cameras _________
intensive/selective
Nike athletic shoes _______________
Dr. Chen, Principle of Marketing
9
Internet Exercise
 Fed Ex
 Many companies lack their own distribution
systems. Firms in this situation may rely on
the services provided by companies like
FedEx to handle their distribution. Learn
more about the services provided by FedEx
at www.fedex.com
Dr. Chen, Principle of Marketing
10
 1. What tools does FedEx provide to make the shipping
process easier?

 FedEx provides a variety of tools, including online pickup
scheduling, online ordering, online payment, online address
books, package tracking, etc.

 2. Other than shipping products, what other services does
FedEx provide?

 FedEx recently purchased Kinkos, so they also provide
copying and printing services. They also provide a
knowledge sharing site and some computer services.
Dr. Chen, Principle of Marketing
11
Figure 13.3 - Typical Marketing Channels for Business Products
Industry distribution
Direct channel
(>50% of business takes title to products
and carries inventories
products, esp.
and most effective
expensive
when a product has
equipment)
broad market appeal
Dr. Chen, Principle of Marketing
Agent does not
acquire title to the
products and usually
does not take
possession
When producer
wishes to cover a
large geographic
area
12
 3. Is there information on the FedEx website that would
help a potential FedEx customer evaluate FedEx
regarding some of the selection criteria shown in Figure
13.3?

 Figure 13.3 shows common marketing channels for business
products. FedEx sells services directly to business
consumers, so a potential customer has all the information
available on the website. FedEx provides options depending
on the size and type of package, shipping speed,
transportation method, etc.
Dr. Chen, Principle of Marketing
13
Video Case 13.1
 TAZA CULTIVATES CHANNEL
RELATIONSHIPS WITH
CHOCOLATE
Dr. Chen, Principle of Marketing
14
 Summary

 Taza Chocolate is a small manufacturer of stoneground organic chocolate made in the classic Mexican
tradition. The company markets most of its products
through U.S. retailers, wholesalers, and distributors.
Individual customers around the world can also buy
Taza chocolate directly from the Taza website, and
local customers can visit the company’s food truck or
factory. The case presents the different marketing
challenges that come with each form of distribution.
Taza also seeks to build positive relationships across
the entire supply chain.
Dr. Chen, Principle of Marketing
15
 1. Which distribution channels does Taza use, and why are
they appropriate for this company?

 Taza markets most of its products through U.S. retailers,
wholesalers, and distributors. Individual customers around
the world can also buy Taza chocolate bars, baking squares,
chocolate-covered nuts, and other specialty items directly
from the Taza website.
 If they live in Somerville, Massachusetts, they might even
find a Taza employee riding a “chococycle,” selling
products and distributing samples at an upscale food truck
festival or a weekend market festival. Selling to distributors
and retailers helps the company to sell a high volume of
product, while selling to individuals helps them to make
personal connections and reach a different set of customers.
Dr. Chen, Principle of Marketing
16
 2. In what ways does Taza benefit from selling directly
to some consumers? What are some potential
problems of selling directly to consumers?

 Selling directly to consumers helps the company to
reach people who aren’t near a retailer or who want a
specific product. Selling directly to consumers also
helps to forge relationships. However, it is less efficient
to ship directly to individuals and complicated to
control the chocolate’s quality (i.e., melting).
Dr. Chen, Principle of Marketing
17
 3. In what ways are Taza’s distribution efforts
influenced by the fact that its products are organic?

 Taza seeks to make personal connections with all the
certified organic growers who supply its ingredients.
High quality ingredients are important to the company,
so Taza believes that direct relationships with farmers
ensure the best product.
 Dealing directly with suppliers allows Taza to meet its
social responsibility goals while ensuring the kind of
quality that commands a premium price.
Dr. Chen, Principle of Marketing
18