Transcript BEC Chap 15 – Distributing products

*
Chapter Fifteen
*
Distributing
Products
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
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MARK STERN
DoggyPads.com
Profile
*
• Stern noticed a need for highquality dog housebreaking pads
and found a manufacturer that
could fill those needs.
• Stern spent most of his time
with storage, shipping, and
inventory control.
• Now he trusts Shipwire to
handle his firm’s distribution.
15-2
WHAT are MARKETING
INTERMEDIARIES?
*
The Emergence
of Marketing
Intermediaries
LG1
*
• Marketing Intermediaries -- Organizations that
assist in moving goods and services from
businesses to businesses (B2B) and from
businesses to consumers (B2C).
• They are called intermediaries because they’re
in the middle of a series of firms that distribute
goods.
15-3
WHAT are MARKETING
INTERMEDIARIES?
*
The Emergence
of Marketing
Intermediaries
LG1
*
• Channel of Distribution -- A group of marketing
intermediaries that joining together to transport and
store goods from producers to consumers.
15-4
TYPES of MARKETING
INTERMEDIARIES?
*
The Emergence
of Marketing
Intermediaries
LG1
*
• Agents and Brokers -- Intermediaries who bring
buyers and sellers together and assist in negotiating
an exchange but do not take title to the goods they
offer.
• Wholesaler -- An intermediary that sells products
to other organizations such as retailers,
manufacturers, and hospitals.
• Retailer -- An organization that sells products to
ultimate customers.
15-5
*
RECYCLING is PART of the
WORLD SUPPLY CHAIN PROCESS
*
Spotlight on Small Business
• Copart, Inc. buys cars damaged in accidents or
stolen cars that are recovered after an insurance
settlement.
• Auctions cars and parts targeting rebuilders,
licensed dismantlers, used-car dealers, and
exporters.
• Copart processes many of the salvaged cars and
doesn’t allow the supply chain to end until all
materials are recycled.
15-6
SELECTED CHANNELS of
DISTRIBUTION
*
The Emergence
of Marketing
Intermediaries
LG1
*
15-7
WHY MARKETING NEEDS
INTERMEDIARIES
*
Why Marketing
Needs
Intermediaries
LG1
*
• Intermediaries perform marketing tasks faster
and cheaper than most manufacturers could
provide them.
• Marketing
intermediaries make
markets more efficient
by reducing
transactions and
contacts.
15-8
HOW INTERMEDIARIES CREATE
EXCHANGE EFFICIENCY
*
Why Marketing
Needs
Intermediaries
LG1
*
15-9
THREE KEY FACTS ABOUT
MARKETING INTERMEDIARIES
*
The Value vs
the Cost of
Intermediaries
*
LG1
• Marketing intermediaries can be eliminated but
their activities can’t.
• Intermediaries perform marketing functions faster
and cheaper than other organizations can.
• Marketing intermediaries add costs to products
but they’re generally offset by the values they
provide.
15-10
DISTRIBUTION’S EFFECT on
YOUR FOOD DOLLAR
*
The Value vs
the Cost of
Intermediaries
LG1
*
15-11
INTERMEDIARIES
CREATE UTILITY
*The Utilities
Created by
Intermediaries
LG2
*
• Utility -- The want-satisfying ability, or value, that
organizations add to goods and services by making
them more useful or accessible to consumers.
• Six types of utilities:
1. Form
2. Time
3. Place
4. Possession
5. Information
6. Service
15-12
*The Utilities
HOW MARKETERS USE UTILITY
Created by
Intermediaries
LG2
*
• Form Utility -- Changes raw materials into useful
products; producers generally provide form utility.
- Starbucks makes coffee the way the customers want it.
- Levi-Strauss transforms denim into clothes.
• Time Utility -- Makes products available when
customers want them.
- Many Walgreens stores are open 24-hours a day.
- Colleges offer day and evening classes.
15-13
*The Utilities
HOW MARKETERS USE UTILITY
Created by
Intermediaries
LG2
*
• Place Utility -- Adds value to products by placing
them where people want them.
- Banks place ATMs at convenient locations.
- Pepsi is available in campus vending machines.
• Possession Utility -- Helps transfer ownership
from one party to another, including providing credit.
- Pay for lunch at McDonalds with your Visa card.
- Car dealers offer loans to buyers.
15-14
*The Utilities
HOW MARKETERS USE UTILITY
Created by
Intermediaries
LG2
*
• Information Utility -- Opens two-way flows of
information between marketing participants.
- Dell’s website offers advice to PC buyers.
- Local government maps show tourist locations.
• Service Utility -- Provides service during and after
a sale and teaches customers how to best use
products.
- Apple offers classes to help computer buyers.
- College placement offices help students find jobs.
15-15
*
PROGRESS ASSESSMENT
Progress
Assessment
*
• What’s a channel of distribution and what
intermediaries participate in it?
• Why do we need intermediaries? How would you
defend intermediaries to someone who said
getting rid of them would save consumers
millions of dollars?
• Give examples of the utilities intermediaries
create and how they provide them.
15-16
WHOLESALE INTERMEDIARIES
*Wholesale
Intermediaries
*
LG3
• Wholesalers normally make B2B sales, however,
stores like Staples and Costco also have retail
functions.
- Retail sales are sales of goods and services to
customers for their own use.
- Wholesale sales are sales of goods and services to other
businesses for use in the business or resale.
• Consumers are more familiar with retailers
than wholesalers.
15-17
TYPES of WHOLESALE
INTERMEDIARIES
*Wholesale
Intermediaries
LG3
*
• Merchant Wholesalers -- Independently owned
firms that take title to the goods they handle. There
are two types:
1. Full-service wholesalers perform all distribution
functions.
2. Limited-function wholesalers perform only selected
distribution functions.
•
About 80% of wholesalers are merchant
wholesalers.
15-18
TYPES of LIMITED-FUNCTION
WHOLESALERS
*Wholesale
Intermediaries
*
LG3
• Rack Jobbers -- Furnish racks or shelves of
merchandise such as music, magazines, and hosiery
for retailers for display and sell them on consignment.
• Cash-and-Carry Wholesalers -- Serve mostly
smaller retailers with a limited assortment of products.
• Drop Shippers -- Take orders from retailers and
other wholesalers and have the merchandise shipped
from producer to buyer.
15-19
ROLES of AGENTS
and BROKERS
*Agents and
Brokers
*
LG3
• Agents generally maintain long-term relationships
with the clients they represent.
- Manufacturer’s agents represent
several manufacturers in a specific
territory.
- Sales agents represent a single
client in a larger territory.
• Brokers usually represent
clients on a temporary basis.
15-20
RETAILING in the U.S.
*Retail
Intermediaries
LG4
*
• There are approximately 2.3 million retailers in
the U.S., not including websites.
• Retailers in the U.S.
employ over 11 million
people and operate under
many different structures.
15-21
*Retail
TOP ONLINE RETAILERS
Intermediaries
LG4
*
• eBay
• Amazon
• Wal-Mart
• Target
• Netfilx
Source: Nielsen Online, www.nielsenonline.com.
15-22
FASTEST GROWING RETAIL
CATEGORIES
*Retail
Intermediaries
LG4
*
• Video games
• Sports and fitness
• Home, garden, and
furniture
• Event tickets
• Consumer electronics
15-23
TYPES of RETAIL STORES
*Retail
Intermediaries
LG4
Types
*
Examples
Department Store
Sears, JC Penney, Nordstom
Discount Store
Wal-Mart, Target
Supermarket
Safeway, Kroger, Albertson’s
Warehouse Club
Costco, Sam’s Club
Convenience Store
7-Eleven
Category Killer
Toys-R-Us, Bass Pro Shops, Office
Depot
Outlet Store
Nordstrom Rack, TJ Maxx, Nike
Outlet
Specialty Store
Jewelry store, shoe stores, bicycle
shops
15-24
RETAIL DISTRIBUTION
STRATEGIES
*Retail
Distribution
Strategy
LG4
*
• Intensive Distribution -- Puts products into as
many retail outlets as possible including vending
machines.
• Selective Distribution -- Uses only a preferred
group of the available retailers in an area.
• Exclusive Distribution -- The use of only one
retail outlet in a given geographic area.
15-25
PICK a STRATEGY…
What’s the Correct Retail Strategy for These Products?
*Retail
Distribution
Strategy
LG4
*
• Ralph Lauren Polo Shirts
• Diet Pepsi
• Rolls Royce Automobiles
• Calloway Golf Clubs
• Snickers Candy Bars
• Steinway Pianos
15-26
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PROGRESS ASSESSMENT
Progress
Assessment
*
• Describe the activities of rack jobbers and drop
shippers?
• What kinds of products would call for each of
these different distribution strategies: intensive,
selective, and exclusive?
15-27
FORMS of NON-STORE
RETAILING
*
Non-Store
Retailing
*
LG5
• Electronic Retailing -- Selling goods and services
to ultimate consumers over the Internet.
• Telemarketing -- The sale of goods and services
via the telephone.
• Vending machines, kiosks, and
carts dispense convenience
goods when consumers deposit
sufficient funds.
15-28
FORMS of NON-STORE
RETAILING
*
Non-Store
Retailing
LG5
*
• Direct Selling -- Selling goods and services to
customers in their homes or workplaces.
• Multilevel marketing uses salespeople who work
as independent contractors.
• Direct Marketing -- Any activity that directly links
manufacturers or intermediaries with ultimate
customers.
15-29
WHAT ONLINE SITES NEED
Important Features on E-Commerce Web Sites
*Electronic
Retailing
LG5
*
• Convenient return policies
• Established brands
• User reviews
• Professional site design
• Alternative payment options
Source: GSI Commerce; Harris Interactive.
15-30
COME BACK AGAIN!
*Electronic
Retail Web Sites with the Highest Customer Satisfaction
Retailing
LG5
*
• Amazon
• Netflix
• QVC
• Apple
• L.L. Bean
Source: ForeSee Results, www.forseeresults.com.
15-31
RETAIL WEB SITES with the
LOWEST CUSTOMER RATING
*Electronic
Retailing
LG5
*
• Circuit City Now Bankrupt!
• Gap
• Home Shopping
Network
• Overstock
• Home Depot
Source: ForeSee Results, www.forseeresults.com.
15-32
The FOUR SYSTEMS of
CHANNEL RELATIONSHIPS
*
Building
Cooperation in
Channel Systems
LG6
*
1. Corporate Distribution Systems
2. Contractual Distribution Systems
3. Administered Distribution Systems
4. Supply Chains
15-33
CORPORATE DISTRIBUTION
SYSTEMS
*
Building
Cooperation in
Channel Systems
LG6
*
• Corporate Distribution Systems -- Exist when
one firm owns all the organizations in a channel of
distribution.
• Examples:
- Goodyear
- Sherwin Williams
15-34
CONTRACTUAL DISTRIBUTION
SYSTEMS
*
Building
Cooperation in
Channel Systems
*
LG6
• Contractual Distribution Systems -- Exist when
members are bound to cooperate through contractual
agreements.
• Examples:
- Franchise System: McDonald’s, Subway, Sonic
- Wholesale-Sponsored Chain: IGA, Ace Hardware
- Retail Cooperative: Associated Grocers, True Value
15-35
ADIMINISTERED DISTRIBUTION
SYSTEMS
*
Building
Cooperation in
Channel Systems
LG6
*
• Administered Distribution Systems -- Exist
when producers manage all the marketing functions
at the retail level.
• Examples:
- Kraft
- Ralph Lauren
15-36
*
SUPPLY CHAINS
Building
Cooperation in
Channel Systems
*
LG6
• Supply Chain -- All the linked activities various
organizations must perform to move goods and
services from the source of raw materials to ultimate
consumers.
• Supply Chain Management -- The process of
managing the movement of raw materials, parts,
work in progress, finished goods, and related
information through all the organizations in the supply
chain.
15-37
*
The SUPPLY CHAIN
Building
Cooperation in
Channel Systems
LG6
*
15-38
*
HOW to REACH the LITTLE GUY
Reaching Beyond Our Borders
*
• Entrepreneurs with very small shops and stores
serve about 80% of the developing world.
• Coke’s Peruvian bottler outsourced
its operations to small wholesalers.
• Distributing goods in developing
nations is different from the U.S.
• Coke and Pepsi research to find
the best practices in global
markets.
15-39
*
USING LOGISTICS
Logistics:
Getting Goods
to Consumers
Efficiently
*
LG7
• Logistics -- The planning, implementing and
controlling of the physical flow of material, final goods
and related information from points of origin to points
of consumption.
• Firms may outsource to
companies specializing
in trade compliance to
determine what is
needed to market
products to global
customers.
15-40
*
LOGISTICS APPLICATIONS
Logistics:
Getting Goods
to Consumers
Efficiently
*
LG7
• Inbound Logistics -- Brings raw materials,
packaging, other goods and services and information
from suppliers to producers.
• Materials Handling -Movement of goods
within a warehouse,
from warehouse to the
factory floor and from
the factory floor to
workstations.
15-41
*
LOGISTICS APPLICATIONS
Logistics:
Getting Goods
to Consumers
Efficiently
*
LG7
• Outbound Logistics -- Manages the flow of
finished products and information to business buyers
and consumers.
• Reverse Logistics -- Brings goods back to the
manufacturer because of defects or for recycling.
15-42
COMPARING TRANSPORTATION
MODES
*
Logistics:
Getting Goods
to Consumers
Efficiently
*
LG7
Mode
Cost
Speed
Dependability
Flexibility
Frequency
Reach
Rail
Med.
Slow
Medium
High
Low
High
Trucks
High
Fast
High
Medium
High
Highest
Pipeline
Low
Medium
Highest
Lowest
Highest
Lowest
Ships
Lowest
Slowest
Lowest
Highest
Lowest
Low
Air
Highest
Fastest
Low
Low
Medium
Medium
15-43
*
LOGISTICS SPECIALISTS
Logistics:
Getting Goods
to Consumers
Efficiently
*
LG7
• Freight Forwarder -- Puts many small shipments
together to create a single large shipment that can be
transported cost-effectively by truck or train.
• Intermodal Shipping -Uses multiple modes of
transportation to complete
a single long-distance
movement of freight.
15-44
TYPES of
INTERMODAL SHIPPING
*
Logistics:
Getting Goods
to Consumers
Efficiently
LG7
*
• Piggybacking: Truck trailers placed on trains
• Fishybacking: Truck trailers placed on ships
• Birdybacking: Truck trailers placed on planes
15-45
*
GET YOUR PRODUCT THERE
Most Popular Modes of Freight Transport
Method
% of Distributors
Trucks
69%
Trains
15%
Pipelines
10%
Ships
6%
Air
Under 1%
Logistics:
Getting Goods
to Consumers
Efficiently
LG7
*
Source: U.S. Freight Transportation Forecast 2008.
15-46
KEEPING YOUR
CARBON FOOTPRINT LOW
Thinking Green
*
*
• Many consumers buy local
products to help reduce the
carbon footprint.
• However, few studies support
that claim.
• Methods of transportation
and how food is grown often
make a significant difference.
15-47
*
STORAGE WAREHOUSES
The Storage
Function
*
LG7
• Storage warehouses hold products for a relatively
long period of time.
• Distribution warehouses are used to gather and
redistribute products such as:
- Beer and soft drinks
- Package deliveries
15-48
*
PROGRESS ASSESSMENT
Progress
Assessment
*
• What four systems have evolved to tie together
members of the channel of distribution?
• How does logistics differ from distribution?
• What are inbound logistics, outbound logistics,
and reverse logistics?
15-49
*
Marks and evaluation
Progress
Assessment
*
• Attendance and homework and class
participation = 30%
• Project 40%
• Prefinal and final = 30 %
15-50
*
Prefinal and final
Progress
Assessment
*
•0
1
•0
60-79
2
80-89
3
90-100
• 5 Minutes or less 1 to 1
• Prefinal chap 11 – 15
• Final chap 16 - 20
15-51