Transcript Chapter 11- Marketing and Distribution

Marketing and
Distribution
The Changing Role of
Marketing
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Marketing: all the activities needed to move
goods and services from the producer to the
consumer
The sole purpose of marketing is to convince
consumers that a certain product or service will
add to their utility.
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Some economists estimate that about 50% of
the price people pay for an item today is the
cost of marketing.
The development of marketing can be traced
by analyzing what it has focused on:
production, sales, advertising and consumer
sovereignty.
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Consumer Sovereignty: the role of the consumer as
ruler of the market when determining the types of
goods and services produced
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Meeting Consumer Utility
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Utility: the amount of satisfaction one gets from a
good or service
Utility can be divided into four major types:
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Form Utility
Place Utility
Time Utility
Ownership Utility
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Form utility is converting raw materials into
desired/needed products.
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Created by production.
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Examples:
Transforming cotton cloth into draperies
 Refining crude oil into gasoline
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Place utility is providing the good/service
where the customer wants it to be.
Examples:
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Locating a gas station on a busy corner.
Internet shopping
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Time utility is providing the good/service at
precisely the time the customer wants it.
Examples:
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A 24-hour grocery store or restaurant
Internet shopping
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Ownership utility is providing goods/services
that people are pleased to own.
Examples:
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Fine art
Luxury cars
Expensive jewelry
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Market Research: gathering, recording, and
analyzing data about the types of goods and
services people want
Should be done before the product is made or
service is offered.
In this sense, the market means the potential
buyers of the good or service.
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When should market research be done?
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At the very beginning when the first ideas about a
new product are being developed.
Test sample products and alternative packaging
designs.
Immediately after a product is released for sale
Early market research helps producers
determine whether there is a market for the
good and can indicate changes in quality.
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Market Surveys
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Market Survey: information gathered by researchers
about possible users of a product based on such
characteristics as age, gender, income, education,
and location
A market survey usually involves a series of
carefully worded questions.
Surveys could also use focus groups.
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Testing New Products
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Offer the item for sale in a small market before
selling it to a larger area.
Test Marketing: offering a product for sale in a small
area for a limited period of time to see how well it
sells before offering it nationally
Of all the new products introduced every year
in the US, most are not profitable and do not
survive in the marketplace.
The Marketing Mix
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Simply producing a good and offering it for
sale is not enough in today’s competitive world
Marketing is necessary for companies to be
successful.
A marketing strategy, or plan, combines the 4
P’s of marketing:
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Product
Price
Place
Promotion
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When it comes to product, a company must
answer certain questions.
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What good or service should be produced?
What services should be offered with the product?
 Consider adding warranties
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How should product be packaged?
 Consider size, design, color, catch phrases and coupons
or rebates.
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How should product be identified?
 Consider logos, songs, celebrity endorsements, and
packaging.
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Determined by law of supply and demand.
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Price leadership occurs when competing
companies sell their products for similar prices.
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Companies must consider the cost of producing,
advertising, selling, and distributing the product.
Price Leadership: practice of setting prices close to those
charged by other companies selling similar products
Selling a new product for a low price to entice
people to buy it is called penetration pricing.
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Where should the product be sold?
Past experience with similar products will help
the marketing department make this decision.
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A cereal company would most likely market a new
cereal in grocery stores.
Companies with goods that appeal to a limited
market would advertise in specialty shops or on the
internet.
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Promotion: informing customers about product
or service
Type of promotion depends upon the product,
the target customer, and amount of money the
company wants to spend.
Examples of promotions: direct-mail
advertising, free samples, cents-off coupons,
and rebates.
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Product Life Cycle: series of stages from first
introduction to complete withdrawal from the
market
Four stages:
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Introduction
Growth
Maturity
Decline
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Marketing programs are different for each
stage.
Pricing can be different for each stage.
Marketers try to extend the life of product by
changing its looks, uses, and the advertising
focus.
Distribution Channels
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Channels of Distribution: routes by which goods
are moved from producers to consumers
Decisions about distribution is another function
of marketing.
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Distribution: moving goods from where they are
produced to the people who will buy them
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Wholesalers: businesses that purchase large
quantities of goods from producers for resale to
other businesses
Retailers: business that sell consumer goods
directly to the public
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Full service wholesalers warehouse goods and
deliver them after retailers pay for them.
Drop shippers are wholesalers that buy the
goods under the condition that the producer
will store and ship the goods after the
wholesaler has sold them.
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A cash-and-carry wholesaler sells merchandise,
but buyer must pay shipping.
A truck wholesaler sells and delivers at the
same time.
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Storage: storing goods for future sales.
Transportation: Moving goods from producers
and/or sellers to buyers.
The type, size, weight of the good and how fast
it is needed factor into storage and
transportation.
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Warehouse club shopping lets people buy a
limited number of models and brands in huge
quantities so the warehouse will get favorable
prices from manufacturers.
Direct marketing is done through catalogs, the
Internet, and “space ads.”