Download Retailers

13
Distributing and
Promoting
Products
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What is the Distribution (Place) element of the
marketing mix?
The process that makes products available
to consumers when and where consumers
want them.
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Distribution: Getting the Product to the
Customer
Producer
Wholesaler /
Retailer
Consumer
Channel of Distribution –
the path that a product takes from
the producer to the consumer
Distribution Strategy: getting the right product to the right
person at the right place, at the right time
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Types of Marketing Intermediaries
•
Agents and Brokers -- Intermediaries who bring buyers and sellers together and assist in
negotiating an exchange but do not take title to the goods.
•
Wholesaler -- An intermediary that sells products to other organizations such as retailers,
manufacturers, and hospitals.
•
Retailer -- An organization that sells products to ultimate customers.
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Selected Channels of Distribution
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Selected Marketing Channels: An
Overview
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
Producer to retailer to consumer
•
Producers sell directly to retailers when retailers (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
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
Producer to agent to wholesaler to retailer to consumer
•
Agent—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
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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Why marketing needs intermediaries
Justifications for marketing intermediaries
• Intermediaries perform essential marketing services
(promotion of products, help sell product)
• Intermediaries provide important market information
to producers (what’s selling, who’s buying,
customer feedback)
• Intermediaries help store products (producers won’t
be burdened with storage costs)
• Intermediaries provide customers with convenience
and choice selection
• Intermediaries accept risk for customer non-payment
or non-sold products
• Intermediaries create EFFICIENCY and UTILITY
• Intermediaries help REDUCE COSTS and provide
VALUE! How?
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How intermediaries create exchange
efficiency
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3 Key Facts About Intermediaries
1) Marketing intermediaries can be eliminated but
their activities cannot.
2) Intermediaries perform marketing functions
faster and cheaper than other organizations can.
3) Marketing intermediaries add costs to products
but they are generally offset by the values they
provide.
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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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Marketing Intermediaries: Retailers
 Retailers: Final link between producers and
consumers
 Retailers may buy from either wholesalers or
producers
 Retailers can sell goods, services, or both
 The United States has nearly 1.1 million retail
establishments with total sales of more than $4
trillion
 Most retailers are small, with annual revenues
well under $1 million
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Types of Retail Stores

Independent retailer: Firm that operates only one retail outlet

Chain retailer: Company that operates more than one retail outlet

Department store: Retail store that employs twenty-five or more persons

Discount store: Self-service, general-merchandise outlet that sells products at
lower-than-usual prices

Warehouse showroom: Retail facility in
a large, low-cost building with large on-premises inventories and minimal service

Convenience store: Small food store that sells a limited variety of products but
remains open beyond business hours

Supermarket: Large self-service store that sells primarily food and household
products

Superstore: 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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More Types of Retail Stores
 Traditional specialty store: Carries a narrow
product mix with deep product lines
 Off-price retailer: Store that buys
manufacturers’ seconds, overruns, returns, and
off-season merchandise for resale to
consumers at deep discounts
 Category killer: 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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Types 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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Direct Marketing
 Catalog marketing: Provides a catalog to customers to
make selections and place orders
 Direct-response marketing: A retailer advertises a product
and makes it available through mail, telephone, or online
orders
 Telemarketing: Performance of marketing-related activities
by telephone
 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: Use of machines to dispense products
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Types of Shopping Centers
 Lifestyle shopping center: 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 even hotels
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Partnering Through SupplyChain 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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Physical Distribution
 All those activities concerned with the efficient
movement of products from the producer to the
ultimate user
 The movement of the products through their
channels of distribution
 Combines several interrelated business
functions, the most important of which are:
•
•
•
•
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Inventory management
Order processing
Warehousing
Materials handling
Transportation
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Inventory Management and
Order Processing
 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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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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Materials Handling and Transportation
 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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Types of Transportation
 Railroads
• Least expensive mode for many products
• Used for commodities that could not be transported by any
other way
 Trucks
• Tremendous expansion since creation of national highways
• Often favored by offering door-to-door service, less stringent
packaging requirements than other services, 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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What is Promotion?
•Promotion
–Communication about an organization and its products that
is intended to inform, persuade, or remind target market
members
–There are several ways in companies can communicate to
target market members
–Promotion is NOT just advertising!!!
•The Promotion Mix
–The particular combination of promotion methods a
firm uses to reach a target market
1) Advertising
2) Public Relations
3) Personal Selling
4) Sales Promotion
•Integrated Marketing Communications (IMC)
–Coordination of all promotion efforts for maximum
informational and persuasive impact on customers,
and to communicate a unified impression about a
product
–Goal = Consistent Messages to Customers
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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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The Promotion Mix: An Overview
 Promotion mix: 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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Types of Advertising by Purpose
 Primary-demand advertising: Increase demand
for all brands of a product in a specific industry
 Selective-demand advertising: Advertising that
is used to sell a particular brand of product
• Immediate-response advertising
• Reminder advertising
• Comparative advertising
 Institutional advertising: Designed to enhance
a firm’s image or reputation
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Types of Advertising Appeals
The 5 Appeals of Product Advertisements
1) Humor
2) Informational
3) Sex
4) Emotional (ex. Fear/Heartfelt)
5) Celebrity
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Popular Advertising Media
• TV advertising is still the dominant media.
• Digital Video Recorders (DVRs) challenge TV
advertising because viewers can skip ads.
• Product Placement -Advertisers pay to put
their products into TV
shows and movies where
the audience will see
them.
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Match Game: Match the Company with
the Slogan
• “Everybody doesn’t like something, but nobody
doesn’t like ___________.”
• “We bring good things to life.”
• “It takes a licking and keeps on ticking.”
• “With a name like _________, it has to be good.”
• “Good to the last drop.”
• “Betcha can’t eat just one!”
• “Because you’re worth it.”
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Social and Legal
Considerations in Advertising
 Evidence shows that advertising is not wasteful:
• Most effective and least expensive way to
communicate to a large audience
• Encourages competition
• Revenues support mass-communication media
• Provides job opportunities in a wide range of fields
 FTC, FDA, and FCC oversee advertising
practices
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Personal Selling
• Personal selling is paid, personal communication
between buyer and seller.
• Direct communication between a firm’s sales force and
potential buyers to make a sale and to build good
customer relationships.
• Most expensive part of the promotional mix as a
salesperson deals with one buyer at a time
• Preferred with high-value, custom-made, or
technically complex products
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Sales Promotion
• Sales Promotion -- The promotional tool that stimulates consumer
purchasing and dealer interest by means of short-term activities.
Consumer Sales Promotion
Stimulate immediate sales
• Premiums
• Contests/Games/Promo Items
• Samples
• Coupons
• Rebates
• Point of Purchase Displays
Trade (B2B) Sales Promotion
Stimulate wholesalers and retailers
to push specific products
• Special Deals
• Allowances
• Trade Shows
• Contests
• Sweepstakes
• Special Events
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Sales Promotion
 Activities or materials that are direct inducements to customers or
salespersons
 Sales promotion objectives
1. Attract new customers
2. Encourage trial of a new product
3. Invigorate the sales of a mature brand
4. Boost sales to current customers
5. Reinforce advertising
6. Increase traffic in retail stores
7. Steady irregular sales patterns
8. Build up reseller inventories
9. Neutralize competitive promotional efforts
10. Improve shelf space and displays
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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
•
•
•
•
•
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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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Selection of Sales Promotion Methods
 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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Selection of Sales Promotion Methods
(continued)
 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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Public Relations
 A broad set of communication activities used to
create and maintain favorable relationships
between an organization and various public
groups, both internal and external
 Groups include: customers, employees,
stockholders, suppliers, educators, the media,
government officials, society in general
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Types of Public Relations Tools
 Written and spoken communications
Examples: Brochures, newsletters, company
magazines, annual reports, news releases,
corporate-identity materials, speeches
 Event sponsorship
Examples: Special events such as concerts
and charity functions that the firm underwrites
wholly or partially
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Publicity
Publicity: Communication in news story form about
an organization, its products, or both
• News release: Typed page of about 300 words provided
by an organization to the media as a form of publicity
• Feature article: Prepared by an organization for inclusion
in a particular publication
• Captioned photograph: Picture accompanied by a brief
explanation
• Press conference: Meeting at which invited media
personnel hear important news announcements and
receive supplementary textual materials and photographs
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Uses of Public Relations
 Public relations can be used to:
• Promote:
 People
 Places
 Activities
 Ideas
• Enhance the reputation of
organization
• Create specific positive company
images
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