Download Chapter 11

Part 3: The marketing mix
Chapter 11: Marketing logistics
Step 5: Design the marketing strategy
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–1
When we finish this lecture you should
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Understand why logistics (physical distribution) is such an
important part of place and marketing strategy planning in
both domestic and overseas markets
Understand why the level of customer service is a marketing
strategy variable
Understand the concept of physical distribution and why it
requires coordination of storage, transportation and related
activities
Realise that cooperation and the sharing of logistics activities
improves value to the customer at the end of the channel
Know the advantages and disadvantages of the various
methods of transportation
Understand how inventory decisions and storage affect
marketing strategy
Understand the concept of distribution centres
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–2
Logistics and physical distribution—
customer service
• The transporting and storing of goods to match
target customers' needs with the organisation’s
marketing mix
• Both within individual organisations and along a
channel of distribution
• Customers think of physical distribution in terms of
the customer service level
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How rapidly and dependably a company can deliver what
the customer wants
• There are trade-offs among physical distribution
costs, customer service levels and sales
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–3
Figure 11.1 Trade-offs between physical
distribution costs, customer service level and
sales
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–4
Coordination of activities
• All transporting, storing and product-handling
activities of an organisation and a channel system
should be coordinated as one system to
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Minimise the costs of distribution
Provide for a given customer service level
• Simply focusing on individual costs may increase
total costs—since a total system is involved
• Requires that the manager decide what aspects of
service are most important to customers
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Examples—order delivery time, availability of products,
order status information
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–5
Examples of factors that affect the
physical distribution service level
• Advance information on product availability
• Time to enter and process orders
• Backorder procedures
• Where inventory is stored
• Accuracy in filling orders
• Damage in shipping, storing and handling
• Order status information
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–6
Examples of factors that affect the
physical distribution service level
(continued)
• Advance information on delays
• Time needed to deliver an order
• Reliability in meeting delivery date
• Complying with customers’ instructions
• Defect-free deliveries
• How needed adjustments are handled
• Procedures for handing returns
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–7
Figure 11.3 Comparative costs of airfreight versus
rail and warehouse
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–8
Supply chain
• Supply chain—The complete set of organisations,
facilities and logistic activities involved in procuring
materials, transforming them into intermediate and
finished products and distributing them
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Just-in-time delivery (JIT)—Reliably getting products
there just before the customer needs them
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Requires close coordination and information flows
Reduces handling costs
Reduces storing costs
Shifts greater responsibility to the supplier
A small problem can cause big effects
Electronic data interchange (EDI) puts information in a
standardised format that is easily shared between
different computer systems
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–9
Exhibit 11.7 Companies such as IBM assist companies with
coordination of physical distribution decisions through electronic data
exchange.
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–10
Transportation
• Marketing function of moving goods
• Helps facilitate economies of scale in producing
goods
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Produce in large quantities where it is inexpensive to
produce, and then ship products to customers
• Choice of transportation affects customer
satisfaction in terms of
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Pricing of product
On-time delivery performance
Condition of goods on delivery
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–11
Transportation choices
• Five major modes of transportation
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Rail
Truck (road)
Ship (water)
Pipeline
Air (aeroplane)
• Choice of transportation mode depends on
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Cost
Delivery speed
Number of locations served
Ability to handle a variety of goods
Frequency of scheduled shipments
Dependability in meeting schedules
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–12
Figure 11.4 Transportation costs as a percentage
of selling price for different products
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–13
Figure 11.5 Benefits and limitations of different
modes of transport
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–14
Storage
• The marketing function of holding goods to provide
time utility
• Inventory is the amount of goods being stored
• Goods are stored at a cost
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–15
Examples of storing costs
• Warehouse expense
• Capital needed to pay for inventory
• Product damage
• Losses due to theft
• Obsolescence
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–16
Figure 11.6 Many expenses contribute to total
inventory cost
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–17
Figure 11.7 A comparison of private warehouses
and public warehouses
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–18
The distribution centre
• Special kind of warehouse designed to speed the
flow of goods to avoid unnecessary storing costs
• Speeds bulk-breaking to reduce inventory carrying
costs
• Helps to centralise control of physical distribution
activities
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–19
Challenges and opportunities
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Marketing managers in Australia and New Zealand recognise
that infrastructure is limited in many developing countries
In some countries it is impossible to implement systems that
provide high levels of customer service
Expansion into other markets may require changes to other
elements of the marketing mix
Major changes in the airline industry and the removal of road
freight restrictions
Air pollution controls, fuel costs and highway speed limits
have all made managers reconsider transportation choices
Changes in technology reduce distribution costs
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–20
What we will be doing in the next
chapter
• In the following chapter we will be discussing
pricing objectives and policies, including
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The role of pricing within the marketing mix
Decisions that must be made about pricing objectives,
strategy planning and price flexibility
Variations in pricing structure including discounts,
allowances and transportation costs
Legal policies
Copyright  2004 McGraw-Hill Australia Pty Ltd
PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy
11–21