Download Understanding Marketing and the Marketing Process

Chapter 12 – Distribution Channels and Logistics Management
Issues Concerning Distribution Channels
What is the Nature Of Distribution Channels?
How do Channel Firms Interact and Organize to do the Work of the Channel?
What Problems do Companies Face in Designing and Managing Their Channels?
What Role Does Physical Distribution Play in Attracting and Satisfying Customers?
What is a Distribution Channel?
 A set of interdependent organizations (intermediaries) involved in the process of making a product or
service available for use or consumption by the consumer or business user.
 Marketing Channel decisions are among the most important decisions that management faces and will
directly affect every other marketing decision.
Why are Marketing Intermediaries Used?
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The use of intermediaries results from their greater efficiency in making goods available to target markets.
Offer the firm more than it can achieve on it’s own through the intermediaries:
Purpose:
CD example
How a Marketing Intermediary Reduces the Number of Channel Transactions
Distribution Channel Functions
These Functions Should be Assigned to the Channel Member Who Can Perform Them Most Efficiently and Effectively to
Provide Satisfactory Assortments of Goods and Services to Target Customers.
Number of Channel Levels (Fig. 12.2)
Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its
Ownership Closer to the Final Buyer.
Dual Distribution
Channel Behavior & Conflict
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The channel will be most effective when:
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all members cooperate to attain overall channel goals and satisfy the target market.
When this doesn’t happen, conflict occurs:
 ___________________ occurs among firms at the same level of the channel, i.e retailer to retailer.
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___________________ occurs between different levels of the same channel, i.e. wholesaler to retailer.
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Conventional Marketing Channel Vs. a Vertical Marketing System (Fig. 12.3)
Types of Vertical Marketing Systems
Corporate Systems
 Involves single ownership of two or more levels of a channel
 Vertical integration - one channel member acquires control of one or more other members, usually by
purchasing them.
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Total vertical integration - one organization controls all marketing channel functions.
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- Manufacturer purchases distributor or retailer
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- Wholesaler or retailer purchases channel members above them.
Contractual Systems
 Involve independent production and distribution companies entering into formal contracts to perform designated
marketing functions.
Administered Systems
 Characterized by a higher degree of interorganizational planning and management usually resulting from the
existence of a strong channel leader.
Innovations in Marketing Systems
Horizontal Marketing System
Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity.
Hybrid Marketing System
A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments.
Changing Channel Organization
A Major Trend is Toward Disintermediation Which Means that Product and Service Producers are Bypassing
Intermediaries and Going Directly to Final Buyers or That New Types of Channel Intermediaries are Emerging to
Displace Traditional Ones.
Impact of the Internet
Channel Design Decisions
Analyzing Consumer Service Needs
Setting Channel Objectives & Constraints
Identifying Major Alternatives
Evaluating the Major Alternatives
Designing International Distribution Channels
Channel Management Decisions
Selecting Channel Members
Motivating Channel Members
Evaluating Channel Members
Chapter 13 – Retailing and Wholesaling
Top Retailers
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What is Retailing?
Retailing - Includes all the activities Involved in Selling Goods or Services Directly to Final Consumers for Their
Personal, Non-business Use.
Retailing can be done in stores (_________________) or out of a store (_______________________) such as:
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Classification of Retailing
- Self-Service, Limited-Service and Full-Service Retailer
- Length and Breadth of the Product Assortment
- Pricing Structure that is used by the Retailer
- Independent, Corporate, or Contractual Ownership Organization
Classification of Retailing: Amount of Service
Self-Service Retailer -
Limited-Service Retailers -
Full-Service Retailers -
Classification of Retailing:Product Line (Tab. 13.1)
Specialty Stores -
Department Stores -
Supermarkets -
Convenience Stores -
Classification of Retailing:Product Line (Tab. 13.1)
Superstores -
Discount Stores -
Off-Price Retailers -
Warehouse Clubs -
Classification of Retailing: Relative Prices
Higher Prices and Offer Higher-Quality Goods and Superior Customer Service
Regular Prices and Offer Normal-Quality Goods and Average Customer Service
Low Prices and Offer Lower-Quality Goods and Little Customer Service
Classification of Retailing: Retail Organization
Merchandising Conglomerates -
Corporate Chain -
Voluntary Chain -
Retailer Cooperatives -
Franchise Organizations -
Retailer Marketing Decisions (Fig. 13.1)
Retailer Strategy
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Target Market
Retail Store Positioning
Retailer Marketing Mix
•Product and service assortment
•Prices
•Promotion
•Place (location)
Product Assortment and Services Decisions
Product Assortment
---Services Mix – Key tool of non-price competition for setting one store apart from another
Store’s Atmosphere
--Retailer’s Price, Promotion, & Place Decisions
Prices Decisions
Promotion Decisions
The Future of Retailing
New Retail Forms and Shortening Retail Lifecycle
Growth of Non-store Retailing
Increasing Intertype Competition
Rise of the Megaretailer
Growing Importance of Retail Technology
Global Expansion of Major Retailers
Retail Stores as “communities” or “hangouts”
Place Decisions
ELECTRONIC COMMERCE
DEFINITION - Exchange of information, goods, service, and payments by electronic means.
History of E-Commerce
 E-commerce actually began in the 1970s when larger corporations started creating private networks to share
information with business partners and suppliers. This process is called Electronic Data Interchange (EDI).
 Prodigy was running text ads and selling flowers in the early '80s. The first documented Online sale in
1994 was what?
E-Commerce Today
Some major product categories have paved the way:
 travel services ($5.95 B in 1999 sales),
 computer hardware and software ($5.8 B),
 books ($1.7 B),
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gifts and flowers ($730 M),
music ($540 M), and
apparel and footwear ($460 M),
E-Commerce Services Today
 In 1999, the online market size for business services was estimated at $22 billion.
 Primary service categories include
o financial ($7.3 billion, 1999),
o corporate travel ($5 billion), and
o professional ($4.4 billion),
o telecommunications ($1.5 billion).
o administrative support ($3.9 billion),
 By 2003, Forrester Research predicts that online services will represent nearly 8 percent of the overall
sector hardly a drop in the bucket.
Future of E-Commerce
 eMarketer, an Internet technology (IT) research and reporting firm, estimates that the dollar figure for ecommerce will rise from approximately
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In Europe, consumers' internet purchases will jump from:
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Online business-to-business e-commerce is projected to speed past $1 trillion in annual revenue by 2003
Future Trends to Watch in E-Commerce
 Women take control. Women make or influence 80 percent of household sales in the United States,
according to WomanTrend, despite the fact that they make up 51 percent of the population.
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The untapped get tapped. Two highly touted markets $509 million health and beauty, and $513 million
grocery still lag behind expectations.
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More "click and mortar." Traditional retailers Circuit City, Crate and Barrel, Sears, Toys R Us, Wal-Mart,
and Federated Department Stores missed the boat in 1995 and 1996, but rest assured they "get it" now, and
are attempting re-entry, this time around with more money and smarts. Watch out.
Still a Long Way To Go
 Andersen Consulting and Forrester Research both show shopping cart abandonment rates of 25%.
 E-commerce still accounts for less than 1% of total retail sales
 Pure plays are struggling to maintain cash flow and are either:
Security Issues are Important
What is Wholesaling?
 All the activities involved in selling goods and services to those buying for resale or business use.
 Wholesaler - those firms engaged primarily in wholesaling activity.
 Wholesalers buy mostly from producers and sell mostly to:
---Why are Wholesalers Used?
Wholesalers are Often Better at Performing One or More of the Following Channel Functions:
Types of Wholesalers
- independently owned business that takes title to the merchandise it handles.
- they don’t take title to the goods, and they perform only a few functions.
- wholesaling by sellers or buyers themselves rather than through independent wholesalers.
Retailer Marketing Decisions (Fig. 13.1)
Wholesaler Strategy
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Target Market
Service Positioning
Trends in Wholesaling
Consolidation within the industry is reducing # of wholesalers
Distinction between large retailers and wholesalers blurs
Wholesalers will continue to increase the services provided
Wholesalers are beginning to go global
Wholesaler Marketing Mix
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Product and service assortment
Prices
Promotion
Place (location)
Chapter 14 – Integrated Marketing Communications Strategy
Marketing Communication Mix or Promotion Mix
Advertising
Personal Selling
Sales Promotion
Public Relations
Direct Marketing
The Changing Communications Environment
Two Factors are Changing the Face of Today’s Marketing Communications:
The Need for Integrated Marketing Communications
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With Integrated Marketing Communications (IMC), the Company Carefully Integrates and Coordinates Its
Many Communications Channels to Deliver a Clear, Consistent, and Compelling Message About the
Organization and Its Product or Service.
Elements in the Communication Process (Fig. 14.2)
Key Factors in Good Communication
Sellers need to know what audiences they wish to reach and response desired.
Sellers must be good at encoding messages that target audience can decode.
Sellers must send messages through media that reach target audiences
Sellers must develop feedback channels to assess audience’s response to messages.
Steps in Developing Effective Communication
Step 1. Identifying the Target Audience
Step 2. Determining the Communication Objectives Buyer Readiness Stages
Step 3. Designing a Message
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Message Content 
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Message Structure 
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Message Format 
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Step 4. Choosing Media
Personal Communication Channels
Non-personal Communication Channels
Step 5. Selecting the Message Source
Step 6. Collecting Feedback
Setting the Total Promotion Budget
One of the Hardest Marketing Decisions Facing a Company is How Much to Spend on Promotion.
- Based on What the Company Can Afford
- Based on a Certain Percentage of Current or Forecasted Sales
- Based on Determining Objectives & Tasks, Then Estimating Costs
- Based on the Competitor’s Promotion Budget
Setting the Promotion Mix
Advertising
Personal Selling
Sales Promotion
Public Relations
Direct Marketing
Product Placement
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Product Placement is the use or display of a product or service in an entertainment program.
The placement involves a payment to the entertainment vehicle, but does not involve payment for “airtime”
Famous examples include:
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Promotion Mix Strategies
- Strategy that Calls for Spending A Lot on Advertising and Consumer Promotion to Build Up (Pull)
Consumer Demand.
- Strategy that Calls for Using the Salesforce and Trade Promotion to Push the Product Through the
Channels.
Strategy Selected Depends on:
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examples:
Socially Responsible Marketing Communication
 Advertising and Sales Promotion
 Personal Selling
Chapter 15 – Advertising, Promotions, and Publicity
Advertising History
U.S. advertisers spend in excess of $212 billion each year;
Worldwide spending exceeds $414 billion.
Advertising is used by:
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What is Advertising?
Advertising is Any Paid Form of Non-personal Presentation and Promotion of Ideas, Goods, or Services by an
Identified Sponsor.
Setting Advertising Objectives
Advertising Objective - specific communication task accomplished with a specific target audience during a specific
period of time
_____________________ - inform consumers or build primary demand
_____________________ - build selective demand
_____________________ - compares one brand to another
_____________________ - keeps consumers thinking about a product
Setting the Promotion Budget
After determining its advertising objectives, the marketer must set the advertising budget for each product and
market. (From Chapter 14)
_____________________ - based on what the company can afford
_____________________ - based on a certain percentage of current or forecasted sales
_____________________ - based on determining objectives & tasks, then estimating costs
_____________________ - based on the competitor’s promotion budget
Setting the Advertising Budget
Factors to be considered when setting the advertising budget:
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Developing Advertising Strategy
Advertising Strategy Consists of Two Major Elements and Companies are realizing the Benefits of Planning These
Two Elements Jointly.
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Developing Advertising Strategy: Creating Ad Messages
Plan a Message Strategy
Develop a Message
Creative Concept “Big Idea”
Advertising Appeals
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Developing Advertising Strategy: Message Execution
Turning the “Big Idea” Into an Actual Ad to Capture the Target Market’s Attention and Interest.
Typical message execution styles:
Testimonial Evidence
Slice of Life
Scientific Evidence
Lifestyle
Technical Expertise
Fantasy
Personality Symbol
Mood or Image
Musical
Advertising Strategy: Selecting Advertising Media
Step 1. Decide on Reach, Frequency, and Impact
Step 2. Choosing Among Major Media Types
Step 3. Selecting Specific Media Vehicles
Step 4. Deciding on Media Timing
Major Media Types
Newspapers
Television
Direct mail
Radio
Magazines
Outdoor
Internet
Evaluating Advertising
Communication Effects -
Sales Effects -
International Advertising Decisions
Adaptation of global advertising
Advertising media differ considerably in availability & cost
Regulation in advertising practices
Comparison ads not acceptable in all countries
Programs must be matched to local cultures and customs
What is Sales Promotion ?
Sales promotion is a mass communication technique that offers short-term incentives to encourage purchase or
sales of a product or service.
Rapid Growth of Sales Promotion
Sales promotion can take the form of . . .
----Rapid growth in the industry has been achieved because:
 Product managers are facing more pressure to increase their current sales,
 Companies face more competition,
 Advertising efficiency has declined,
 Consumers have become more deal oriented.
Sales Promotion Objectives
Increase short-term sales or help build long-term market share.
Get retailers to:
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Major Consumer Sales Promotion Tools
Samples
Coupons
Cash Refunds
Price Packs
Major Consumer Sales Promotion Tools – (con’t)
Premium
Advertising Specialties
Patronage Rewards
Point-of-Purchase
Contests
Sweepstakes
Game
Major Trade Sales Promotion Tools
Trade Promotion Objectives
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Persuade Retailers or Wholesalers to Carry a Brand
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Give a Brand Shelf Space
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Promote a Brand in Advertising
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Push a Brand to Consumers
Trade-Promotion Tools
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Discounts
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Allowances
Major Business Sales Promotion Tools
Business-Promotion Tools
Business-Promotion Objectives
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Conventions
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Generate Business Leads
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Trade Shows
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Stimulate Purchases
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Sales Contests
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Reward Customers
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Motivate Salespeople
Developing the Sales Promotion Program
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Decide on the Size of the Incentive
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Set Conditions for Participation
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Determine How to Promote and Distribute the Promotion Program
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Determine the Length of the Program
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Evaluate the Program
What is Public Relations?
Public relations involves building good relations with the company’s various publics by obtaining favorable
publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.
Major Public Relations Functions
Public Relations Departments May Perform Any of All of the Following Functions:
Press Relations or Agentry -
Product Publicity -
Public Affairs-
Lobbying -
Investor Relations -
Development -
Major Public Relations Tools
News
Speeches
Special Events
Written Materials
Audio/Visual Materials
Corporate Identity Materials
Public Service Activities
Web Site
Major Public Relations Decisions
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Setting Public Relations Objectives
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Choosing the Public Relations Messages and Vehicles
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Implementing the Public Relations Plan
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Evaluating Public Relations Results
Chapter 16 – Personal Selling and Sales Management
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Nature of Personal Selling
Most salespeople are well-educated, well-trained professionals who work to build and maintain long-term
relationships with customers.
The term salesperson covers a wide spectrum of positions from:
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What is Personal Selling?
Involves two-way, personal communication between salespeople and individual customers. Communication can be:
The Role of the Sales Force
Personal selling is effective because salespeople can:
 probe customers to learn more about their problems,
 adjust the marketing offer to fit the special needs of each customer,
 negotiate terms of sale, and
 build long-term personal relationships with key decision makers.
The Role of the Sales Force
Sales Force
Serves as a Critical Link
Between a Company and its Customers Since They:
Major Steps in Sales Force Management (Fig. 16.1)
Designing Sales Force Strategy and Structure
- exclusive territory to sell the company’s full product line
- sales force sells only a portion of the company’s products or lines
- sales force sells only to certain customers or industries
Some Traits of Good Salespeople
Recommendations for Recruiting Salespeople
Current Salespeople, Employment Agencies, Classified Ads, College Students, Internet
Training Salespeople
The Average Sales Training Program lasts for Four Months and Has the Following Goals:
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Help salespeople know & identify with the company
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Learn about the products
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Learn about competitors’ and customers’ characteristics
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Learn how to make effective presentations
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Understand field procedures and responsibilities
Compensating Salespeople
To Attract Salespeople, a Company Must Have an Attractive Plan Made Up of Several Elements
Directing Salespeople
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Supervising Salespeople
Motivating Salespeople
• Organizational Climate
• Sales Quotas
• Positive Incentives
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Annual Call Plan
Time-and-Duty Analysis
Sales Force Automation
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Evaluating Salespeople
 Management gets information about its salespeople in several ways:
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 Formal evaluation of performance can be done qualitatively or quantitatively.
 Evaluation methods of performance include:
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Chapter 17 – Direct and Online Marketing: The New Marketing Model
Mass Marketing and Direct Marketing
Mass Marketing
Direct Marketing
What is Direct Marketing?
Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an
immediate response and cultivate lasting customer relationships.
Forms of Direct Marketing
Face-to-Face Selling
Direct Response TV
Telemarketing
Kiosk Marketing
Direct Mail
Online Marketing
Catalog
Benefits and Growth of Direct Marketing
Buyers Benefits
Sellers Benefits
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Customer Databases
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Customer Databases are an Organized Collection of Comprehensive Data About Individual Customers or
Prospects Including:
----Database Marketing
is the process of building, maintaining, and using customer databases and other databases for the purposes of
contacting and transacting with customers.
How companies use their databases:
Online Marketing
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Online Marketing is conducted through interactive online computer systems, which link consumers with
sellers electronically.
Who is the Online Customer?
 They tend to be younger, more affluent, better educated, and more male than the general population; female
usage almost equals males.
 Other characteristic of net users:
Promise and Challenge of Online Marketing
Limited Consumer Exposure and Buying
Skewed User Demographics and Psychographics
Chaos and Clutter
Security
Ethical Concerns
Public Policy and Ethical Issues in Direct Marketing
Irritation to Consumers
Unfairness, Deception, or Fraud
Invasion of Privacy