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Chapter 15 Distributing Products Quickly and Efficiently 14- 1 Marketing Intermediaries and the Supply Chain This arrow really represents a series of suppliers , e.g. the farmer, grain wholesaler and flour mill owner are each in the chain that provides flour.

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Chapter

15

Distributing

Products

Quickly and

Efficiently

14-1


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Marketing Intermediaries

and the Supply Chain

This arrow really represents a series of suppliers, e.g. the farmer, grain wholesaler and flour mill owner are each in the chain that provides flour.

The Wholesalers arrow represents one or more sequential wholesalers.


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Channels of Distribution


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Are Intermediaries Bad?

  • About half the cost of the things we buy are marketing costs that go largely to pay for the work of intermediaries.

  • Why don’t we get rid of the intermediaries and pass the savings on to the consumer?


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Cutting Out the Middleman

Traditional Book Distribution

Borders/ Barnes and Noble Model

Amazon.com

Publisher

Publisher

Publisher

Wholesalers

Amazon.com

Retail Chain

Independent bookstores

Consumers

Consumers

Consumers


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For every dollar you spend

on food, ___¢ goes to…


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Functions Performed by Marketing Intermediaries

  • Transportation

  • Storage

  • Selling, including

    • Merchandising

    • Personal selling

    • Advertising


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Hitachi

Sony

Mitsubishi

Toshiba

Exchange Efficiency in a World Without Intermediaries


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Hitachi

Sony

Mitsubishi

Toshiba

Best Buy

Exchange Efficiency in a World with Intermediaries


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Three Basic Points About Intermediaries

  • Marketing intermediaries can be eliminated, but their activities can’t.

  • Intermediaries have survived in the past because they have performed marketing functions more effectively and efficiently than others could.

  • Intermediaries add costs to products, but these costs are usually more than offset by the values they create.


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Form Utility


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Time Utility


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Place Utility

The 18 Starbucks Locations Nearest You


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Possession Utility


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Possession Utility (cont.)

  • Credit

  • Delivery

  • Installation

  • Anything that “facilitates the transfer of ownership”


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Information Utility


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Service Utility


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Types of Merchant Wholesalers

Full-service wholesalers

  • Perform sales functions, carry inventories (with the associated risks), provide delivery, and extend credit to customers

  • Rack jobbers

    Limited-function wholesalers

  • Cash-and-carry wholesalers

  • Drop-shippers


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Agents and Brokers

  • Neither take title to the goods

  • Agents maintain a long-term relationship with the people they represent. Examples:

    • Sports agents

    • Manufacturer’s agent (rep)

    • Insurance agent

  • Brokers are usually hired on a temporary basis. Examples:

    • Real estate broker

    • Farm commodities broker


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Types of Retailers


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Types of Retailers


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Intensity

Level

Objective & Product Type

Examples

Intensive

  • Achieve mass marketselling

  • Convenience goods

Candy, gum,

magazines,

soda pop, batteries

Retail Distribution Strategy


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Retail Distribution Strategy

Intensity

Level

Objective & Product Type

Examples

Selective

  • Work with selected

  • intermediaries

  • Shopping and some

  • specialty goods.

DVD players, TVs,

personal computers,

cameras, furniture,

most clothing


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Retail Distribution Strategy

Intensity

Level

Objective & Product Type

Examples

Exclusive

  • Work with very fewintermediaries

  • Specialty goods

Some designer clothing and purses,

private helicopters, private airplanes


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Non-Store Retailing

  • Direct selling

  • Vending machines, kiosks, and carts


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Multilevel marketing

  • E.g. Amway, Mary Kay Cosmetics

  • NOT pyramid schemes!

    Pyramid scheme example: The “Plane Game”


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Electronic retailing

Sometimes calledE-tailingorB2C E-commerce

  • Amazon.com

  • Target.com


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Direct marketing


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Supply Chain Management

“Re-engineering the processes along the entire value chain from producers to consumers to simultaneously reduce inventories and reduce stock-out or line-down situations.”


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The Supply Chain for Fiberrific Cereal

Foodstuff

Suppliers

Foodstuff

Suppliers

Foodstuff

Suppliers

Packaging

Suppliers

Packaging

Suppliers

Packaging

Suppliers

Wholesalers

Wholesalers

Retailers

Retailers

Retailers

ManufacturingFacility

Storage

CompanyHQ

Warehouse

Consumer


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Logistics

  • Inbound logistics: is concerned with bringing raw materials, packaging, and parts from suppliers to your company efficiently.

  • Materials handling: is the movement of raw materials, parts, and goods within the company.


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Outbound Logistics

  • Outbound logistics is concerned with managing the flow of finished products from your company to your customers.


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Freight Forwarder

  • A freight forwarder is a company that puts many small shipments together to create a single large shipment that can be transported cost-effectively to the final destination.


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Choosing the right transportation mode

  • The largest percentage of goods in the U.S. (by volume) is shipped by rail (35-40%).

  • Trucks are the second most popular surface transportation mode, handling about 25% of the volume.

    • Can deliver to almost any business destination


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Choosing the right transportation mode

  • Water transportation is the cheapest per pound, but is slow and offers limited destinations.

  • Pipelines are used primarily for transporting water, petroleum, and petroleum products.

  • Air transportation is the fastest, but the most expensive per pound.


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Intermodal transportation

Piggyback: loading truck trailers on railcars.


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Intermodal transportation

  • Fishyback: loading truck trailers onto ships


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Intermodal transportation

  • Birdyback: loading truck trailers onto airplanes


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