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. The Wholesalers arrow represents one or more sequential wholesalers.
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?
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
For every dollar you spend on food, ___¢ goes to…
Functions Performed by Marketing Intermediaries • Transportation • Storage • Selling, including • Merchandising • Personal selling • Advertising
Hitachi Sony Mitsubishi Toshiba Exchange Efficiency in a World Without Intermediaries
Hitachi Sony Mitsubishi Toshiba Best Buy Exchange Efficiency in a World with Intermediaries
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.
Place Utility The 18 Starbucks Locations Nearest You
Possession Utility (cont.) • Credit • Delivery • Installation • Anything that “facilitates the transfer of ownership”
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
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
Intensity Level Objective & Product Type Examples Intensive • Achieve mass marketselling • Convenience goods Candy, gum, magazines, soda pop, batteries Retail Distribution Strategy
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
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
Non-Store Retailing • Direct selling • Vending machines, kiosks, and carts
Multilevel marketing • E.g. Amway, Mary Kay Cosmetics • NOT pyramid schemes! Pyramid scheme example: The “Plane Game”
Electronic retailing Sometimes calledE-tailingorB2C E-commerce • Amazon.com • Target.com
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.”
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
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.
Outbound Logistics • Outbound logistics is concerned with managing the flow of finished products from your company to your customers.
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.
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
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.
Intermodal transportation Piggyback: loading truck trailers on railcars.
Intermodal transportation • Fishyback: loading truck trailers onto ships
Intermodal transportation • Birdyback: loading truck trailers onto airplanes