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1. Major Points of Ch. 1. Let’s Learn about:. 1. Key Terms and Definitions 2. Why Marketing Channels and Intermediaries?** 3. Marketing Channels and other Marketing Concepts 4. The Flows in the Marketing Channels** 5. Basic Principles for Marketing Channels**

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major points of ch 1

1

Major Points of Ch. 1

Let’sLearnabout:

1. Key Terms and Definitions

2. Why Marketing Channels and Intermediaries?**

3. Marketing Channels and other Marketing Concepts

4. The Flows in the Marketing Channels**

5. Basic Principles for Marketing Channels**

6. Evolution of Marketing Channel Concept

chapter 2
Chapter 2

The Channel Participants

major points of ch 2

1

Major Points of Ch. 2

Let’slearn about:

1. Who Are Major Participants in the Marketing Channel*

2. Why does a manufacturer shift distribution tasks to intermediaries? **

3. Wholesalers (or Distributors)

4. Retailers

5. Facilitating Agencies

major participants in the marketing channel

Topic 1:

2

Major Participants in the Marketing Channel

* Commercial Channel

* Target Markets

why shift distribution tasks to intermediaries
Why shift distribution tasks to intermediaries?*

Topic 2:

1

Producers

&

Manufacturers

Intermediaries

• lack expertise

• lack economies of scale

in distribution

• spread high fixed costs

over large quantities of

diverse products

• achieve economies of

scope and economies of

scale

example distribution of crayons

2

Example:Distribution of Crayons

A Manufacturer’s direct

distribution to customers requires

• Huge order processing

facility

• Huge inventory

• Several warehouse

locations

• Transportation of

product to consumers

= distribution cost

prohibitive

value chain analysis

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Value Chain Analysis**

Support Activities

Margin

Outbound

Logistics

Marketing

and

Sales

Operations

Inbound

Logistics

Service

Primary Activities

* Firm Boundary Issue

major types of wholesalers

Topic 3:

2

Major Types of Wholesalers

* Transfer Pricing Issue

merchant wholesalers
(Merchant) Wholesalers

2

Buy

Take title to

Store

Handle

www.ingrammicro.com

Large quantities/varieties of products

Resell to

Industrial,

commercial,

or

institutional

concerns

Other

Wholesalers

Retailers

agents brokers commission merchants
Agents, Brokers, & Commission Merchants

2

Involved in buying & selling

while acting on behalf of manufacturers

Commissions

on

sales or purchases

Ex) Latest Changes in IT Industry

manufacturers sales branches offices

2

Manufacturers’ Sales Branches & Offices

Separated from manufacturing plants

Distribute manufacturer’s products at wholesale

Owned & operated by manufacturers

Some wholesale allied & supplementary products purchased from other manufacturers.

Question: Why would a manufacturer operate its own sales branches?

merchant wholesalers main distribution tasks for manufacturers
Merchant Wholesalers’ Main Distribution Tasksfor Manufacturers

2

 Provide market coverage

 Make sales contacts

 Hold inventory

 Process orders

 Gather market information**

 Offer customer support

• Operate at high levels of effectiveness and efficiency

• Average cost curves lower than those for their suppliers

merchant wholesalers main distribution tasks to serve customers
Merchant Wholesalers’ Main Distribution Tasks To Serve Customers*

2

 Assure product availability

 Provide customer service

 Extend credit & financial

assistance

 Offer assortment convenience

 Break bulk

 Help customers with advice &

technical support**

agent wholesalers main distribution tasks
Agent Wholesalers’ Main Distribution Tasks

2

Manufacturers’

Agents

Market coverage

Sales contacts

agent wholesalers main distribution tasks1
Agent Wholesalers’ Main Distribution Tasks

2

Selling agents

Market coverage

Sales contacts

Order processing

Marketing information

Product availability

Customer services

agent wholesalers distribution tasks
Agent Wholesalers’ Distribution Tasks

2

Brokers

Market coverage

Sales contacts

Order processing

Marketing information

Product availability

Customer services

Ex) Food Brokers

agent wholesalers main distribution tasks2
Agent Wholesalers’ Main Distribution Tasks

2

Commission

Merchant

Market coverage

Sales contacts

Order processing

Breaking bulk

Credit

Holding inventory

retail structure
By Ownership of Establishment

By Kind of Business (Merchandise Handled)

By Size of Establishment

By Degree of Vertical Integration

By Type of Relationship with other Business Organizations

By Method of Consumer Contact

By Type of Location

By Type of Service Rendered

By Legal Form of Organization

By Management Organizations or Operational Technique

Topic 4:

2

Retail Structure

Alternative Bases for Classifying Retailers

kind of business classifications
Motor vehicle & parts dealers

Furniture & home furnishings stores

Electronics & appliance stores

Building material & garden equip. & supply dealers

Food & beverage stores

Health & personal care stores

Gasoline stations

Clothing & clothing accessories stores

Sporting goods, hobby, book, & music stores

General merchandise stores

Miscellaneous store retailers

Nonstore retailers

2

Kind-of-Business Classifications

Retail Trade

retail structure trends
Retail Structure Trends

1

Decreasing number of establishments

Increasing sales

= increase in size of retail establishments

measured by average sales volume

per store

concentration in retailing
Concentration in Retailing

1

4% of all retail firms

accounted for nearly 80%

of total sales!!

distribution tasks performed by retailers
Distribution Tasks Performed by Retailers

2

The role of the retailer is to interpret the demands of his customers and to find and stock the goodsthese customers want, when they want them, and in the way they want them. This adds up to having the right assortments at the time customers are ready to buy.

— Charles Y. Lazarus (1961)

distribution tasks performed by retailers1

2

Distribution Tasks Performed by Retailers
  • Interpret and relay consumer demand*
  • Remove risk by ordering in advance of the season
  • Divide large quantities into consumer-sized lots
  • Offer manpower & physical facilities close to consumers’ residences
  • Provide personal assistance to help sell products*
  • Offer storage
slide27

THE INCREASING POLARITY OF RETAIL TRADE

Stagnant Rates of

Growth and Low Profitability

Specialized

Retail Outlets:

High Touch

Mass-

Merchandisers:

High Tech

Conventional

Outlets

High Rates of

Growth and

Attractive Profitability

slide28

USE OF THE UPC CODE IN RETAIL PRODUCT REPLENISHMENT: WAL-MART EXAMPLE

  • The UPC is scanned and registered into Wal-Mart’s database
  • Item locator program.
  • Data transmission.
  • Retail link.
  • Forecasting.

UPC Code for Carnation Nonfat Dry Milk, 25.6 oz. size

UPC Code for Duncan Hines Moist Deluxe Lemon Supreme Flavor Cake Mix, 18.25 oz. size

UPC Code for Marketing Channels, 5th edition

Source: Text is adapted from Linda F. Magyar, “A Turn of the SKU,” New York Times Magazine, April 6, 1997, section 6, p. 55.

UPCs are scanned from real products.

facilitating agencies in marketing channels

Topic 5:

2

Facilitating Agencies in Marketing Channels
  • Transportation agencies
  • Storage agencies
  • Order processing agencies
  • Advertising agencies
  • Financial agencies
  • Insurance companies
  • Marketing research firms
slide30

SOME SOURCES OF INFORMATION

ABOUT THE WHOLESALING/RETAILING

  • General industry information:
    • http://www.naw.org (National Association of Wholesaler-Distributors)
    • http://www.pwc.com/Extweb/industry.nsf/docid/F8F07C9BBD28881A85256D9D00127C1C (a site run by PWC)
  • Industry consultants:
    • Pembroke Consulting, Inc.
    • Merrifield Consulting Group, Inc.
    • Indian River Consulting Group
    • Frank Lynn & Associates
    • Michael E. Workman & Associates
slide31

1

  • We Missed Something in the Whole Discussion on Marketing Channel Participants.
  • What is it?