Marketing 3.05 Acquire foundational knowledge of channel management to understand its role in marketing Acquire foundational knowledge of channel management to understand its role in marketing
What is channel management? • Controlling the movement of the product(s) through the system. • Logistics deals with the movement of goods and timing of the deliveries • Distribution involves the movement, storage and inventory control of the product(s).
What is a channel? • The path (channel) a product travels from the producer (manufacturer) to the ultimate consumer
MARKETING MIX & FUNCTIONS • Remember the Marketing Mix? • Remember the 6 functions? • ________ MGMT = _________
Channel management decisions • Select channel members • Manage and motivate channel members • Evaluate channel members • What is the best means to distribute the product?
Who is an intermediary (middleman)? • Channel members who assist the producer in getting the goods and services to the final user
ACTIVITY 1 Get with your 10 o’clock and get a Marketing Essential book and got to pp 376-377 Various intermediaries include • Wholesalers • Retailers • Agents Define and give a Complete example
What is a direct channel? • Distribution that occurs directly from the producer to the consumer • For example: A consumer buys apples from an apple farmer • Cuts out the middleman
What is an indirect channel? • Distribution that occurs through one or more intermediaries before reaching the final user • For example: The apple farmer sells his apples to Harris Teeter and Harris Teeter sells them to the consumer
Indirect channel is used…. • When a producer doesn’t want responsibility for the selling activities of a large retailer • Producer to agent to retailer to consumer • Because wholesalers usually buy in large quantities • Producer to wholesaler to retailer to consumer
Transportation is… • Physically moving from Place A Place B • Methods include: • Trucking or motor carriers • Railroads • Marine shipping • Pipelines • Air cargo services
Inventory is….. • Storing of merchandise before it is sold • Perpetual inventory control • Physical inventory control • Methods for checking inventory • Blind check method • Direct check method • Spot check method • Quality check method
ACTIVITY 2 • Get with your 7 o’clock appointments • Complete “Channels of Distribution Match Up” • You have 10 minutes
Purpose of channel members • Channel members add value to a product by performing certain channel activities expertly • Marketing • Packaging • Financing • Storage • Delivery • Merchandising • Personal selling
Distribution planning involves… • Decisions about a product’s physical movement and transfer of ownership from producer to consumer. • Some of the major considerations are: • Multiple channels • Control vs. costs • Intensity of distribution desired • Involvement in e-commerce
Multiple channels…. • Some products meet the needs of both industrial and consumer markets. • J & J Snack Foods sells its pretzels, drinks and cookies using multiple channels to: • Supermarkets • Movie Theaters • Stadiums • Schools • Hospitals
Distribution Intensity • Distribution intensity is how widely a product will be distributed; marketers want to achieve the ideal market exposure • Exclusive distribution – protected territories for distribution of a product in a given geographic area; business maintains tight control over a product • Ex. Franchisor legally requires a franchisee to sell only the franchisor’s products • Integrated distribution is where the manufacturer acts as wholesaler and retailer for its own products. Ex. The Gap sells its clothing in company-owned retail stores.
Distribution Intensity • Selective distribution – a limited number of outlets in a given geographical area are used to sell the product. • Very important to select channel members that can maintain the image of the product and are good credit risks, aggressive marketers and good inventory planners. • Ex. Dana Buckman sells its clothing only through top department stores that appeal to the affluent customers who buy its merchandise. It does not sell in a chain megastore or a variety store.
Distribution Intensity • Intensive distribution – the use of all suitable outlets to sell a product. • The objective is complete market coverage and the ultimate goal is to sell to as many customers as possible, wherever they choose to shop. • Ex. Motor oil is sold in quick-lube shops, farm stores, auto parts retailers, supermarkets, drugstores, hardware stores, warehouse clubs, and other mass merchandisers.
Dual distribution • A manufacturer may sell its products through multiple outlets at the same time: • Toll-free phone system • Company website • Multiple retailers
Horizontal and Vertical Conflict • Horizontal Conflict: occurs between channel members at the same level • Good, old-fashioned business competition • Ex: two retailers selling pet supplies compete to sell to the same target market • Vertical Conflict: occurs between channel members at different levels within the same channel • Producers and wholesalers or producers and retailers
Customer service and appropriate channel management • Ensures timely delivery of products • Effective communication is important • Order processing • Correct shipping information • Correct products • Handling complaints • Reducing the probability of complaints • Nice and friendly people
Customer Service and Channel Management • Grey-market strategy – selling product in foreign countries for a lower price than customers can get domestically • Full-line forcing - Producer or supplier insistence that the dealer must carry the full range of products in the line. This policy may not be illegal if it can be established that it serves a legitimatebusinessneed.
Bad Customer service and Channel Management • Vendor consistently has back orders • Product not available when ordered • Coercion – large business threatening to stop using a supplier unless given major concessions • Tying agreement - Purchase agreement in which the customer is forced to purchase a slow-selling or unknown brand or product with a fast-selling or well known one. Such coercion is usually illegal.
Use of Technology in Distribution • Some businesses have the capacity to distribute most or all of their products through the internet • e-commerce: Products are sold to customers and industrial buyers through the Internet. • e-marketplace • Satellite tracking = a dispatcher has current knowledge of a delivery truck’s location and destination
Use of Technology in Distribution • Tracking of package • Bar coding on package • Package scanned at transition points in distribution chain • Customer uses internet to follow package along distribution chain; e-mail may be used • Global distribution: in some countries the postal service is not reliable; package tracking facilitates global trade
Activity 3 • Get with your 3 o’clock • Complete 3.05 Review • We will review 3.00 questions in 10 minutes!
C 1. Sales begin to level off on a 5 year old product because customers are purchasing the competitor's brand. What strategy would be most appropriate to use in this situation? A. Take the product off the market B. Do nothing; fluctuations in sales are common C. Modify the product to renew customer interest D. Triple the advertising budget for the product
D 2. Which activity is addressed in the product/service management function? A. Setting discounts to clear products from inventory B. Determining where products will be offered for sale C. Focusing promotions on a new-product release D. Eliminating products that are slow sellers
B 3. Which of the following is a way that a business can extend the life cycle of an established product? A. By promoting the product to current users B. By finding new uses for the product C. By restricting distribution D. By attracting consumers who are innovators
D 4. Why does a company need to know what stage of the product life cycle its products are in? A. To prevent imitators from entering the market B. To find new uses for the product C. To predict the length of the life cycle D. To adapt its marketing strategies
C 5. Why might profits sometimes decline for the company that first introduced the product during the growth stage of a product's life cycle? A. Because sales decline in the growth stage B. Because marketing strategies are adjusted C. Because competitors have entered the market D. Because production is more efficient
D 6. What is a technologically advanced method that allows businesses to produce products that are? A. Intermittent conversion B. Automatic production C. Computerized robotics D. Mass customization
B 7. What is one way businesses use computer technology to obtain information to improve their product/service mix? A. Mailing questionnaires to customers B. Tracking visitors to their web sites C. Compiling detailed databases D. Preparing interactive software programs
B 8. What is an example of an ethical issue that a product/service manager might face? A. Use of color on the label B. Use of environmentally friendly packaging C. Use of packaging as a means of promotion D. Use of nutrition information on a food label
B 9. Why is the quality level of a product an important product/service management decision? A. It identifies a product's brand. B. It reflects the image of the business. C. It protects the consumers. D. It refers to the way the product works.
B 10. A company advertises that its products are durable lightweight, and come in a variety of colors. What strategy is the company using to position its product? A. Price and quality B. Features and benefits C. Unique characteristics D. Relationship to other products
D 11. "Great taste, great price" is what product positioning strategy? A. Relationship to other products B. Features and benefits C. Unique characteristics D. Price and quality
A 12. In what stage of brand loyalty do people become aware of the brand? A. Recognition B. Satisfaction C. Insistence D. Preference
C 13. What costs do businesses usually include in the price of their products? A. Regulations B. Inflation C. Transportation D. Orientation
D 14. What would be the most appropriate pricing strategy for a business in a small town where unemployment has skyrocketed and the economy is in a downturn? A. Below-cost pricing B. High-level pricing C. Odd-cents pricing D. Flexible pricing
C 15. What is the advantage to a business of using bar-code pricing? A. Easier for customers to read B. Reduces required business security C. Easier to change prices
A 16. A business charges a small company a higher price for a product than it charges a large company What does this represent? A. Price discrimination B. Controlled pricing C. Price competition D. Regulated pricing
B 17. A group of companies recently decided to sell their products for the same price. In what unethical activity are the businesses engaging? A. Bait-and-switch B. Price fixing C. Loss-leader pricing D. Gray markets
C 18. What is an external factor that affects the price that a business charges for its products? A. Operating costs B. Variable expenses C. Economic conditions D. Employee benefits
A 19. What do marketers want to achieve by determining distribution intensity? A. Ideal market exposure B. Complete market coverage C. Perfect market balance D. Total market saturation
D 20. Which of the following is an aspect of channel management that impacts customer service? A. Advertising B. Taxes C. Protectionism D. Timeliness
C 21. What is one action that customer service can take to facilitate order processing? A. Negotiate aggressively B. Oversee assembly C. Communicate effectively D. Monitor inventory
B 22. What indirect channel of distribution is used to reach large retailers when the producer doesn’t want responsibility for the selling activities? A. Producer to wholesaler to retailer to consumer B. Producer to agent to retailer to consumer C. Producer to wholesaler to consumer D. Producer to consumer
C 23. What factor could determine legal ownership of goods in the distribution process? A. Country in which the product is produced B. Availability of the product C. Involvement of agents D. Physical characteristics of the product