Chapter 11

1. Chapter 11 Marketing and Distribution

2. Chapter 11Section 1 The Changing Role of Marketing

3. The Development of Marketing • Marketing: all the activities needed to move goods and services from the producer to the consumer • The sole purpose of marketing is to convince consumers that a certain product or service will add to their utility.

4. The Development of Marketing • Some economists estimate that about 50% of the price people pay for an item today is the cost of marketing. • The development of marketing can be traced by analyzing what it has focused on: production, sales, advertising and consumer sovereignty. • Consumer Sovereignty: the role of the consumer as ruler of the market when determining the types of goods and services produced

5. The Development of Marketing • Meeting Consumer Utility • Utility: the amount of satisfaction one gets from a good or service • Utility can be divided into four major types: • Form Utility • Place Utility • Time Utility • Ownership Utility

6. Form Utility • Form utility is converting raw materials into desired/needed products. • Created by production. • Examples: • Transforming cotton cloth into draperies • Refining crude oil into gasoline

7. Place Utility • Place utility is providing the good/service where the customer wants it to be. • Examples: • Locating a gas station on a busy corner. • Internet shopping

8. Time Utility • Time utility is providing the good/service at precisely the time the customer wants it. • Examples: • A 24-hour grocery store or restaurant • Internet shopping

9. Ownership Utility • Ownership utility is providing goods/services that people are pleased to own. • Examples: • Fine art • Luxury cars • Expensive jewelry

10. Market Research • Market Research: gathering, recording, and analyzing data about the types of goods and services people want • Should be done before the product is made or service is offered. • In this sense, the market means the potential buyers of the good or service.

11. Market Research • When should market research be done? • At the very beginning when the first ideas about a new product are being developed. • Test sample products and alternative packaging designs. • Immediately after a product is released for sale • Early market research helps producers determine whether there is a market for the good and can indicate changes in quality.

12. Market Research • Market Surveys • Market Survey: information gathered by researchers about possible users of a product based on such characteristics as age, gender, income, education, and location • A market survey usually involves a series of carefully worded questions. • Surveys could also use focus groups.

13. Market Research • Testing New Products • Offer the item for sale in a small market before selling it to a larger area. • Test Marketing: offering a product for sale in a small area for a limited period of time to see how well it sells before offering it nationally • Of all the new products introduced every year in the US, most are not profitable and do not survive in the marketplace.

14. Chapter 11Section 2 The Marketing Mix

15. Marketing • Simply producing a good and offering it for sale is not enough in today’s competitive world • Marketing is necessary for companies to be successful. • A marketing strategy, or plan, combines the 4 P’s of marketing: • Product • Price • Place • Promotion

16. Product • When it comes to product, a company must answer certain questions. • What good or service should be produced? • What services should be offered with the product? • Consider adding warranties • How should product be packaged? • Consider size, design, color, catch phrases and coupons or rebates. • How should product be identified? • Consider logos, songs, celebrity endorsements, and packaging.

17. Price • Determined by law of supply and demand. • Companies must consider the cost of producing, advertising, selling, and distributing the product. • Price leadership occurs when competing companies sell their products for similar prices. • Price Leadership: practice of setting prices close to those charged by other companies selling similar products • Selling a new product for a low price to entice people to buy it is called penetration pricing.

18. Place • Where should the product be sold? • Past experience with similar products will help the marketing department make this decision. • A cereal company would most likely market a new cereal in grocery stores. • Companies with goods that appeal to a limited market would advertise in specialty shops or on the internet.

19. Promotion • Promotion: informing customers about product or service • Type of promotion depends upon the product, the target customer, and amount of money the company wants to spend. • Examples of promotions: direct-mail advertising, free samples, cents-off coupons, and rebates.

20. Product Life Cycle • Product Life Cycle: series of stages from first introduction to complete withdrawal from the market • Four stages: • Introduction • Growth • Maturity • Decline

21. Product Life Cycle • Marketing programs are different for each stage. • Pricing can be different for each stage. • Marketers try to extend the life of product by changing its looks, uses, and the advertising focus.

22. Chapter 11Section 3 Distribution Channels

23. Channels of Distribution • Channels of Distribution: routes by which goods are moved from producers to consumers • Decisions about distribution is another function of marketing. • Distribution: moving goods from where they are produced to the people who will buy them

24. Wholesalers and Retailers • Wholesalers: businesses that purchase large quantities of goods from producers for resale to other businesses • Retailers: business that sell consumer goods directly to the public

25. Wholesalers and Retailers • Full service wholesalers warehouse goods and deliver them after retailers pay for them. • Drop shippers are wholesalers that buy the goods under the condition that the producer will store and ship the goods after the wholesaler has sold them.

26. Wholesalers and Retailers • A cash-and-carry wholesaler sells merchandise, but buyer must pay shipping. • A truck wholesaler sells and delivers at the same time.

27. Storage and Transportation • Storage: storing goods for future sales. • Transportation: Moving goods from producers and/or sellers to buyers. • The type, size, weight of the good and how fast it is needed factor into storage and transportation.

28. Distribution Channels • Warehouse club shopping lets people buy a limited number of models and brands in huge quantities so the warehouse will get favorable prices from manufacturers. • Direct marketing is done through catalogs, the Internet, and “space ads.”