Marketing mod 12 – Flashcards

is the sequence of steps that includes getting raw materials, manufacturing the product, moving the product to the stores through a variety of distribution channels, and finally, selling it.

involve a variety of intermediaries, or people who facilitate getting the product to the customer, including retailers, wholesalers, distributors, franchisers, agents and brokers, and manufacturer-owned intermediaries.

Raw materials Maufacturing the Product Delivering the Product Selling the end product to Consumer

Manufacturing the Product Delivering the Product Selling the end product to Consumer

Reatiler Wholesalers Distributors Franchisers Agents and Brokers Manufacturer owned intermediaries

Retailers generally sell different manufacturers' products through their stores, and sell directly to the customers through these retail outlets. For example, in their stores, Dillard's sells clothes, jewelry, shoes, and other products manufactured by different companies.

Wholesalers stock different products from different manufacturers and sell them to the retailers/consumers. They generally buy in bulk and resell to the retailers in small lots. BJ's is an example of a wholesale club.

Distributors are similar to wholesalers but generally stock up on a specific type of product.

Franchises are independent businesses that offer a service or sell products of a company in exchange for a fee. McDonald's has franchises all over the world.

Agents and brokers sell a company's products and services to customers, and are paid on a sales commission basis.

Some manufacturers own showrooms and sales branches where they sell their products directly to the customers. For example, Apple stores are owned and operated by Apple.

The manufacturer might not have as much control over the market as it would like. The manufacturer cannot dictate the price that the intermediaries charge for the products. Because external firms are involved, the manufacturer might have to put in extra effort to monitor and review constantly the actions of the intermediaries.

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Step 1:Develop distribution objectives Step2:Evaluate external and internal environments Step3:Choose a distribution strategy Step4:Develop distribution tactics

Place, Time, & Cost In general, the basic objective of all companies using distribution channels is to make the product available at the right place, at the right time, and at minimum cost. This knowledge helps manufacturers decide which channels they should pick based on their distribution objectives. Case study: Walmart Walmart's distribution objective is mainly to reduce purchasing costs as much as possible so that it can provide products at the best prices to its customers. To achieve this objective, Walmart uses its own distribution centers in most cases, and ensures that the distribution center is, at most, a day's drive away from the stores. Partner Objectives Manufacturers also take into consideration the marketing objectives of the retailer because they should not conflict with the manufacturers' marketing objectives. For example, if Unilever wants to use Wal-Mart as its retailer for its personal care products, then Unilever should make sure it is aware of Wal-Mart's marketing and distribution objectives. Desired Service Levels The distribution objective is generally expressed in terms of desired service level. Matching the desired service level to what each of the channels has to offer helps in selecting the right channels. The desired service level of the manufacturer should be derived from the service level expected by its customers.

Internal factors Some of the important internal factors include the capability of the distribution function within the organization, the amount the firm can invest in distribution, the customers it is targeting, and the kind of product it is offering. External factors External factors include the channel intermediaries available, the competitor's distribution structure, and whether the target customers have access to the available intermediaries.

1 Can it afford to sell through Publix, a large grocery store chain in the southern part of the ? 2 What other retailers are available? 3 Should it consider selling at wholesale clubs like BJ's? 4 Is there a Wal-Mart at the locality they want to target? 5 Is Procter and Gamble also using the same retailers to sell its personal care brands?

Number of levels Unilever must decide whether they want to have only one level of intermediary before reaching the customer. It might pick the manufacturer-retailer-consumer channel to sell its food brands. It might pick Publix to be the retailer it wants to use to carry its food brands. Structure The structure can be composed of conventional, vertical, or horizontal systems. In a conventional distribution channel, the intermediaries used by Unilever, like wholesalers and retailers, do not communicate with each other and work independently. The only interaction is during the buying and selling process. In a vertical system, also known as vertical marketing system, interorganizational planning and management exists to aid in long-term relationship building between the manufacturers, retailers, and wholesalers. It also involves contracts between some members to perform some specific functions. Franchisees are an example of a vertical marketing system. In a horizontal marketing system, two or more intermediaries at the same channel level work together. An example is Coca-Cola and Nestle, which work together to sell ready-to-drink coffee and tea, like Nestea. This arrangement is advantageous to both the parties as Coca-Cola uses its marketing and distribution expertise, and Nestle lends its popular brand names, like Nescafe and Nestea. Intensity Intensity is determined by the number of intermediaries at each level, and generally depends on the type of product that the manufacturer is trying to sell. In an intensive distribution system, Unilever tries to reach as many markets and customers as it can, and hence has all its wholesalers and retailers stock and sell its products. In an exclusive distribution system, manufacturers like a high-end car manufacturer such as Rolls Royce have single outlets in a particular region. This is generally the case for high-priced products and products that have limited number of customers. An exclusive distribution system can be used strategically by the marketer to create the idea of scarcity and to position the product as something special and difficult to find. In a selective distribution system, there is a larger number of intermediaries used than an exclusive distribution, but not as many as an intensive distribution system. For example, Kenmore appliances are sold in some retail stores, but are not available in all places.

Training, supervision, and encouragement Training, supervision, and encouragement by the manufacturer play an important role in channel partners giving their best to make the distribution channel system work. Training ensures that the intermediaries are educated about the products and are able to help customers with product-related queries. Supervision and encouragement helps in boosting performance. Dealer incentives Dealer incentives are provided by the manufacturer to the channel members to help them make more profits for themselves. This, in turn, makes the channel members do their best to promote and sell the manufacturer's products. Some examples of incentives are volume discounts, rewards and compensation for the channel partners, and advertising support provided by manufacturers.

Horizontal channel conflicts Manufacturers should try to ensure such horizontal channel conflicts do not arise. If they do, they should be resolved before any major damage is done. A conflict between Wal-Mart and Target, if they are part of the same distribution channel, is a horizontal channel conflict because both are retailers. They might have conflicts in feeling that the other is trying to lure customers. Interchannel conflicts A conflict between Publix, which is a retailer, and the wholesaler that supplies Hershey's products to it, is an interchannel conflict. The conflict may be related to the pricing of the products. Vertical channel conflicts An example of vertical channel conflict is the conflict that arises between an end user and a retailer like Kmart. Channel cooperation? You might ask yourself: If there is channel conflict, shouldn't there be channel cooperation, as well? In theory, yes, at times there is channel cooperation. However, the marketer and sales executives spend much more time figuring out ways to reduce channel conflict among channel members as each member tries to maximize sales. This interaction often leads to the detriment of other channels. Progressive, however, is an example of a company that has benefitted from creating a strategy where the distribution channels function more cooperatively than most.

Performance factor 1 Sales Performance factor 2 Market coverage Performance factor 3 Cost benefits Performance factor 4 Product distribution factors Performance factor 5 Durability Performance factor 6 Inventory management Performance factor 7 Forecasting demand

Sales figures have to be monitored to ensure there is a substantial increase in sales after using the distribution channels, or that there is enough sales to justify the costs involved in using different intermediaries in the channels of distribution. If there are multiple channel members present at a channel level, manufacturers monitor whether there is a difference in sales numbers among these channel members, analyze the possible reasons, and make necessary changes. Sales managers generally receive daily, weekly, monthly, quarterly, and yearly sales figures to compare against the sales objectives. When you see a big sale at the end of the quarter at the car dealer, you can presume that it is trying to boost sales figures to meet overall objectives.

Market coverage Firms have to evaluate and analyze the markets to ensure they receive enough market coverage by using their current distribution channels. The markets that the firm targets should be covered completely by these distribution channels. If not, necessary steps have to be taken to ensure coverage. For example, if Target stores in the Midwest are supposed to be selling your company's products, you want to be sure that all the Target stores have the product on the shelf, not just some of them (unless, of course, this is part of your marketing strategy).

Businesses have to analyze whether there are cost benefits to the business by using different channels of distribution. Also, firms have to find ways to get additional cost benefits and improve the efficiency of the distribution system. Marketing and sales managers are constantly looking for ways to make the channels more efficient from a sales productivity standpoint, and also from a cost standpoint. These days, many companies offer their products only through online purchasing to avoid the cost of establishing outlets.

Firms pay close attention to details like the intermediaries' ability to fulfill the target market's needs, answer customer queries, and have the know-how to provide service support. The experience and expertise of the distribution channel is key to selling the product and providing after-sales services when necessary. Ensuring that the sales staff is knowledgeable about the product as well as current promotional activities is paramount to a well-performing distribution strategy.

The durability of a channel is based on how long the channel can function effectively in the distribution channel system. Firms monitor the durability of different intermediaries and take necessary actions to ensure there is no disruption in the flow of product distribution.

Manufacturers monitor whether the current inventory levels managed by the intermediaries are sufficient to fulfill all customer orders, or whether there is excess inventory buildup with any of the intermediaries. Inventory management is key, particularly with perishable products. Perishable products include both groceries and high-tech items

Manufacturers must be able to forecast demand accurately for their products. Often, the forecast is based on data received from their intermediaries. One of the reasons for the success of the beverage giant Coca-Cola is its sound and effective distribution strategy and ability to forecast demand. Companies like Coca-Cola and Wal-Mart have systems that continually report and manage inventories so that demand can be forecast and products can be in place to meet demand.