Chapter 14 , 15 – Marketing Channels, Retailing

Marketing Channels
Also the channel of distribution; A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer; a pipeline; represent the place or distribution in the marketing mix
Supply chain
The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function; connects business entities in the marketing channel; whole process
Marketing channel benefits
1) Specialization and division of labor 2) Overcoming discrepancies 3) Providing contact efficiency
Specialization and Division of Labor
-creates greater efficiency
-provides lower costs
-achieves economies of scale
-aids producers who lack resources to market directly
-builds good relationships with customers
Discrepancy of Quantity
The difference between the amount of product produced and the amount an end user wants to buy.
Discrepancy of Assortment
The lack of all the items a customer needs to receive full satisfaction from a product or products
Temporal Discrepancy
A situation that occurs when a product is produced but a customer is not ready to buy it.
Spatial Discrepancy
The difference between the location of a producer and the location of widely scattered markets.
Over __% reduction because efficiency of having a middle person
Types of Channel Intermediaries
Retailers, Merchant Wholesalers, and Agents & Brokers
A channel intermediary that sells mainly to customers; take title to goods
Merchant Wholesaler
An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. ex. Sames Club
Agent and brokers
Wholesaling intermediaries who facilitate the sale of a product by representing channel members; do not take title; contact buyers and sellers
Factors Suggesting Type of Wholesaling Intermediary to Use
1) Product characteristics
2) Buyer considerations
3) Market characteristics
4) Custom v. standardization
________ do well in complex, one off products, longer lead times between order and shipping, and when there is a low profit margin. ex. insurance
_____ do well with standardization, simple products a lot of customers, and frequent ordering
Types of channel functions
Transactional, Logistical, and Facilitating
Transactional Functions
1) Contacting & Promotion
2) Negotiating
3) Risk Taking
Logistical Functions
1) Physically distributing
2) Storing
3) Sorting
Facilitating Functions
1) Researching
2) Financing
The process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption
Direct channel
A distribution channel in which producers sell directly to consumers.
Retailer Channel
Channel where Retailer is between producer and consumer
Wholesalers Channel
goes Producer to Wholesalers to Retailers to Consumers
Agent/Broker Channel
Goes from producer to agents/broker to wholesalers to retailers to consumers
3 types of business to business exchanges on the internet
1) Agents link buyers and sellers
2) Companies drop the intermediary from the supply chain
3) “Private exchanges” with select suppliers automate the supply chain
Alternative Channel Arrangements
1) Multiple channels
2) Nontraditional channels
3) Strategic channel alliances
Strategic channel alliances
Channel that leads to one company’s using another’s marketing channel
Types of business channels
1) Direct
2) Industrial
3) Agent/broker
4) Agent/broker industrial
Factors affecting channel choice
1) Marketing
2) Product
3) Producer
Level of Distribution Intensity
1) Intensive
2) Selective
3) Exclusive
Market Factors that affect channel choices
1) Customer profiles
2) Consumer or Industrial customer
3) Size of market
4) Geographic location
Product Factors that affect channel choices
1) Product Complexity
2) Product Price
3) Product Standardization
4) Product Life Cycle
5) Product Delicacy
Producer Factors
1) Producer Resources
2) Number of Product Lines
3) Desire for Channel Control
A form of distribution aimed at having a product available in every outlet. Mass market selling. Convenience goods Ex. candy bars
A form of distribution achieved by screening dealers to eliminate all but a few in any single area. Shopping and some specialty goods Ex. Ralph Lauren
A form of distribution that established one or a few dealers within a given area. Specialty goods and industrial equipment Ex. Rolex
Social Dimension of Channels
Power, Control, Leadership, Conflict, and Partnering
Channel Power
A channel member’s capacity to control or influence the behavior of other channel members
Channel Control
A situation that occurs when one marketing channel member intentionally affects another member’s behavior
Channel Leader
A member of a marketing channel that exercises authority/power over the activities of other members
Channel Conflict
A clash of goals and methods between distribution channel members
Channel Partnering
The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage
Conflicts may occur if channel members:
1) Have conflicting goals
2) Fail to fulfill expectations of other channel members
3) Have ideological differences
4) Have different perceptions of reality
Horizontal conflicts
occur among firms at the same level of the channel, e.g., two car dealers.
Vertical Conflicts
occur between different levels of the same channel, e.g., Black & Decker and Home Depot
Transaction-Based Partnering
Short-term, adversarial, independent, price is important, many suppliers, little info sharing, and little investment
Long-term, cooperative, dependent, value-added services, few suppliers, a lot of info sharing, and high investment required
All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use.
Role of retailing
1) Over 1.6 million U.S. retailers employ
more than 24 million people
2) Retailers account for 11.6 percent of U.S.
3) Retailing accounts for 13 percent of U.S.
4) Retailers ring up almost $4 trillion in
sales—nearly 40 percent of the U.S. GDP
5) Industry is dominated by a few giant organizations, such as Wal-Mart
Classification of Retail Operations
1) Ownership
2) Level of Service
3) Product Assortment
4) Price
Classification of Ownership
1) Independent retailers
2) Chain stores
3) Franchises
Independent Retailers
Owned by a single person or partnership and not part of a larger retail institution
Chain Stores
Owned and operated as a group by a single organization
The right to operate a business or sell a product
Levels of service
1) Factory outlet/Warehouse clubs
2) Discount Stores
3) Exclusive Stores
Gross Margin
The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted.
Types of retail operations
Department, Specialty, Supermarkets, Drugstores, Convenience, Discount, Restaurants
Categories of Discount Stores
Full-line discounters, specialty-discount stores, warehouse clubs, and off-price discount retailers
Mass merchandising
Retailing strategy using moderate to low prices on large quantities of merchandise and lower service to stimulate high turnover of products.
Retail store combining groceries and general merchandise goods with a wide range of services.
Full-line discounter
Retailer offering consumers very limited service and carrying a broad assortment of well-known, nationally branded “hard goods”. ex. Walmart
Category killers
Specialty discount stores that heavily dominate their narrow merchandise segment.
Nonstore Retailing
Automatic vending, direct retailing, direct marketing, and electronic retailing
Direct retailing
door-to-door, office-to-office, and home sale parties
Direct Marketing
direct mail, catalogs and mail order, telemarketing, and electronic retailing
Product and Trade Name Franchising
Dealer agrees to sell in products provided by a manufacturer or wholesaler.
Business Format Franchising
An ongoing business relationship between a franchiser and a franchisee.
Retail marketing strategy
1) Define & Select a Target Market
2) Develop the 6 Ps
Segment Retail Marketing by
Demographics, Geographics, and Psychographics
Retailing Mix
Product, Place, Price, Personnel, Promotion, and Presentation
Product Offering
The mix of products offered to the consumer by the retailer; also called the product assortment or merchandise mix.
Advertising, Public Relations, Publicity, and Sales Promotion
1) Community- economic growth potential, competition, and geography
2) Site- Freestanding store, shopping center, and mall
Important factors for site choice
Neighborhood socioeconomics, Traffic flow, Land costs, Zoning regulations, Public transportation, Site’s visibility, parking, entrances and exits, accessibility, and safety, Fit with other stores
Shopping center advantages
1) Design attracts shoppers
2) Activities and anchor stores draw customers
3) Ample parking
4) Unified image
5) Sharing of common area expenses
Shopping center disadvantages
1) Expensive leases
2) Failure of common promotion efforts
3) Lease restrictions
4) Hours of operation
5) Anchor store domination
6) Direct competitors
7) Consumer time limits
The overall impression conveyed by a store’s physical layout, décor, and surroundings
Factors in Presentation
1) Employee type and density
2) Merchandise type and density
3) Fixture type and density
4) Sounds
5) Odors
6 ) Visual Factors
Two Common Selling Techniques
1) Trading Up
2) Suggestion Selling
Customer Service for Online Retailers
1) Easy-to-use websites
2) Product availability
3) Simple returns
Order of Retail Marketing Strategy
Product, Place, Promotion, Price, Presentation, Personnel
Consumers are involved in the
retail experience
Purchasing goods through mobile devices
Customer service and personal selling
supports postioning

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