Marketing Ch. 14, 16, 7

what are intermediaries
liaison between manufacturer and end-user market

agent or broker

agent or broker
any intermediary with authority to represent retailers, wholesalers or manufacturers

does not take ownership of product

an intermediary who sells to other intermediaries

takes ownership of product

an intermediary who mainly sells to consumers

takes ownership of product

what are marketing channels
distribution channels

individuals or firms involved in the process of making a product or service available for consumption or use by consumer

products “flow” in these channels from producers to intermediaries to consumers

why do we need intermediaries
transactional function: buying, selling, risk taking
logistical function: storing, dispersing, assorting
facilitating function: financing, providing marketing information, grading
direct channel
from producer directly to consumer
retailer channel
from producer to retailer to consumer
wholesaler channel
from producer to wholesaler to retailer to consumer
agent/broker channel
from producer to agent/broker to wholesaler to retailer to consumer
vertical marketing systems (VMS)
channel members act as a unified system

benefits include: greater control, less conflict, and economies of scale due to the size of the system

corporate VMS
successive stages of production and distribution under a single ownership

eg. backward vs. forward integration

contractual VMS
independent production and distribution firms collaborate based on contracts

eg. franchising

administered VMS
coordination at successive stages of production and distribution based on one channel member
intensive distribution
product available in every outlet where customer might want to buy it
selective distribution
product available in few retail outlets in geographic area
exclusive distribution
product available in one or very few retail outlets in geographic area
vertical channel conflict
between different levels in marketing channel
horizontal channel conflict
between same levels in marketing channel
how can channel conflicts be avoided/resolved
diversified product offerings
potentially through vertical marketing systems or channel cooperation
integrated marketing communication (IMC)
the careful coordination of all promotional messages for a product or a service to assure consistency at every contact point where a company meets its audiences

clear and consistent message throughout the promotional mix

what are the goals and tasks of promotion
inform: increase awareness, explain product, build company image
persuade: encourage brand switching, influence customer to buy now, persuade customers to call
remind: remind consumers where to buy, remind that product may be needed
the different types of promotion
advertising, personal selling, direct selling, public relations, sales promotion
one-way mass communication about a product or organization that is paid for by an identified sponsor (eg. tv, radio, newspapers, magazines, books, etc.)
advantages of advertising
good to reach mass market
full control over message content
low cost per contact
disadvantages of advertising
less trust-worthy
hard to get feedback
can be very expensive
cannot customize (because everyone is getting the same message)
public relations
communication form that evaluates public attitudes and seeks to earn public understanding and acceptance (eg. through events)

eg. product placement during tv shows now because people have PVR so they can skip ads
eg. sponsoring an event

big difference between advertising and PR
someone paid for advertising and it is very obvious, but with PR the one who pays doesn’t have as much control over the message
advantages of PR
more trustworthy/credibility(less subliminal messages.. comes from independent sources such as reviewers and critics)
mass-market; can reach a lot of people
disadvantages of PR
limited control over the message
hard to get feedback
sales promotion
short-term inducement of value offered to arouse interest in buying a good or service (eg. free samples, coupon, contest premiums)
advantages of sales promotion
can increase short term sales quickly
can create store or website traffic
efficient; effectiveness easier to track than PR (eg. coupons)
disadvantages of sales promotion
short term
sales drop off when deals end
can dilute brand image with too many sales promotion
advertising needed to convert the customer who tried the product into a loyal customer
personal selling
two-way flow of communication between a buyer and seller, often in a face-to-face encounter, designed to influence a person’s or groups purchase decision
advantages of personal selling
feedback is easy to gather
create relationships with customers
can select audience
can provide a lot of detailed and customized information to the customer
easier to track than advertising and PR
disadvantages of personal selling
message can be inconsistent among sales people
not good for reaching mass market
most expensive in per contact cost
direct marketing
direct communication with consumers to generate a response in the form of an order, a request for further information or a visit to a retail outlet (eg. direct mail, catalogues, online ads)
advantages of direct marketing
can often be quickly modified
cheaper than personal selling and more customizable that advertising and PR (cost effective)
easier to track and measure
disadvantages of direct marketing
customers are getting tired of it
(eg. throw flyers in trash)
data management can be expensive
what promotional element should a company choose and how much emphasis on each
depends on where u are in product life cycle
eg. in growth stage you spend a lot of money on promotion because you want market share

target audience
– potential buyers: if there aren’t that many customers it is a waste to spend money on advertising
-geographic location

available funds

push and pull strategy


push strategy
selling to the medias, push it through the intermediaries; using promotional efforts to push product through distribution channel

eg. personal selling is done through intermediaries
eg. if you sell through retail stores you have to push

pull strategy
using consumer advertising to PULL product through the channel of distribution; product is pulled through the channel

eg. direct marketing
– if you have a direct channel there is no wholesaler or retailer so its pull

ineffective IMC can lead to..
customer confusion
loss of customers
loss of brand equity
conflicts within company

all for something that costs A LOT to pursue

factors influencing the international marketing mix
international economic environment
international technological environmen: to what degree are technological innovations used by consumers in the market?
international social-cultural environment: how do cultural factors affect business?
international regulatory environment: do any legal restrictions complicate entering the market?
competitive environment
adjusting marketing sizes according to cultural, regional and national differences
the development of marketing strategies that treat the entire world as a single entity

eg. big mac fully standardized amongst countries
eg. gillett uses same picture for ads and save costs this way.. the only thing that changes is the language across countries

customization critiques
lower economies of scale
closer to customer needs and wants
more difficult to manage and design the appropriate mix
increased complexity of operations
standardization critiques
economies of scale
lower research and development expenses
lower advertising expenses
can lead to lower customer satisfaction
international entry strategies
joint ventrue
direct investment
producing goods in one country and selling them in another country
direct exporting
through own distribution
indirect exporting
through intermediaries
advantages and disadvantages of exporting
advantages: fast way to enter, low risk, low financial commitment
disadvantages: less control, lower profit potential
offer the right to a trademark, patent, or other similarly valued items of intellectual property in return for a fee

types: contract manufacturing, contract assembly, franchising

advantages and disadvantages of licensing
advantages: still fairly low risk, relatively fast way to enter, can be used for services, creates employment for host country

disadvantages: forgo control, may create competition, brand image can be jeopardized

joint venture
agreements between two or more firms to invest together to create a local business, sharing ownership, control, and profits of the nnew company
advantages and disadvantages of joint venture
advantages: more control, good way to acquire market knowledge, access to local borrowing agencies (eg. banks)

disadvantages: greater financial commitment, greater risk (but shared), greater potential for conflict

(foreign) direct investment (FDI)
a firm invests in and owns a foreign subsidiary or division
advantages and disadvantages of FDI
advantages: most control, cost savings, better understanding of local market conditions, less affected fluctuations in the exchange rates

disadvantages: higher risk, highest financial commitment, most sensitive to local environmental factors (eg. strikes, unions, education)

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