Marketing Ch. 15 & 16

the decisions and activities that make products available to customers and when and where they want to purchase them
supply chain
all the activities associated with the flow and transformation of products from raw materials through to the end customer; from to to the end
supply chain management
long term partnerships among marketing channel members that reduce inefficiencies, costs, and redundancies and develop innovative approaches to satisfy customers
ex: T-shirt in class video
wholesalers, retailers
operations management
the total set of managerial activities used by an organization to transform resource inputs into products, services, or both
logistics managements
planning, implementing,and controlling the efficient and effective flow and store of products and information from the point of origin to consumption to meet customers’ needs and wants
supply management
in its broadest form, refers to the processes that enable the progress of value from raw material to final customer and back to redesign and final disposition
ex: purchasing, procurement, sourcing
supply-chain managements
a set of approaches used to integrate the functions of operations management, logistics management, supply management, and marketing channel management so products are produced and distributed in the right quantities, to the right locations, and at the right time
operations management – sample activities
organizational system-wide coordination of operations and partnerships to meet customers’ product needs
supply management – sample activities
sourcing of necessary resources, products, and services from suppliers to support all supply-chain members
logistics management – sample activities
all activities designed to move the product through the marketing channel to the end user, including warehousing and inventory management
channel management – sample activities
all activities related to selling, service, and the development of long-term customer relationships
marketing channel (aka channel of distribution or distribution channel)
a group of individuals and organizations that direct the flow of products from producers to customers within the supply chain
-if channel member is eliminated, another channel member MUST perform the duties and absorb the costs
marketing intermediaries
middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products
ex: wholesalers and retailers
marketing information – sample activities
analyze sales data and other information in databases and information systems; perform or commission marketing research
marketing management – sample activities
establish strategic and tactical plans for developing customer relationships and organizational productivity
facilitating exchanges – sample activities
choose product assortments that match the needs of customers; cooperate with channel members to develop partnerships
set promotional objectives; coordinate advertising, personal selling, sales promotion, publicity, and packaging
establish pricing policies and terms of sales
physical distribution
manage transportation, warehousing, materials handling, inventory control, and communication
time utility
having products available when the customer wants them
-represents the biggest challenge–dealing with speculative production (est. demand)
-if wrong, lost sales or increased cost of inventory
ex: movies on demand; toy manufacturers around Christmas especially
place utility
created by making products available in locations where customers wish to purchase them (convenience stores)
ex: shopping malls that have an ATM machine inside; vending machine
possession utility
means that the customer has access to the product to use or to store for future use
ex: can occur through ownership or through arrangements that give the customer the right to use the product, such as a lease or rental agreement
-credit: buy now, pay later
ex:lay away, credit
form utility
by assembling, preparing, or otherwise refining the product to suit individual customer needs
ex: ready to eat soup, canned soup
-reduce overall costs of marketing exchanges
-reduce search costs for customers
marketing channels facilitate exchange efficiencies
create utility and facilitate exchange efficiencies
the significance of marketing channels
consumer products
business products
multiple marketing channels
channel alliances
types of marketing channels
producers, like Dell computers,that sell products directly from their factories to end users use direct marketing channels
ex:direct/ (direct website)
a frequent choice of large retailers because it allows them to buy in quantity from manufacturers
ex: Kmart and Walmart, new automobiles and new college textbooks are sold this way, primarily nonvoter retailers such as L.L. Bean and J. Crew
-for very large retailers
represents a lon-standing distribution channel, especially for consumer products; practical option for producers that sell to hundreds of thousands of customers through thousands of retailers
ex: Wrigley gum has a large number of retailers; many convenience goods
-most common
producer>agents or brokers>wholesalers>retailers>consumers
frequently for products intended for mass distribution, such as processed foods
ex: to place cracker in specific retail outlets, a food processor may hire an agent (food broker) to sell cracker to wholesalers who sell cracker to supermarkets, vending machines, and other retail outlets
-producers may to have money to hire sales force
producer>organizational buyers
direct channel for business products; more than half of all business products (especially expensive equipment) are sold through direct channels
-meeting specifications for buyers
producer>industrial distributors>organizational buyers
most effective when a product has broad market appeal, is easily stocked and serviced, is sold in small quantities, and is needed on demand to avoid high losses
ex: staples w/ 3m or Adobe
producer>agents>organizational buyers
employs a manufactures’ agent, doesn’t acquire title to the products and usually does not take possession
ex:producers have no money or desire for a sales force
producer>agents>industrial distributors>organizational buyers
may be appropriate when the producer wishes to cover a large geographic area but maintains no sales force due to highly seasonal demand or because it cannot afford a sales force; also useful for a business marketer that wants to enter a new geographic market without expanding its existing sales force
industrial distributor
an independent business organization that takes title to industrial products and carries inventories
advantages of industrial distributor
-they can perform the needed selling activities in local markets at a relatively low cost to a manufacture and reduce a producer’s financial burden by providing customers with credit services
-aware of local needs and can pass on market info to producers
-reduce producers’ capital requirements
advantages of manufacturers’ agents
-usually possess considerable technical and market information and have an established set of customers
-can be an asset because the seller doesn’t have to support a year-round sales force
disadvantages of manufacturers’ agents
-seller may have little control over the agents
-agents generally prefer to concentrate on their larger accounts
-often reluctant to spend time following up with customers after the sale, putting forth special selling efforts, or providing sellers with market information when such activities reduce the amount of productive selling time
manufacturers’ agent
an independent businessperson who sells complementary products of several producers in assigned territories and is compensated through commissions
disadvantages of industrial distributor
-may be difficult to control because they are independent firms
-often stock competing brands, so a producer cannot depend on them to sell its brand aggressively
-maintain inventories so they incur numerous expenses
-less likely to handle bulky or slow-selling items or items that needs specialized facilities or extraordinary selling efforts
-some lack the technical knowledge necessary to sell and service certain products
dual distribution
the use of two or more marketing channels to distribute the same products to the same target market
ex: kellogg sells to large retail grocer chains and food wholesalers that in turn sell cereals to retailers
-can cause dissatisfaction among wholesalers and smaller retailers when they must compete with large retail grocery chains that make direct purchases from manufactures
dual distribution – horizontal
producer to more than 1 retailer system
dual distribution – vertical
producer sells directly to consumers and through retailers (Adobe software, converse shoes)
ex: vera bradley
producer>consumer – can go to their website
producer>co owned retailer>consumer – can go tho their store in mall (company owned)
producer>retailer>consumer – can go to Maggie Ann’s and buy it (not company owned)
strategic channel alliance
an agreement whereby the products of one organization are distributed through the marketing channels of another
-products of two firms are often similar with respect to target markets or uses, but they aren’t direct competitors
multiple channels
used when the same product is directed to both consumers and business customers
-customer characteristics
-product attributes
-type of organization
-environmental forces
-characteristics of intermediaries
selecting marketing channels
customer characteristics
marketing managers must consider the characteristics of target-market members in channel selection
product attributes
can have a strong influence on the choice of marketing channels
type of organization
will have a great impact on the distribution channels chosen
it is important for a company to keep its costs low so it can offer lower prices than its competitors if necessary
environmental forces
adverse economic conditions might force an organization to use a low-cost channel, even though customer satisfaction is reduced, in contrast a booming economy may allow a company to choose a channel that previously had been too costly to consider
-intensive distribution
-selective distribution
-exclusive distribution
intensity of market coverage
intensive distribution
-using all available outlets to distribute a product;
-appropriate for most convenience products with high replacement rates; routinized response
-provides availability and reduces search time
-availability is more important than outlet type
ex:Gum, Coke, Pringles, and Duracell batteries – available in many retail outlets
selective distribution
-using only some available outlets in an area to distribute a product
-appropriate for shopping products, and durable goods with low replacement rates; limited problem solving
-high qualification requirements for intermediaries to distribute, sell, service, and support products
-desirable when a special effort, such as customer service from a channel member, is important to customers
-used to motivate retailers to provide adequate service
ex:iPods, televisions, DVD players, and shoes – available in some outlets
exclusive distribution
using a single outlet in a fairly large geographic area to distribute a product
-suitable for products purchased infrequently, consumed over a long period of time, or requiring service or information to fit them to buyers’ needs
-expensive, high-quality purchased infrequently; specialty goods; extended problem solving
-exclusive outlets provide an incentive to sellers in limited markets
-dealers carry complete inventory and have trained staff for sales and service
-used as an incentive to sellers when only a limited market is available for products
ex: specialty products, such as haute couture, Mont Blanc pens, BMWs, and Fendi handbags – available in very few outlets
strategic issues in marketing channels
-competitive priorities in marketing channels
-channel leadership, cooperation, and conflict
-channel integration
channel captain
the dominant leader of a marketing channel or a supply channel
-establishes channel policies and coordinates development of the marketing mix
-may be a producer, wholesaler, or retailer
channel leadership
many marketing-channel decisions are determined by give-and-take among channel partners, with the idea that the overall channel ultimately will benefit
channel power
the ability of one channel member to influence another member’s goal achievement
channel captain – producer
most numerous
ex: P&G, Campbell’s, Kraft Foods
channel captain – retailer
large chains
ex: Walmart, Sears, JC Penny
channel captain – wholesalers
must be large scale
ex: IGA (Independent grocer association – buys in large quantities to reduce costs; pass savings on to member retail grocery stores)
-power is shifting to consumers
channel cooperation
vital if each member is to gain something from other members; enables retailers, wholesalers, suppliers, and logistics providers to speed up inventory replenishment, improve customer service, and cut the costs of bringing products to the consumer
channel conflict
although channel members work toward the same goal-distributing products profitably and efficiently-members sometimes may disagree about the best methods for attaining this goal
– intermediaries diversifying into and offering competing products (private label brands)
-producers attempting to circumvent intermediaries and dealing directly with retailers or consumers; dual distribution
channel integration
channel members can either combine and control most activities or pass them on to another channel member; various channel stages may be combined under the management of a channel captain either horizontally or vertically
vertical channel integration
combining two or more stages of the marketing channel under one management
-channel members coordinate their efforts to reach target market
vertical marketing system (VMS)
a marketing channel managed by a single channel member to achieve efficient, low-cost distribution aimed at satisfying target market customers
corporate, administered, or contractual
three forms of vertical marketing systems
corporate VMS
combines all stages of the marketing channel, from producers to consumers, under a single owner
ex:super-market chains that own food-processing plants and large retailers that purchase wholesaling and production facilities
-owns all or part of channel
ex: The Limited, Firestone
administered VMS
channel members are independent, but a high level of inter organizational management is achieved through informal coordination
-one channel member dominates the administered VMS so that distribution decisions take the whole system into account
-less restrictive than franchising
ex: because of size and power, Intel exercises a strong influence over distributors and manufacturers in its marketing channels, as do Kellogg and Magnavox
May tag appliance stores, ACE hardware
contractual VMS
the most popular type of vertical marketing system, channel members are linked by legal agreements spelling out each member’s rights and obligations
-channel members follow strict guidelines
ex: franchise organizations, McDonald’s and KFC; wholesaler-sponsored groups IGA, Re-Max realtors,
-most popular
horizontal channel integration
combining organizations at the same level of operation at the same level of operation under one management
-cooperative arrangement between 2 or more companies at the same level of channel
-2 retailers, 2 producers etc. under same management (Disney merging with Pixar)
usually acquired through acquisition or merger
buying, selling, storing, transportation, provides market information, financing, risk taking
intermediary services
estimate demand for next channel member
closer to end consumer and better knows trends
acts as a sales force calling
takes on the risk and cost of inventory
-cost=inventory (non-earning assets)
-risk=unsold/spoiled goods
ex:produce goes bad, fashion goes out
cost of transporting goods/delivery
provides market information
acts as intermediary between channel partners
grants credit to retailers or customers
risk taking
credit risk, inventory risk, transportation risk (store goes under)
transactions in which products are bought for making other products or for general business operations BUT NO TO THE CONSUMERS
when to use wholesaling
-smaller producers use for cost savings; don’t have economies of scale (how you get product sold worldwide), can’t afford sales force
-producers may want to put resources elsewhere; invest in expansion, etc. not wholesaling functions
-wholesalers are more efficient; skilled specialists with contracts
-retailers may prefer wholesaling; can carry many products from many producers
merchant, agents and brokers
two types of wholesalers
merchant wholesalers
own product, take title, assume risk, and buy and resell products to other wholesaler, to retailers, or to other business customers
cash and carry, truck, drop shippers, mail order
limited service wholesaling
general line, limited line, specialty, rack jobbers
full service wholesaling
general line
(width) wide product mix but limited depth (convenience story)
limited line
(depth) few product lines but many products (groceries – packaged goods)
specialty line
single product line or a few items (groceries – fruit)
non-food products (magazines/books/greeting cards)
cash and carry
customers pay cash and furnish transportation (fishing wharf) get fish and bring back
transports products directly to customers for inspection and selection (snap-on-tools)
drop shippers
takes title to goods and negotiates sales but never actually takes possession of products (coal, lumber)
mail order
uses catalogs instead of a sales fore to sell products to retail and business buyers
ex: small retailers use to acquire industry
agents and brokers
do not take title to producers and are compensated with commissions for negotiating exchanges between sellers and buyers
represent either buyer or seller usually on a permanent basis
bring buyers and sellers together on a temporary basis
-food brokers
-real-estate brokers
-other brokers
manufacturers’ agents, selling agents, commission merchant
3 kinds of agents
manufactures’ agents
independent agent that represents 2+ sellers and usually offers complete product lines in territories
selling agents
market a whole product line or a manufacturers’ entire output worldwide
commission merchant
receives goods on consignment from local sellers and negotiates sales in large, central markets
ex: agricultural things-futures; clothes, grains
Goods that are given to a business to sell but for which title to the goods remains with the vendor
physical distribution – aka logistics
activities used to move products from producers to consumers and other end users
-must meet the needs of both the supply chain and customers
the contracting of physical distribution tasks to third parties with specialized logistics skills who don’t have managerial authority within the marketing channel
ex:E-bay vendors, and use UPS or FedEx; “Fulfilled by Amazon”
1. max. customer service
2. decrease costs
3. decrease cycle time-time to process order
physical distribution objectives
max. customer service
accuracy of orders fulfillment- % orders filled correctly
-availability of order – % orders backorders
decrease costs
reducing total distribution costs
-overall goal is to achieve the lowest total distribution cost compatible with the firm’s customer service objectives
decrease cycle time
reducing cycle (process completion) time
-faster processes for increased customer service
cycle time
the time needed to complete a process
order processing, inventory management, materials handling, warehousing, transportation,
physical distribution in supply-chain management
order processing
the receipt and transmission of sales order information
-entails three main tasks: order entry, order handling, and order delivery
order entry
begins when customers or sales people place purchase orders via telephone, regular mail, e-mail, or website
order handling
once an order is entered, it is transmitted to a warehouse, where product availability is verified, and to the credit department, where prices, terms, and the customer’s credit rating are checked
order delivery
when is has been assembled and packed for shipment, the warehouse schedules delivery with an appropriate carrier
electronic data interchange (EDI)
a computerized means of integrating order processing with production, inventory, accounting, and transportation
inventory management
developing and maintaining adequate assortments of products to meet customers’ needs
-minimize inventory costs yet have sufficient supply of goods to satisfy customers
-reorder point
stockouts (or shortages)
then too few products are carried in inventory this is the result of products that can result in brand switching, lower sales, and loss of customers
reorder point
the inventory level that signals the need to place a new order
=(order lead time x usage rate) + safety stock
order lead time
the average time lapse between placing the order and receiving it
usage rate
the rate at which a product’s inventory is used or sold during a specific time period
safety stock
the amount of extra inventory a firm keep to guard against stockiest resulting from above-average usage rates and/or longer-than-expected lead times
just-in-time (JIT)
an inventory-management approach in which supplies arrive just when needed for production or resale
materials handling
physical handling of tangible goods, supplies, and resources in warehousing operations and transportation from points of production to points of consumption
-unit loading
radio frequency identification (RFID)
radio waves to track materials tagged through every phase of handling; greatly improves the tracking of shipments and reduces cycle times. hundreds can be read at a time
-standard to track
unit loading, containerization
two common methods used in materials handling
unit loading
one or more boxes are placed on a pallet or skid; these units can then be loaded efficiently by mechanical means, such as forklifts, trucks, or conveyer systems
the consolidation of many items into a single, large container that is sealed at its point of origin and opened at its destination; providing increased handling efficiency and security in shipping
the design and operation of facilities for storing and moving goods
– fall into two general categories: private and public
make bulk
bring small lots together to make one larger lot for shipment
break bulk
take large lots and break into smaller lots for shipment
functions of warehousing
receiving, identifying, sorting, dispatching to storage, holding goods, recalling and assembling, and dispatching shipments
private warehouses
company-operated facilities for storing and shipping products
ex: specific requirements, refrigerators
public warehouses
business that lease storage space and related physical distribution facilities to other firms
ex: christmas/seasonal items
field public warehouses
established by public warehouses at the owner’s inventory location
bonded storage
a warehousing arrangement in which imported or taxable products are not released until the products’ owners pay U.S. customs duties, taxes, or other fees
distribution centers
large, centralized warehouses that focus on moving rather than storing goods
the movement of products from where they are made to intermediaries and end users
railroads, trucks, waterways, airways, and pipelines
transportation modes
carry heavy, bulky freight that must be shipped long distances over land
provide the most flexible schedules and routes of all major transportation modes in the US because they can go almost anywhere
-more expensive and vulnerable to weather; size and weight restrictions
are the cheapest method of shipping heavy, low-value, nonperishable goods
air transportation
the fastest but most expensive form of shipping, used most often for perishable goods; for high-value, low-bulk items; and for products that require quick delivery over long distances, such as emergency shipments
the most automated transportation mode, usually belong to the shipper and carry the shipper’s products
intermodal transportation
two or more transportation modes used in combination
shipping that uses both truck trailers and railway flatcars
shipping that uses truck trailers and water carriers
shipping that uses truck trailers and air carriers
freight forwarders
organizations that consolidate shipments form several firms into efficient lot sizes
freight transportation firms that provide several modes of shipment
tying agreement
an agreement in which a supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well
full-line forcing
in which a supplier requires that channel members purchase the supplier’s entire line to obtain any of the supplier’s products
exclusive dealing
a situation in which a manufacturer forbids an intermediary form carrying products of competing manufactures
all transaction in which the buyer intends to consume the product through personal, family, or household use
-the ultimate consumers are the buyers
-over 1 million retailers in the US
-20% of all employees in US work in retail
-majority of personal income is spent in retail establishments
-often takes place in stores or service establishments, but also occurs through direct selling, direct marketing, and vending machines
an organization that purchases product for the purpose of reselling them to ultimate consumers
-retailers are the critical link between producers and ultimate consumers
retailers add value
-create utility for the consumer
-enhance image, offer services, offer assistance
time, place, possession, and form
create utility
catalog, telemarketing, online
retailers are under attack by___,____,___ growing by 25%/yr.
product assortment
width, depth
width (narrow or wide)
types of products
depth (shallow or deep)
choices among products
concession stand
general-merchandise retailers, specialty retailers, non-store retailing, franchising
major types of retail store
general-merchandise retailer
a retail establishment that offers a variety of product lines that are stocked in considerable depth
department store
discount sores
convenience stores
warehouse club
warehouse showroom
types of general-merchandise retailers
department store
large retail organizations characterized by a wide product mix and organized into separate departments to facilitate marketing efforts and internal management
-offers more services
-higher prices
ex:Macy’s, Sears, JCPenny
discount stores
self-service, general-merchandise stores that offer brand-name and private-brand products at low prices
-offer fewer services than department stores
-lower prices but higher volume
ex:Walmart, Target, Kmart
convenience stores
a small self-service store that is open long hours and carries a narrow assortment of products, usually convenience items
-open long hours
ex: 7-eleven, Circle K, Stripes
large, self-service stores that carry a complete line of food products, along with some nonfood products such as cosmetics and nonprescription drugs
-consumers make more than 3/4 of all grocery purchases in supermarkets
-high volume
-became popular in 1930’s
–depression-consumers became price conscious
–automobile-could travel further to save money
–refrigerators-could store food longer
ex: Kroger, Albertson’s, Winn-Dixie
scrambled merchandising
one of the changes stores make to stay competitive; non-food items (8-25% of sales) like health and beauty, pharmacy, magazines, books (high margins)
giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products
(originated in Europe)
-combine features of discount stores and supermarkets
ex:Walmart Supercenters, SuperTarget, Super Kmart centers, some Kroger stores
stores tha combine supermarket and discount store shopping in one location
-larger than superstores
-focus on low prices and vast selections
-successful in Europe and S. America
ex:carrefour (french retailer)
Kmart, Walmart and carrefour have operated hypermarkets in the US, most were unsuccessful and and closed
warehouse clubs
large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing
-offer same types of products as discount stores but in a limited range of sizes and styles
-often located in industrial areas
-merchandise is stacked on pallets or displayed on pipe racks
-average shopper has more education, higher income, and larger household than average supermarket shopper
ex:Sam’s Club, Costco
warehouse showrooms
retail facilities in large, low-cost buildings with large on-premises inventories and minimal services
-warehouse materials-handling technology
-vertical merchandise displays
-high volume, low overhead operations stress fewer personnel services
ex: IKEA
the 4th wall
what walk-mart calls the wall in from of register; has vision center, Subway, McDonalds
-last opportunity to get more money from you
traditional specialty retailers
category killers
off-price retailers
3 types of specialty retailers
specialty retailers
emphasize narrow and deep assortments
-do not sell specialty items
-offer substantial assortments in a few product lines
traditional specialty retailers
stores that carry a narrow product mix with deep product lines
-aka limited-line retailers, or single-line retailers
-commonly sell shopping products
-have high costs, which margins, which levels of service, high prices
ex: The limited, radio shack, hickory farms, gap, and foot locker
-usually small specialty stores
-department stores=main competitors
category killers (box store)
concentrate on 1 major product category
-compete on the basis of low prices and product availability
ex:home depot, petsmart, best buy, Toys R Us
single line, limited line, super specialty line
types of traditional specialty retailers
single line
clothing- men, women, kids – Gap
limited line
women’s clothing – Ann Taylor
super specialty line
women’s lingerie – Victoria’s Secret
off price retailers
buy manufacturers’ seconds, overruns, returns and off season merchandise for resale to consumers at deep discounts
-ex: TJ Maxx
category killer
a very large specialty store that concentrates on a major product category and competes on the basis of low prices and product availability
-expand rapidly and gain sizable market shares
ex:Home Depot and Lowe’s, Staples, Office Depot, and OfficeMax, Barnes and Noble, Petco and PetSmart, and BestBuy
off-price retailers
stores that buy manufacturers’ seconds, overruns, returns, and offseason merchandise for resale to consumer at deep discounts
ex:T.J.Maxx, Marshalls, Stein Mart, and Burlington Coat Factory
-location of retail stores
-retail positioning
-store image
-category management
strategic issues in retailing
location of retail stores
least flexible of the strategic retailing issues but is one of the most important because location dictates the limited geographic trading area from which a store draws its customers
one of the most important decision for a retail store
factors affecting location
-intended target market
-kinds of products
-suitability site for customer access
-competitor location
-entry and exit, critical mass
-“Anchor”-malls have anchor’s like Sears or Macy’s or JC Penny
free standing structures, traditional business districts, traditional shopping centers
types of locations
free standing structures
ex: Jiffy lube
traditional business districts
ex: Michigan Avenue
types of traditional shopping centers
neighborhood shopping center
a type of shopping center usually consisting of several small convenience and specialty stores, such as small grocery stores, gas stations, and fast-food restaurants
-generally product mixes consist of essential products, and depth of the product lines is limited
community shopping center
a type of shopping center with one or two department stores, some specialty stores, and convenience stores
-wide product mixes and deep product lines
regional shopping center
a type of shopping center with the largest department stores, widest product mixes, and deepest product lines of all shopping centers
ex: many shopping malls, although some are community
supperregional shopping center
a type of shopping center with the widest and deepest product mixes that attract customers from many miles away
-often have special attractions beyond stores, such as skating rinks, amusement centers, or upscale restaurants
ex: Mall of America
lifestyle shopping center
a type of shopping center that is typically open air and features upscale specialty, dining, and entertainment stores, usually owned by national chains
ex: designed to resemble traditional “Main Street” shopping centers
power shopping center
a type of shopping center that combines off-price stores with category killers
ex: anchored by stores such as Gap, Toys “R” Us, PetSmart, and Home Depot
(all box stores together)
Retail positioning
Identifying an unserved or undeserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment
Atmospherics (store image)
The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying
Exterior atmospherics
Include storefront, display windows, store entrances, and degree of traffic congestion
-especially important to new customers
Interior atmospherics
Include aesthetic considerations, such as lighting, wall and floor coverings, dressing facilities, and store fixtures
Category management
A retail strategy of managing groups of similar, often substitutability products produced by different manufacturers
-a move toward a collaborative supply chain initiative to enhance customer value
-requires the acquisition, analysis, and sharing of sales and consumer information between the retailer and manufacturer
Direct marketing
The use of the telephone, Internet, and no personal media to introduce products to customers, who can then purchase them via mail. Telephone, or the Internet
-one type of non-store
Nonstore retailing
The selling of products outside the confines of a retail facility
-growing rapidly-direct selling-direct marketing
Catalog marketing, direct response marketing, telemarketing, television home shopping, and online retailing
Direct marketing can occur through:
Catalog marketing
A type of marketing in which an organization provides a catalog from which customers make selections and place orders by mail, telephone, or the Internet
-these retailers generally offer considerable,e product depth for just a few lines of products
-advantages : efficiency and convenience for customers, retailer benefits by being able to locate in remote, low-cost areas;save on expensive store fixtures; and reduce both personal selling and store operating expenses
-disadvantages : inflexible, provides limited service, most effective for a selected set of products
Direct response marketing
A type of marketing in which a retailer advertises product and makes it available through mail or telephone orders
Ex: television commercial offering exercise machines, cosmetics or household cleaning products available through a toll-free number, and a newspaper or magazine advertisement for a series of children’s books available by filling out the form in the ad or calling a number
The performance of marketing related activities by telephone
-a number of organizations use this to strengthen the effectiveness of traditional marketing methods
-can help generate sales leads, improve customer service, speed up payments on past due accounts, raise funds for nonprofit organizations, and gather marketing data
Television home shopping
A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card
-most popular products are jewelry, clothing, housewares, and electronics
Online retailing
Retailing that makes products available to buyers through computer connections
Ex: zappos, eBay
Direct selling
Marketing products to ultimate consumers through face to face sales presentations at home or in the workplace
-most takes place on individual basis, but some use the “party” approach (Tupperware and Mary Kay)
-benefits: gives marketer an opportunity to demonstrate the product in an environment-usually the customers home; door-to-door can give the customer personal attention and the product can be presented to the customer at a convenient time and location
-expensive high priced goods
Automatic vending
The use of machines to dispense products ( less than 2% of all retail sales), one of most impersonal forms of retailing
Ex: redbox, atm
An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration
Supplier, may receive some percentage of total sales in exchange for furnishing equipment, buildings, management know-how, and marketing assistance to the franchisee
Dealer, supplies labor and capital, operated the franchised business, and agrees to abide by the provisions of the franchise agreement
Franchising advantages – franchisee
-enables a franchisee to start a business with limited capital and benefit from the business experience of others
-some are often assured customers as soon as the open
-if business problems arise, the franchisee can obtain guidance and advice from the franchiser at little or no cost
-generally more successful than independently owned businesses
-franchisee receives materials to use in local advertising and cam benefit from national promotional campaigns sponsored by the franchiser
Franchising advantages – franchiser
-the franchiser gains fast and selective product distribution without incurring the high cost of constructing and operating its own outlets
-franchiser has more capital for expanding production and advertising
-can ensure that outlets are maintained and operated according to its own standards
-benefits from fact that the franchisee, being sole proprietor in most cases, is likely to be highly motivated to succeed
Franchising disadvantages
-franchiser can dictate many aspects of the business
-franchisees must pay to use franchiser’s name, products, and assistance
-franchisees must often work very hard
– some agreements are not uniform
-franchiser gives up a certain amount of control when entering into a franchise agreement; consequently individual establishments may not be operated exactly according to the franchiser’s standards
Transactions in which products are bought for resale, for making other products, or for general business operations
An individual or organization that sells products that are bought for resale, for making other products, or for general business operations
-buy products and resell them to reseller, government, and institutional users
Services provided by wholesalers
Extension of the producer’s sales force; provide financial assistance ( often pay for transporting goods); reduces a producer’s warehousing expenses and inventory investment by holding goods in inventory; extend credit and assume losses from buyers who turn out to be poor credit risks, and when they buy a producer’s entire output and pay promptly or in cash, are a source of working capital
-serve as conduits for information within the marketing channel
-support retailers by assisting with a R,sting strategy, especially the distribution component
-can forge successful relationships with retailers for the benefit of customers
Merchant wholesalers, agents and brokers, manufacturers’ sales branches and offices
Types of wholesalers
Merchant wholesalers
Independently owned businesses that take title to goods, assume ownership risks, and buy and resell products to other wholesalers, business customers, or retailers
-useful for providing market coverage, making sales contracts, storing inventory, handling orders, collecting market information, and furnishing customer support
Full service wholesalers, limited service wholesalers
Types of merchant wholesalers
Full service wholesalers
Merchant wholesalers that perform the widest range of wholesaling functions
-relied on for product availability, suitable assortment, breaking large quantities into smaller ones, financial assistance, and technical advise and service
-earn higher gross margins than other wholesalers, but operating expenses are higher because they perform a wider range of functions
General merchandise, limited line, specialty line
Full service wholesalers types
General merchandise wholesalers
Full service wholesalers with a wide product mix but limited depth within product lines
Ex: drugs, no perishable foods, cosmetics, detergents, and tobacco
Limited line wholesalers
Full service wholesalers that carry only a few product lines such as groceries, lighting fixtures etc. but many product mixes
Ex:Bergen brunswig corp. pharmaceuticals and health and beauty aids
Specialty line wholesalers
Full service wholesalers that carry only a single product line or a few items within a product line
Ex: chia seeds direct
Rack jobbers
Full service, specialty line wholesalers that own and maintain display racks in stores
-specialize in no food items with huh profit margins, such as health and beauty aids, books, magazines, hosiery, and greeting cards
Limited service wholesalers
Merchant wholesalers that provide some services and specialize in a few functions
-take title to merchandise but often do not deliver merchandise, grant credit, provide marketing info, store inventory, or plan ahead for customers’ future needs
-important to the distribution of products like specialty foods, perishable items, construction materials, and coal
Cash and carry, truck, drop shippers, and mail order
Types of limited service wholesalers
Cash and carry wholesalers
Limited service wholesalers that transport products directly to customers for inspection and selection
-usually bane a limited line of products with a high turnover rate, such as groceries, building materials, and electrical or office supplies
Truck wholesalers
Limited service wholesalers that transport a limited line of products directly to customers for on the spot inspection and selection
-often small operators who own and drive their own
Drop shippers
Limited service wholesalers that take title to goods and negotiate sales but never actually take possession of products
-assume responsibility for products during the entire transaction, including the costs of any unsold goods
Mail order wholesalers
Limited service wholesalers that sell products through catalogs
-wholesale mail order houses generally feature cosmetics, specialty foods, sporting goods, office supplies, and automotive parts
Agents and brokers
Negotiate purchases and expedite sales but do not take title to products, aka functional middlemen, perform a limited number of services in exchange for a commission, which generally is based on the product’s selling price
-know their markets well and often form long lasting associations with customers
-enable manufacturers to expand sales when resources are limited
Intermediaries that represent either buyers or sellers on a permanent basis
Intermediaries that bring buyers and sellers together temporarily
-not involved in financing or physical possession, have no authority to set prices, and assume almost no risks
Manufacturers’ agents, selling agents, commission merchants
Types of agents
Manufactures’ agents
Independent intermediaries that represent two or more sellers and usually offer customers complete product lines
-sell and take orders year round
-restricted to a particular territory
-have little or not control over producers pricing and marketing policies
-commonly used in sales of apparel, machinery and equipment, steel, furniture, automotive products, electrical goods, and certain food items
Selling agents
Intermediaries that market a whole product line or a manufacturer’s entire output
-perform every wholesaling activity except taking title to products
-usually assume sales function for several producers simultaneously and are used often in place of marketing departments
-used most often by small producers or by manufacturers that have difficulty maintaining a marketing department because of seasonal production or other factors
-generally no territorial limits and compete authority over prices, promotion, and distribution
-represent no competing product lines
Commission merchants
Agents that receive goods on consignment from local sellers and negotiate sales in large, central markets
-broad powers regarding prices and terms of sale
-specialize in obtaining the best price possible
Sales branches
Manufacturer owned intermediaries that sell products and provide support services to the manufacturer’s sales force
-situated away from manufacturing plant; located where large customer are concentrated and demand is high
-offer credit, deliver goods, give promotional assistance, and furnish other services
-customers : retailers, business buyers, other wholesalers
– common in lumber and automatics parts industries
Sales offices
Manufacturer owned operations that provide services normally associated with agents
-located away from manufacturing plants, but carry no inventory
-may sell products that enhance the manufacturers own product line
wheel of retailing
hypothesis holding that new retailers usually enter market as low status, low margin, low price operators but eventually evolve into high-cost, high price merchants
ex:fruit stand to a grocery store

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