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84 Cards in this Set
- Front
- Back
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Distribution
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Movement of goods and services from producers to customers
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Marketing (distribution) channel
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The system of marketing institutions that enhances the:
Physical flow of goods and services Ownership title, from producer to consumer or business user |
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Logistics
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Coordinating the flow of information, goods, and services among members of the distribution channel
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Supply-chain management
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Control of the activities of purchasing, processing, and delivery through which:
Raw materials are transformed into products and made available to final consumers |
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Physical distribution
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Broad range of activities aimed at:
Efficient movement of finished goods from the end of the production line to the consumer |
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Four functions of marketing channels:
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•Facilitatingthe exchange process by reducing the number of marketplace contacts necessaryto make a sale
•Adjustingfor discrepancies in the market’s assortment of goods and services via sorting•Standardizingexchange transactions by setting expectations for products •Facilitatingsearches by both buyers and sellers |
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Marketing intermediary
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Organization that operates between producers and consumers or business users
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Wholesaler
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Takes title to the goods it handles and then distributes these goods to:
Retailers Other distributors End consumers |
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Why do service firms market through short channels?
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because they sell intangible products and need to maintain personal relationships within their channels
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AlternativeMarketing Channels
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Direct channel
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Moves goods directly from a producer to the business purchaser or ultimate user
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Direct selling
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Strategy designed to establish direct sales contact between producer and final user
Important option for goods that require extensive demonstrations in persuading customers to buy Plays an important role in both B2B and B2C markets The Internet and direct mail are important tools for direct selling |
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Channels Using Marketing Intermediaries: Producer to wholesaler to retailer to consumer
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The traditional channel for consumer goods
Gives small producers access to hundreds of retailers Gives small retailers access to wholesaler’s specialized distribution skills |
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Channels Using Marketing Intermediaries: Producer to wholesaler to business user
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Industrial distributor - Intermediaries in the business market that take title to goods
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Channels Using Marketing Intermediaries: Producer to agent to wholesaler to retailer to consumer
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Common in markets served by small companies
Agent performs the basic function of bringing buyer and seller together
Agent may or may not take possession of goods but does not take title |
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Channels Using Marketing Intermediaries: Producer to agent to wholesaler to business user
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Manufacturers’ representative - Intermediary who represents manufacturers of related but noncompeting products and receives a commission on each sale
Agent wholesaling intermediary that represents manufacturers of related but noncompeting products and receives a commission on each sale Provides an independent sales force to contact wholesale buyers |
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Manufacturers’ representative
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Intermediary who represents manufacturers of related but noncompeting products and receives a commission on each sale
Agent wholesaling intermediary that represents manufacturers of related but noncompeting products and receives a commission on each sale |
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Channels Using Marketing Intermediaries: Producer to agent to business user
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Independently owned wholesaler takes title to the goods
Common in transactions with large unit sales in which transportation is a small percentage of the total cost |
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Dual Distribution
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Movement of products through more than one channel to reach the firm’s target market
Used to maximize the firm’s coverage in the marketplace To increase the cost-effectiveness of the firm’s marketing effort |
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Reverse Channels
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Channels designed to return goods to their producers
Gained increased importance with: Rising prices for raw materials Increasing availability of recycling facilities The passage of additional antipollution conservation laws Used for recalls and repairs |
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FactorsInfluencing Marketing Channel Strategies
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Intensive distribution
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Distribution of a product through all available channels
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Selective distribution
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Distribution of a product through a limited number of channels
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Exclusive Distribution
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Distribution of a product through a single wholesaler or retailer in a specific geographic region
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Legal Problems of Exclusive Distribution
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Exclusive dealing agreement prohibits a marketing intermediary from handling competing products
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Closed sales territories
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Restrict their distributors to certain geographic regions
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Tying agreements
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Arrangement that requires a marketing intermediary to carry items other than those they want to sell
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Who Should Perform Channel Functions?
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A member of the channel must perform certain central marketing functions
Responsibilities of the different members may vary An independent intermediary earns a profit in exchange for providing services to manufacturers and retailers An intermediary must provide betterservice at lower costs than manufacturers or retailers can provide forthemselves |
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Keys to successful management of channel relationships include the development of high levels of:
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Coordination
Commitment Trust between channel members |
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Channel captain
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Dominant and controlling member of a marketing channel
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Horizontal conflict
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Disagreements among channel members at the same level
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Vertical conflict
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Occurs among members at different levels of the channel
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The gray market: Gray goods
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Products manufactured abroad under license from a U.S. firm and then sold in:
The U.S. market in competition with that firm’s own domestic output |
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Achieving Channel Cooperation
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Best achieved when all members of channel see themselves as equal components of the same organization
Channel captain should provide this leadership |
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Vertical Marketing Systems
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Designed to improve distribution efficiency and cost-effectiveness by:
Integrating various functions throughout the distribution chain |
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Forward integration
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Firm attempts to control downstream distribution
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Backward integration
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Manufacturer attempts to gain greater control over inputs to production process
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Vertical Marketing Systems: Benefits
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Improves chances for controlling and coordinating the steps in the distribution or production process
May lead to the development of economies of scale that ultimately saves money May let a manufacturer expand into profitable new businesses |
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Vertical Marketing Systems: Disadvantages
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Involves some costs
Marketers lose some flexibility |
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Marketers have developed three categories of VMSs
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Corporate systems
Administered systems Contractual systems |
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Corporate marketing system
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A single owner operates the entire marketing channel
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Administered marketing system
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Achieves channel coordination when a dominant channel member exercises its power
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Contractual Marketing Systems
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Coordinates channel activities through formal agreements among participants
Wholesaler-sponsored voluntary chain A wholesaler has formal agreement with retailers to use a common name and to purchase the wholesaler’s goods |
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Retail cooperative
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Retailers establish a shared wholesaling operation to help them compete with chains
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Franchise
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A wholesaler or retailer agrees to meet the operating requirements of a manufacturer or other franchiser
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Logistics and Supply Chain Management
Effective logistics requires: |
Proper supply chain management
Control of the activities of purchasing, processing, and delivery Delivery through which raw materials are transformed into products and made available to final consumers |
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Supply chain
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Complete sequence of suppliers and activities that contribute to the creation and delivery of merchandise
Begins with raw-material inputs for production Ends with the movement of final product to customers Takes place in two directions: upstream and downstream |
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The Supply Chain of a Manufacturing Company
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Radio Frequency Identification (RFID)
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Technology that uses a tiny chip with identification information that can be read by a scanner using radio waves from a distance
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Enterprise Resource Planning
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Software system that consolidates data from among a firm’s various business units
ERP and its related software aren’t always perfect |
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Logistical Cost Control
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The distribution function accounts for half of a firm’s total marketing costs
Businesses are reexamining each link of their supply chains to identify activities that do not add value for customers Third-party logistics firms - Specialize in handling logistical activity |
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Third-party logistics firms
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Specialize in handling logistical activity
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A physical distribution system contains these elements:
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Customer service
Transportation Inventory control Protective packaging and materials handlingOrder processing Warehousing |
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The Problem of Suboptimization
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Results when the managers of individual physical distribution functions attempt to:
Minimize costs, but the impact of one task on the others leads to less than optimal results Occurs when a firm introduces a new product that:May not fit easily into its current physical distribution system Effective management of physical distribution requires cost trade-offs |
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Customer-Service Standards
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State the goals and define acceptable performance for the quality of service a firm expects to deliver to its customers
After these standards are defined:Designers assemble other physical distribution components to meet these standards at the lowest possible total cost |
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Customer-Service Standards
Components of overall cost: |
Transportation
Warehousing Inventory control Customer service/order processingAdministrative costs |
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approximately 10 percent to product costs
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Transportation and delivery expenses
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Freight carriers use two basic rates:
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Class rate
Commodity rate or special rate |
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Common carriers
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Provide transportation services as for-hire carriers to the general public
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Contract carriers
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For-hire transporters that do not offer their services to the general public
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Private carriers
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Transporters that provide service solely for internally generated freight
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Railroads
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Most efficient way for moving bulky commodities over long distances; enjoying a resurgence
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Intermodal operations
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Combination of transport modes, to improve customer service and achieve cost advantages
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Motor carriers
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Relatively fast and consistent service
Receives greater revenue per ton shipped Technology (satellite communication system) has improved the efficiency of trucking |
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Water carriers
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Inland or barge lines and ocean-going, deepwater ships
Barge lines carry bulky, low-unit-value commodities such as grain, lumber, and steel |
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Freight rates are based on the:
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Size of the vessel
Cost of fuel Security requirements |
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Pipelines: Advantages&Disadvantages
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Efficiently transports natural gas and oil
Advantages: Low maintenance&Dependable Disadvantages: Few locations, Accommodate only a small number of products, & Relatively slow |
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Air freight
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Declining in certain market sectors
Firms are adapting UPS is offering two less-expensive, nonguaranteed services: UPS Air Freight Direct UPS Air Freight Consolidated |
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Comparison of Transport Modes
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Freight Forwarders and Supplemental Carriers
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Act as transportation intermediaries that consolidate shipments to gain lower rates for their customers
The customers gain advantages from the services Lower costs on small shipments Faster delivery service than they could achieve with their own LTL and LCL shipments |
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Piggyback
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Most widely used form of intermodal coordination
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Birdyback service
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Sends motor carriers to pick up a shipment locally and deliver that shipment to local destinations
An air carrier takes it between airports near those locations |
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Fishyback service
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Intermodal coordination system between motor carriers and water carriers
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Storage warehouse
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Holds goods for moderate to long periods in an attempt to balance supply and demand for producers and purchasers
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Distribution warehouse
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Assembles and redistributes goods, keeping them moving as much as possible
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Automated warehouse technology
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Can cut distribution costs and improve customer service
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Warehouse locations
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Main influences on choice
Warehousing and materials handling costsDelivery costs from warehouses to customersWarehouse location affects customer service |
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Companies must balance maintaining enough inventory to meet customer demand with:
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Incurring unneeded costs for carrying excess inventory
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To manage cost, firms use:
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Just-in-time (JIT)
RFID technology Vendor-managed inventory (VMI) |
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Order Processing
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Directly affects firm’s ability to meet customer service standards
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Order Processing Includes four major activities:
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Conducting a credit check
Keeping a record of the sale Making appropriate accounting entriesLocating orders, shipping them, and adjusting inventory records |
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Materials handling system
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Activities for moving products within plants, warehouses, and transportation terminals
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Unitizing
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Combining as many packages as possible into each load that moves within or outside a facility
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Containerization
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Combining several unitized loads into a single, well protected load for shipment
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