Understanding Marketing and the Marketing Process

Chapter 12 – Distribution Channels and Logistics Management Issues Concerning Distribution Channels What is the Nature Of Distribution Channels? How do Channel Firms Interact and Organize to do the Work of the Channel? What Problems do Companies Face in Designing and Managing Their Channels? What Role Does Physical Distribution Play in Attracting and Satisfying Customers?

What is a Distribution Channel?  A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.  Marketing Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.

Why are Marketing Intermediaries Used? • The use of intermediaries results from their greater efficiency in making goods available to target markets. • Offer the firm more than it can achieve on it’s own through the intermediaries:

• Purpose:

CD example

How a Marketing Intermediary Reduces the Number of Channel Transactions

Distribution Channel Functions These Functions Should be Assigned to the Channel Member Who Can Perform Them Most Efficiently and Effectively to Provide Satisfactory Assortments of Goods and Services to Target Customers. Number of Channel Levels (Fig. 12.2) Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer.

Dual Distribution

Channel Behavior & Conflict • The channel will be most effective when: 

 all members cooperate to attain overall channel goals and satisfy the target market.

• When this doesn’t happen, conflict occurs:  ______occurs among firms at the same level of the channel, i.e retailer to retailer.

 ______occurs between different levels of the same channel, i.e. wholesaler to retailer.

Conventional Marketing Channel Vs. a Vertical Marketing System (Fig. 12.3)

Types of Vertical Marketing Systems Corporate Systems  Involves single ownership of two or more levels of a channel  Vertical integration - one channel member acquires control of one or more other members, usually by purchasing them.

 Total vertical integration - one organization controls all marketing channel functions.  - Manufacturer purchases distributor or retailer  - Wholesaler or retailer purchases channel members above them.

Contractual Systems  Involve independent production and distribution companies entering into formal contracts to perform designated marketing functions.

Administered Systems  Characterized by a higher degree of interorganizational planning and management usually resulting from the existence of a strong channel leader. Innovations in Marketing Systems Horizontal Marketing System Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity.

Hybrid Marketing System A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments.

Changing Channel Organization A Major Trend is Toward Disintermediation Which Means that Product and Service Producers are Bypassing Intermediaries and Going Directly to Final Buyers or That New Types of Channel Intermediaries are Emerging to Displace Traditional Ones.

Impact of the Internet

Channel Design Decisions Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

Identifying Major Alternatives

Evaluating the Major Alternatives

Designing International Distribution Channels

Channel Management Decisions Selecting Channel Members Motivating Channel Members

Evaluating Channel Members Chapter 13 – Retailing and Wholesaling Top Retailers 1. 6. 2. 7. 3. 8. 4. 9. 5. 10. What is Retailing? Retailing - Includes all the activities Involved in Selling Goods or Services Directly to Final Consumers for Their Personal, Non-business Use.

Retailing can be done in stores (______) or out of a store (______) such as: . . . . . Classification of Retailing - Self-Service, Limited-Service and Full-Service Retailer - Length and Breadth of the Product Assortment - Pricing Structure that is used by the Retailer - Independent, Corporate, or Contractual Ownership Organization Classification of Retailing: Amount of Service Self-Service Retailer -

Limited-Service Retailers -

Full-Service Retailers -

Classification of Retailing: Product Line (Tab. 13.1) Specialty Stores -

Department Stores -

Supermarkets -

Convenience Stores -

Classification of Retailing: Product Line (Tab. 13.1) Superstores - Discount Stores -

Off-Price Retailers -

Warehouse Clubs -

Classification of Retailing: Relative Prices Higher Prices and Offer Higher-Quality Goods and Superior Customer Service

Regular Prices and Offer Normal-Quality Goods and Average Customer Service

Low Prices and Offer Lower-Quality Goods and Little Customer Service

Classification of Retailing: Retail Organization Merchandising Conglomerates -

Corporate Chain -

Voluntary Chain -

Retailer Cooperatives -

Franchise Organizations -

Retailer Marketing Decisions (Fig. 13.1) Retailer Strategy Retailer Marketing Mix • Target Market • Product and service assortment • Retail Store Positioning • Prices • Promotion • Place (location)

Product Assortment and Services Decisions Product Assortment --

Services Mix – Key tool of non-price competition for setting one store apart from another

Store’s Atmosphere --

Retailer’s Price, Promotion, & Place Decisions Prices Decisions Promotion Decisions Place Decisions

The Future of Retailing New Retail Forms and Shortening Retail Lifecycle

Growth of Non-store Retailing

Increasing Intertype Competition

Rise of the Megaretailer

Growing Importance of Retail Technology

Global Expansion of Major Retailers

Retail Stores as “communities” or “hangouts” ELECTRONIC COMMERCE DEFINITION - Exchange of information, goods, service, and payments by electronic means.

History of E-Commerce  E-commerce actually began in the 1970s when larger corporations started creating private networks to share information with business partners and suppliers. This process is called Electronic Data Interchange (EDI).  Prodigy was running text ads and selling flowers in the early '80s. The first documented Online sale in 1994 was what?

E-Commerce Today Some major product categories have paved the way:  travel services ($5.95 B in 1999 sales),  gifts and flowers ($730 M),  computer hardware and software ($5.8 B),  music ($540 M), and  books ($1.7 B),  apparel and footwear ($460 M),

E-Commerce Services Today  In 1999, the online market size for business services was estimated at $22 billion.  Primary service categories include o financial ($7.3 billion, 1999), o corporate travel ($5 billion), and o professional ($4.4 billion), o telecommunications ($1.5 o administrative support ($3.9 billion). billion),  By 2003, Forrester Research predicts that online services will represent nearly 8 percent of the overall sector hardly a drop in the bucket.

Future of E-Commerce  eMarketer, an Internet technology (IT) research and reporting firm, estimates that the dollar figure for e- commerce will rise from approximately

 In Europe, consumers' internet purchases will jump from:

 Online business-to-business e-commerce is projected to speed past $1 trillion in annual revenue by 2003

Future Trends to Watch in E-Commerce . Women take control. Women make or influence 80 percent of household sales in the United States, according to WomanTrend, despite the fact that they make up 51 percent of the population.

. The untapped get tapped. Two highly touted markets $509 million health and beauty, and $513 million grocery still lag behind expectations.

. More "click and mortar." Traditional retailers Circuit City, Crate and Barrel, Sears, Toys R Us, Wal-Mart, and Federated Department Stores missed the boat in 1995 and 1996, but rest assured they "get it" now, and are attempting re-entry, this time around with more money and smarts. Watch out.

Still a Long Way To Go . Andersen Consulting and Forrester Research both show shopping cart abandonment rates of 25%. . E-commerce still accounts for less than 1% of total retail sales . Pure plays are struggling to maintain cash flow and are either:

Security Issues are Important What is Wholesaling? . All the activities involved in selling goods and services to those buying for resale or business use. . Wholesaler - those firms engaged primarily in wholesaling activity. . Wholesalers buy mostly from producers and sell mostly to: ------

Why are Wholesalers Used? Wholesalers are Often Better at Performing One or More of the Following Channel Functions:

Types of Wholesalers

- independently owned business that takes title to the merchandise it handles.

- they don’t take title to the goods, and they perform only a few functions.

- wholesaling by sellers or buyers themselves rather than through independent wholesalers.

Retailer Marketing Decisions (Fig. 13.1) Wholesaler Strategy Wholesaler Marketing Mix • Target Market • Product and service assortment • Service Positioning • Prices • Promotion • Place (location)

Trends in Wholesaling Consolidation within the industry is reducing # of wholesalers

Distinction between large retailers and wholesalers blurs

Wholesalers will continue to increase the services provided

Wholesalers are beginning to go global Chapter 14 – Integrated Marketing Communications Strategy Marketing Communication Mix or Promotion Mix Advertising

Personal Selling

Sales Promotion

Public Relations

Direct Marketing

The Changing Communications Environment Two Factors are Changing the Face of Today’s Marketing Communications:

The Need for Integrated Marketing Communications • With Integrated Marketing Communications (IMC), the Company Carefully Integrates and Coordinates Its Many Communications Channels to Deliver a Clear, Consistent, and Compelling Message About the Organization and Its Product or Service.

Elements in the Communication Process (Fig. 14.2)

Key Factors in Good Communication Sellers need to know what audiences they wish to reach and response desired. Sellers must be good at encoding messages that target audience can decode. Sellers must send messages through media that reach target audiences Sellers must develop feedback channels to assess audience’s response to messages.

Steps in Developing Effective Communication Step 1. Identifying the Target Audience

Step 2. Determining the Communication Objectives Buyer Readiness Stages

Step 3. Designing a Message A

Message Content - . . .

Message Structure - . . .

Message Format - . . .

Step 4. Choosing Media Personal Communication Channels Non-personal Communication Channels

Step 5. Selecting the Message Source

Step 6. Collecting Feedback

Setting the Total Promotion Budget One of the Hardest Marketing Decisions Facing a Company is How Much to Spend on Promotion.

- Based on What the Company Can Afford

- Based on a Certain Percentage of Current or Forecasted Sales

- Based on Determining Objectives & Tasks, Then Estimating Costs

- Based on the Competitor’s Promotion Budget

Setting the Promotion Mix Advertising

Personal Selling

Sales Promotion

Public Relations

Direct Marketing

Product Placement • Product Placement is the use or display of a product or service in an entertainment program. • The placement involves a payment to the entertainment vehicle, but does not involve payment for “airtime” • Famous examples include:   

Promotion Mix Strategies

- Strategy that Calls for Spending A Lot on Advertising and Consumer Promotion to Build Up (Pull) Consumer Demand.

- Strategy that Calls for Using the Salesforce and Trade Promotion to Push the Product Through the Channels.

Strategy Selected Depends on: --

examples:

Socially Responsible Marketing Communication  Advertising and Sales Promotion

 Personal Selling Chapter 15 – Advertising, Promotions, and Publicity Advertising History

U.S. advertisers spend in excess of $212 billion each year; Worldwide spending exceeds $414 billion. Advertising is used by: . . . . What is Advertising? Advertising is Any Paid Form of Non-personal Presentation and Promotion of Ideas, Goods, or Services by an Identified Sponsor.

Setting Advertising Objectives Advertising Objective - specific communication task accomplished with a specific target audience during a specific period of time

______- inform consumers or build primary demand

______- build selective demand

______- compares one brand to another

______- keeps consumers thinking about a product Setting the Promotion Budget After determining its advertising objectives, the marketer must set the advertising budget for each product and market. (From Chapter 14) ______- based on what the company can afford ______- based on a certain percentage of current or forecasted sales ______- based on determining objectives & tasks, then estimating costs ______- based on the competitor’s promotion budget Setting the Advertising Budget Factors to be considered when setting the advertising budget: . . . . Developing Advertising Strategy Advertising Strategy Consists of Two Major Elements and Companies are realizing the Benefits of Planning These Two Elements Jointly. .

Developing Advertising Strategy: Creating Ad Messages Plan a Message Strategy

Develop a Message

Creative Concept “Big Idea”

Advertising Appeals ------Developing Advertising Strategy: Message Execution Turning the “Big Idea” Into an Actual Ad to Capture the Target Market’s Attention and Interest. Typical message execution styles: Testimonial Evidence Slice of Life

Scientific Evidence Lifestyle

Technical Expertise Fantasy

Personality Symbol Mood or Image

Musical Advertising Strategy: Selecting Advertising Media Step 1. Decide on Reach, Frequency, and Impact

Step 2. Choosing Among Major Media Types

Step 3. Selecting Specific Media Vehicles

Step 4. Deciding on Media Timing

Major Media Types Newspapers

Television

Direct mail

Magazines

Outdoor

Internet

Evaluating Advertising Communication Effects -

Sales Effects - International Advertising Decisions Adaptation of global advertising

Advertising media differ considerably in availability & cost

Regulation in advertising practices

Comparison ads not acceptable in all countries

Programs must be matched to local cultures and customs

What is Sales Promotion ? Sales promotion is a mass communication technique that offers short-term incentives to encourage purchase or sales of a product or service.

Rapid Growth of Sales Promotion Sales promotion can take the form of . . . ------Rapid growth in the industry has been achieved because: . Product managers are facing more pressure to increase their current sales, . Companies face more competition, . Advertising efficiency has declined, . Consumers have become more deal oriented.

Sales Promotion Objectives Increase short-term sales or help build long-term market share. Get retailers to:

Major Consumer Sales Promotion Tools Samples

Coupons

Cash Refunds

Price Packs Major Consumer Sales Promotion Tools – (con’t) Premium

Advertising Specialties

Patronage Rewards

Point-of-Purchase

Contests

Sweepstakes

Major Trade Sales Promotion Tools Trade Promotion Objectives Trade-Promotion Tools . Persuade Retailers or Wholesalers to Carry a Brand . Discounts

. Give a Brand Shelf Space

. Promote a Brand in Advertising . Allowances

. Push a Brand to Consumers

Major Business Sales Promotion Tools Business-Promotion Tools Business-Promotion Objectives . Conventions . Generate Business Leads

. Trade Shows . Stimulate Purchases

. Sales Contests . Reward Customers

. Motivate Salespeople

Developing the Sales Promotion Program . Decide on the Size of the Incentive . Set Conditions for Participation . Determine How to Promote and Distribute the Promotion Program . Determine the Length of the Program . Evaluate the Program What is Public Relations? Public relations involves building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories, and events.

Major Public Relations Functions Public Relations Departments May Perform Any of All of the Following Functions: Press Relations or Agentry -

Product Publicity -

Public Affairs-

Lobbying -

Investor Relations -

Development -

Major Public Relations Tools News

Speeches

Special Events

Written Materials

Audio/Visual Materials

Corporate Identity Materials

Public Service Activities

Web Site

Major Public Relations Decisions . Setting Public Relations Objectives

. Choosing the Public Relations Messages and Vehicles

. Implementing the Public Relations Plan . Evaluating Public Relations Results Chapter 16 – Personal Selling and Sales Management Nature of Personal Selling  Most salespeople are well-educated, well-trained professionals who work to build and maintain long-term relationships with customers.  The term salesperson covers a wide spectrum of positions from: 

What is Personal Selling? Involves two-way, personal communication between salespeople and individual customers. Communication can be:

The Role of the Sales Force Personal selling is effective because salespeople can:  probe customers to learn more about their problems,  adjust the marketing offer to fit the special needs of each customer,  negotiate terms of sale, and  build long-term personal relationships with key decision makers.

The Role of the Sales Force

Sales Force Serves as a Critical Link Between a Company and its Customers Since They:

Major Steps in Sales Force Management (Fig. 16.1) Designing Sales Force Strategy and Structure - exclusive territory to sell the company’s full product line

- sales force sells only a portion of the company’s products or lines

- sales force sells only to certain customers or industries

Some Traits of Good Salespeople

Recommendations for Recruiting Salespeople Current Salespeople, Employment Agencies, Classified Ads, College Students, Internet Training Salespeople The Average Sales Training Program lasts for Four Months and Has the Following Goals: . Help salespeople know & identify with the company . Learn about the products . Learn about competitors’ and customers’ characteristics . Learn how to make effective presentations . Understand field procedures and responsibilities Compensating Salespeople To Attract Salespeople, a Company Must Have an Attractive Plan Made Up of Several Elements

Supervising Salespeople Directing Salespeople Motivating Salespeople • Organizational Climate • • Sales Quotas • • Positive Incentives

• 

 Annual Call Plan   Time-and-Duty Analysis  Sales Force Automation   Evaluating Salespeople  Management gets information about its salespeople in several ways: 

 Formal evaluation of performance can be done qualitatively or quantitatively.

 Evaluation methods of performance include: 

 Chapter 17 – Direct and Online Marketing: The New Marketing Model Mass Marketing and Direct Marketing Mass Marketing

Direct Marketing

What is Direct Marketing? Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.

Forms of Direct Marketing Face-to-Face Selling Direct Response TV Telemarketing Kiosk Marketing Direct Mail Online Marketing Catalog

Benefits and Growth of Direct Marketing Buyers Benefits Sellers Benefits ...... Customer Databases  Customer Databases are an Organized Collection of Comprehensive Data About Individual Customers or Prospects Including: ------Database Marketing is the process of building, maintaining, and using customer databases and other databases for the purposes of contacting and transacting with customers. How companies use their databases: -

Online Marketing  Online Marketing is conducted through interactive online computer systems, which link consumers with sellers electronically.

Who is the Online Customer?  They tend to be younger, more affluent, better educated, and more male than the general population; female usage almost equals males.  Other characteristic of net users:

Promise and Challenge of Online Marketing Limited Consumer Exposure and Buying

Skewed User Demographics and Psychographics

Chaos and Clutter

Security

Ethical Concerns

Public Policy and Ethical Issues in Direct Marketing Irritation to Consumers

Unfairness, Deception, or Fraud

Invasion of Privacy