Retailing

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 De
signing 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
se
rvice 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 Use
d?

•

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 Targe
t 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 marketin
g channel functions.





-

Manufacturer purchases distributor or retailer






-

Wholesaler or retailer purchases channel members above them.



Contractual Systems



Involve independent p
roduction 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 s
trong 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 Chan
nels 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 Cha
nnel 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 A
lternatives

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



-

Inde
pendent, 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 Re
tailing:

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




Clas
sification of Retailing:

Retail Organization

Merchandising Conglomerates
-





Corporate Chain
-





Voluntary Chain
-





Retailer Cooperatives
-





Franchise Organizations
-





Retailer Marketing Decisions
(Fig. 13.1)

Retailer Strategy

•

Targe
t Market

•

Retail Store Positioning

Retailer Marketing Mix

•
Product and service assortment

•
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
-

Exc
hange 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 servic
es ($5.95 B in 1999 sales),



computer hardware and software ($5.8 B),



books ($1.7 B),



gifts and flowers ($730 M),



music ($540 M), and



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

professional ($4.4 billion),

o

administrative support ($3.9 billion),

o

corporate travel ($5 billion), and

o

telecommunications ($1.5 billion).



By 2003, Forrest
er 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
-
co
mmerce 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 con
trol
. 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 "g
et 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

•

Target Market

•

Service Positioning

Wholesaler Marketing Mix

•

Produc
t and service assortment

•

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 servic
es 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 w
hat 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


I


D


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 Promot
ion 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 th
e 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 w
ith 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 b
udget


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




Radio




Magazines




Outdoor




Internet




Evaluating Advertising

Communication Effects
-





Sales Effects
-





International Advertising Decisions

Adaptation of global advertising


Advertising media dif
fer 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 techniqu
e 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 ar
e 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 sh
are.

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


Game


Major Trade Sales Promotion Tools

Trade Promotion Objectives



Persuade Retailers or Wholesalers to Carry a Brand



Give a Brand Shelf Space



Promote a Brand in Advertising



Push a Brand to Consumers

Trade
-
Promotion Tools



Discounts




Allowanc
es

Major Business Sales Promotion Tools
Business
-
Promotion Tools



Conventions



Trade Shows



Sales Contests

Business
-
Promotion Objectives



Generate Business Leads



Stimulate Purchases



Reward Customers



Motivate Salespeople

Developing the Sales Promotion Progra
m



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 Per
form 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

Au
dio/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 salesper
son 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 becau
se 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 Sal
es 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 Salespeo
ple






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 sales
people 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 Salespeo
ple, a Company Must Have an Attractive Plan Made Up of Several Elements










Supervising Salespeople

Directing Salespeople

•



•



•





Annual Call Plan



Time
-
and
-
Duty Analysis



Sales Force Automation


Motivating Salespeople

•

Organizational Climate

•


Sales Quo
tas

•


Positive Incentives

















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 includ
e:











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 individu
al consumers to both obtain an
immediate response and cultivate lasting customer relationships.




Forms of Direct Marketing

Face
-
to
-
Face Selling


Telemarketing


Direct Mail


Catalog


Direct Response TV


Kiosk Marketing


Online Marketing


Benefits and Gr
owth of Direct Marketing

Buyers Benefits






















Sellers Benefits























Customer Databases



Customer Databases are an Organized Collection of Comprehensive Data About Individual Customers or
Prospects Including:

--

--

--

--

Databas
e 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 c
onducted 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 e
quals 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 Is
sues in Direct Marketing

Irritation to Consumers



Unfairness, Deception, or Fraud



Invasion of Privacy