Chapter 12

1

2

CHAPTER 12

PRODUCTS DISTRIBUTION AND PROMOTION

3

LEARNING OBJECTIVES

1. Identify the advantages and disadvantages of direct chanel of distribution, and identify factors that could determine the optimal channel of distribution.

2. Identify types of market coverage.3. Describe the various forms of

transportation use to distribute products.

4. Identify how wholesalers can serve manufacturers and retailers.

5. Identify the strategy and potential benefits of vertical channel integration.

6. Identify how promotion can benefit firms.

Main ResourcesChannels Distribution

Accelerate the

Distribution Processes

Promotion

Determining the

Optimal Promotion Mix

4

LEARNING OBJECTIVES (cont.)

7. Describe how advertising is used.

8. Describe the steps in personal selling.

9. Describe the methods of sales promotion.

10. Describe how firms can use public relations to promote products.

11. Explain how firms select the optial mix of promotions to use.


Accelerate the


Promotion

Determining the


5

INTRODUCTION

PRODUCS DISTRIBUTION A distribution channel represents

the path of a product from the producer to the customer. The channel often includes marketing intermediaries, or firms that participate in moving the product toward the customer. In making the distribution process success, the firms must take into consideration on the following questions:


Accelerate the


Promotion

Determining the


6

What should be its optimal form of distribution ?

What type of market coverage should it pursue ?

How can it accelerate its distribution ?

How many retailers improve its distribution ?

How many wholesalers improve its distribution ?

Should it create its own intermediary to distribute its products ?


Accelerate the


Promotion

Determining the


7

PRODUCTS PROMOTION

Firms regularly engage in promotion, which is the act of informing or reminding consumers about a specific product or brand. They can use promotion to increase the demand for the product and thereby increase the value of the firm. Some of most important promotion decision are ;


Accelerate the


Promotion

Determining the


8

What type of advertising should be used ?

What other promotion methods should be used ?

How the firm can use public relations to promote its business ?

What is the optimal mix of promotions to use ?


Accelerate the


Promotion

Determining the


9

VARIATION CHANNEL OF DISTRIBUTION The manner by which products

are made accessible to the customer is called distribution decision. Firms must develop a strategy to ensure that products are distributed to customers at a place convenient to them. Following are the variation of channel distribution;


Accelerate the


Promotion

Determining the


10

VARIATION CHANNEL OF DISTRIBUTION (cont)

Direct ChannelProducer of a product deals directly with customers and marketing intermediaries are not involved. One of the methods on direct channel is by using website where consumers can place orders online.


Accelerate the


Promotion

Determining the


11


Advantages of a direct channel;

1. The full difference between the manufacturer’s cost and the price paid by the consumer goes to the producer.

2. The producer can easily obtain firsthand feedback on the product.


Accelerate the


Promotion

Determining the


12


Disadvantages of a direct channel;1. A firm engage with direct channel,

need more employees. This includes the needs to hire sales and delivery people to reach the product to the customers.

2. Incur more expenses to promote the product. Intermediaries can promote products through advertisements or even by placing the product in a place where consumers will see it.


Accelerate the


Promotion

Determining the


13


One Level Channel

One marketing intermediary is between the producer and the customer is applied in one level channel of distribution. Some marketing intermediaries is called merchants and they become owner of the products and the resell them.


Accelerate the


Promotion

Determining the


14


Two Level ChannelIn two level channel of distribution, two marketing intermediaries are between the producer and the customer.Small businesses that produce one or a few products commonly use a two level channel of distribution. Because these businesses are not well known, they may not receive orders from retail outlets. Therefore they rely on agents to sell the products to retailers.


Accelerate the


Promotion

Determining the


15


Factors That Determine the Optimal

Channel of Distribution

Ease of Transporting Degree of Standardization Internet Orders


Accelerate the


Promotion

Determining the


16

SELECTING THE DEGREE OF MARKET COVERAGE

Intensive Distribution

Intensive distribution is used to distribute a product across most or all possible outlets when a firm want to achieve a high degree of market coverage for all types of consumers.

Selective Distribution

Selective distribution is used to distribute a product through selected outlets. Some outlets are intentionally avoided.


Accelerate the


Promotion

Determining the


17

SELECTING THE DEGREE OF MARKET COVERAGE (cont)

Exclusive Distribution

Only one or a few outlets are used with exclusive distribution. For example, some luxury items are distributed exclusively to a few outlet that cater to very wealthy customers. By limiting the distribution, the firm can create or maintain the prestige of the product.


Accelerate the


Promotion

Determining the


18

SELECTING THE TRANSPORTATION

USED TO DISTRIBUTE PRODUCTS

Truck - are commonly used for transport because they can reach any destination on land. They can usually transport products quickly and can make several stops.

Rail - Railroads are useful for heavy products, especially when the sender and the receiver are located close to railroad stations. For long distances, rail can be a cheaper form of transportation than trucks.

Air - Transportation by air can be quick and relatively inexpensive for light items such as computer chip and jewelry.


Accelerate the


Promotion

Determining the


19

Water - For some coastal or port locations, transportation by water deserves to be considered. Shipping is necessary for the international trade of

some goods such as automobiles. Pipeline - For products such as oil and

gas, pipelines can be an effective method

of transportation.


Accelerate the


Promotion

Determining the


20

HOW TO ACCELERATE THE DISTRIBUTION PROCESS

The firm’s performance will affected by the structure of it’s distribution system. A lengthy distribution process has an adverse effect. A product will take longer to reach customer, which may allow competitors to supply products to the market sooner. As a result, retail stores or customers may order their products from other firms. Therefore the distribution processes can be accelerated by;

Streamline the channel of distribution Distributing using the internet Integrate the production and distribution process


Accelerate the


Promotion

Determining the


21

BACKGROUND OF RETAILERS, WHOLESALERS AND IMPLEMENTING THE

VERTICAL CHANNEL INTEGRATION

The wholesalers serves manufacturer by providing;

Warehouse, sales expertise,delivery to retailers, free from credit risk, and information of customer.

The wholesaler serves retailers by providing; Warehouse, promotion, credit, display and

information.

Vertical channel integration is used when two or more levels of distribution are managed by a single firm.


Accelerate the


Promotion

Determining the


22

PROMOTION

Sales promotion consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade.


Accelerate the


Promotion

Determining the


23

Major Decisions in Sales Promotion

1.Establishing Objective

2.Selecting Consumer-Promotion Tools

3. Selecting Trade- Promotion Tools

4. Selecting Business and Sales Force Promotion Tools

5. Developing the program

6. Pre -testing, Implementing, Controlling, and Evaluating the Program


Accelerate the


Promotion

Determining the


24

PROMOTION MIX

The promotion mix is the combination of promotion methods that a firm uses to increase acceptance of its products. The four methods of promotion are;

1. Advertising

2. Personal selling

3. Sales promotion

4. Public relations


Accelerate the


Promotion

Determining the


25

PROMOTION MIX (cont)

1. Advertising

Four main types of advertising are; Brand advertising Comparative advertising Reminder advertising Institutional advertising


Accelerate the


Promotion

Determining the


26


2. Personal Selling

Salespeople conduct personal selling on a retail basis, on an industrial basis, and

on an individual basis. Salespeople who sell on an industrial or individual basis generally perform the following steps;

Identify the target market Contact potential customers Make the sales presentation Answer questions Close the sale Follow up


Accelerate the


Promotion

Determining the


27


3. Sales Promotion The set of activities that is intended to influence consumers. The most common sales promotion strategies are;

Rebates – a potential refund by the manufacturer to the consumer.

Coupon – a promotional device used in newspapers, magazines, and ads to encourage the purchase of a product.

Sampling – offering free samples to encourage consumers to try new brand or product.

Displays – products are placed in a prominent area in stores, the displays are used to attract consumers who are in the store for other reasons.

Premium – a gift or prize provided free to consumers who purchase a specific product.


Accelerate the


Promotion

Determining the


28


4. Public Relation Involves a variety of programs designed to promote or protect a company’s image or its individual products. Public relations departments perform at least five function : press relations, product publicity, corporate communication, lobbying and counseling. The most common types of public relations strategies done by;

Special events News releases Press conference


Accelerate the


Promotion

Determining the


29

DETERMINING THE OPTIMAL PROMOTION MIX

Firms must consider the characteristics of their target market and their promotion budget when determining the optimal promotion mix.

1. Target MarketIf a firm’s target market is made up of a wide variety of customers throughout a specific region, it may use advertising to promote its product. When firms direct their promotion directly at the target market, they provide information to the consumers who would most likely purchase the products. Consumers become aware of the product without hearing about it from a retailer. They may then request the product from retailers, who in turn request it from wholesalers or producers. This strategy is called a pull strategy, because the product is pulled through the distribution channel as a result of consumer demand.


Accelerate the


Promotion

Determining the


30

1. Target Market(cont.)

However, some producers direct their promotion at wholesalers or retailers instead of their target market. When producers promote their products to wholesalers or retailers, their promotion effort is called a push strategy.


Accelerate the


Promotion

Determining the


31

2. Promotion Budget Is the amount of funds that have been set aside to pay for all promotion methods over a specified period. The promotion budget for a specific product is influenced by the following characteristics:

Phase of the product life cycle Competition

Economic condition


Accelerate the


Promotion

Determining the


32

Critical Thinking Questions1. Explain the five key services provided by

wholesalers to manufacturer?2. Briefly summarize why are Internet

businesses likely to involve direct channel distribution ?

3. Define vertical channel integration.4. Explain the promotion mix. List and briefly

describe the four methods of promotion.5. Explain the differences between the pull

strategy with the push strategy associated with promotion.

6. Discuss the different types of promotion that would be utilized throughout the product life cycle for a product or service.


Accelerate the


Promotion

Determining the


33

SUMMARY

In this chapter we have:1. Identified the advantages and

disadvantages of direct channel distribution.

2. Identified the importance of wholesaler as well as retailer to the manufacturer.

3. Describe the role of promotional efforts to the business growth.

4. Describe the most common sales promotion methods and its effectiveness according to different types of business.


Accelerate the


Promotion

Determining the
