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Business in Business in Action 8e Action 8e Bovée/ThillBovée/Thill
Developing a Business Mindset
Chapter 15Chapter 15Distribution and Distribution and
Marketing LogisticsMarketing Logistics
Production Systems
Copyright © 2017 Pearson Education, Inc.
Learning Objectives
1. Explain the role of marketing intermediaries in contemporary business, and list the eight primary functions that intermediaries can perform.
2. Identify the major types of wholesalers, and summarize four trends shaping the future of wholesaling.
3. Identify the major retailing formats, and summarize six trends shaping the future of retailing.
15-2
Copyright © 2017 Pearson Education, Inc.
Learning Objectives (cont.)
4. Explain the strategic decisions that manufacturers must make when choosing distribution channels.
5. Identify five key attributes of distribution channel design and management.
6. Highlight the major components of physical distribution and logistics.
15-3
The Role of Marketing Intermediaries
Copyright © 2017 Pearson Education, Inc.
• Distribution strategy A firm’s overall plan for moving products
through intermediaries and on to final customers
• Marketing intermediaries Businesspeople and organizations that assist
in moving and marketing goods and services between producers and consumers
15-4
Wholesaling versus Retailing
Copyright © 2017 Pearson Education, Inc.
• Wholesalers Intermediaries that
sell products to other intermediaries for resale or to organizations for internal use
• Retailers Intermediaries that
sell goods and services to individuals for their own personal use
15-5
Contributions of Marketing Intermediaries
Copyright © 2017 Pearson Education, Inc.
• Matching buyers and sellers• Providing market information• Providing promotional and sales support• Gathering assortments of goods• Transporting and storing products
15-6
Contributions of Marketing Intermediaries (cont.)
Copyright © 2017 Pearson Education, Inc.
• Assuming risks• Providing financing• Completing product solutions• Facilitating transactions and supporting
customers
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Copyright © 2017 Pearson Education, Inc.
Exhibit 15.1 How Intermediaries Simplify Commerce
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Wholesaling and Industrial Distribution
Copyright © 2017 Pearson Education, Inc.
• Merchant wholesalers Independent wholesalers that take legal title
to the goods they distribute
• Distributors Merchant wholesalers that sell products to
organizational customers for internal operations or the production of other goods, rather than to retailers for resale
15-9
Wholesaling and Industrial Distribution (cont.)
Copyright © 2017 Pearson Education, Inc.
• Agents and brokers Independent wholesalers that do not take title
to the goods they distribute but may or may not take possession of those goods
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The Outlook for Wholesaling
Copyright © 2017 Pearson Education, Inc. 15-11
Threat of disintermediationThreat of disintermediation
The Outlook for Wholesaling (cont.)
Copyright © 2017 Pearson Education, Inc.
• Disintermediation The replacement of intermediaries by
producers, customers, or other intermediaries when those other parties can perform channel functions more effectively or efficiently
15-12
Retailing Formats
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• Wheel of retailing An evolutionary process by which stores that
feature low prices gradually upgrade until they no longer appeal to price-sensitive shoppers and are replaced by a new generation of leaner, low-price competitors
15-13
Retailing Formats (cont.)
Copyright © 2017 Pearson Education, Inc.
• Department stores Large stores that carry a variety of products
in multiple categories, such as clothing, house wares, gifts, bedding, and furniture
• Specialty stores Stores that carry only a particular type of
goods, often with deep selection in those specific categories
15-14
Retailing Formats (cont.)
Copyright © 2017 Pearson Education, Inc.
• Discount stores Retailers that sell a variety of everyday goods
below the market price by keeping their overhead low
• Off-price retailers Stores that sell designer labels and other
fashionable products at steep discounts
15-15
Retailing Formats (cont.)
Copyright © 2017 Pearson Education, Inc.
• Online retailers Companies that use e-commerce
technologies to sell over the Internet Includes Internet-only retailers and the online
arm of store-based retailers
• E-commerce The application of Internet technologies to
wholesaling and retailing
15-16
Copyright © 2017 Pearson Education, Inc.
Exhibit 15.2 Retail Store Formats
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The Outlook for Retailing
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• Physical overcapacity • Continued growth in online retailing• Growth of multichannel retailing• Format innovations• Retail theater• Threat of disintermediation
15-18
The Outlook for Retailing (cont.)
Copyright © 2017 Pearson Education, Inc.
• Multichannel retailing Coordinated efforts
to reach consumers through more than one retail channel
• Retail theater The addition of
entertainment or education aspects to the retail experience
15-19
Distribution Strategies
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• Distribution mix A combination of intermediaries and channels
a producer uses to reach target customers
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Distribution Strategies (cont.)
Copyright © 2017 Pearson Education, Inc.
• Customer needs and expectations• Product support requirements• Segmentation, targeting, and positioning• Competitors’ distribution channels• Established industry patterns and
requirements
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Copyright © 2017 Pearson Education, Inc.
Exhibit 15.3
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Common DistributionChannel Models
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Exhibit 15.3 Common DistributionChannel Models (cont.)
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Market Coverage
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• Intensive distribution A market coverage strategy that tries to place
a product in as many outlets as possible
• Selective distribution A market coverage strategy that uses a
limited number of carefully chosen outlets to distribute products
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Market Coverage (cont.)
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• Exclusive distribution A market coverage strategy that gives
intermediaries exclusive rights to sell a product in a specific geographic area
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Channel Conflict
Copyright © 2017 Pearson Education, Inc.
• Channel conflict Disagreement or tension between two or
more members in a distribution channel, such as competition between channel partners trying to reach the same group of customers
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Channel Organization and Control
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• Marketing systems Arrangements by which channel partners
coordinate their activities under the leadership of one of the partners
15-27
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Exhibit 15.4 Factors That Influence Distribution Channel Choices
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Physical Distribution and Logistics
• Physical distribution All the activities
required to move finished products from the producer to the consumer
• Logistics The planning,
movement, and flow of goods and related information throughout the supply chain
15-29
Copyright © 2017 Pearson Education, Inc.
Exhibit 15.5 Steps in the Physical Distribution Process
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• Order processing Functions involved in receiving and filling
customer orders
• Distribution centers Advanced warehouse facilities that specialize
in collecting and shipping merchandise
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Physical Distribution and Logistics (cont.)
Physical Distribution and Logistics (cont.)
Copyright © 2017 Pearson Education, Inc.
• Intermodal transportation The coordinated use of multiple modes of
transportation, particularly with containers that can be shipped by truck, rail, and sea
15-32
Applying What You’ve Learned
Copyright © 2017 Pearson Education, Inc.
1. Explain the role of marketing intermediaries in contemporary business, and list the eight primary functions that intermediaries can perform.
2. Identify the major types of wholesalers, and summarize four trends shaping the future of wholesaling.
3. Identify the major retailing formats, and summarize six trends shaping the future of retailing.
15-33
Copyright © 2017 Pearson Education, Inc.
Applying What You’ve Learned (cont.)
4. Explain the strategic decisions that manufacturers must make when choosing distribution channels.
5. Identify five key attributes of distribution channel design and management.
6. Highlight the major components of physical distribution and logistics.
15-34
Copyright © 2017 Pearson Education, Inc. 15-35