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Distribution & Retailing
Unit 4 Subhajit Sanyal
P = Location
• Convenience
• Distribution
• Availability
• Accessibility
• Usability
• Where and when necessary
• Size and portability
Product Classes - Place
• Convenience Products - have to be in convenient places - small stores, vending machines
• Shopping Products - have to be where shoppers go, malls, superstores etc.
• Specialty Products - have to available where people want to buy them - ie. Movie theatres have to be located where many people go, and where you can park easily
Place and PLC• PLACE must be considered in terms
of the Product Life Cycle
• In the beginning Growth Stage - it might be good to have your product sold in a certain location, but in the maturity or decline stage, you may have to change locations to make it better for customers who are no longer so strongly interested in buying
What is it?
• Distribution - the where when how and why products and services are made available to potential customers
• Physical distribution - the activities concerned with the physical flows through producer to intermediaries to consumers and customers
Objectives of Distribution
• Appropriate and adequate distribution
• Access to markets and target customers
• Relative cost effectiveness in access, transaction value and distribution
• Reseller motivation
• Revenue returns from channel members
• Competitive representation
• Customer service
Marketing / Distribution Channels create- Time- Place- Possession/ownership utility
• Delivered at the right time - time utility• Delivered to the right place - place utility• With appropriate legal requirements -
possession / ownership utility
Product Classes - Place
• The different Product Classes have different PLACE situations
• Place decisions can be aided by knowing about the product classes
Product Classes - Place
• Convenience Products - have to be in convenient places - small stores, vending machines
• Shopping Products - have to be where shoppers go, malls, superstores etc.
• Specialty Products - have to available where people want to buy them - ie. Movie theatres have to be located where many people go, and where you can park easily
Place and PLC
• PLACE must be considered in terms of the Product Life Cycle
• In the beginning Growth Stage - it might be good to have your product sold in a certain location, but in the maturity or decline stage, you may have to change locations to make it better for customers who are no longer so strongly interested in buying
Discrepancies
• Discrepancy of Quantity
• Discrepancy of Assortment
Discrepancies
• Discrepancy of Quantity• the mfg. Makes much more than
individual consumers want to buy each time
• middlemen, wholesalers and retailers break this amount down into smaller amounts for individual consumers to buy
Discrepancies
• Discrepancy of Quantity
• … the difference between the quantity of products it is economical for an individual producer to make and the quantity normally wanted by individual consumers or users...
Discrepancies
• Discrepancy of Assortment• the difference between ALL the product
lines a mfg. Makes, and what the wholesaler wants to sell, and what the consumer will buy
• middlemen, break this amount down into different selections which the wholesalers want
Discrepancies
• middlemen, break this amount down into different selections which the wholesalers want
• EG. KRAFT makes many many different types of salad dressing
• A no-frills store just wants to sell 7 types cause its customers don’t buy the fancy kinds
Accumulation - combining products from several different producers. “… make it more convenient for companies to buy and handle…”
When farmers collect food, and sell them to buyers who gather large amounts for shipping to processors
The Accumulating Process
Breaking Bulk - take all the product and physically move it into small containers so it can be shipped to wholesalers. “… divide larger quantities into smaller quantities…”
Separating products into grades and qualities desired by different target markets.
Eg. Food products, small onions, large onions,
or white eggs, brown eggs
or …
Sorting
Taking heterogeneus commodities and sorting them into homogenous categories
Eg. All apples into red apples and green apples
Sorting
The process that helps producers,
• who produce different amounts,
• and different types,
• organize their products
• into categories/assortments
• to make it easier for the consumer to buy.
Sorting
“… putting together a variety of products to give a target market what it wants…”
ie. In this video store, mostly Asian films
ie. In this record store, mostly hip hop
ie. In this jewelry store, mostly chains
Assorting
Some stores cannot take the full range of a company’s product line - they do not have the shelf space or floor space - so they carefully select the brands of several mfgs to sell.
Assorting
Marketing / Distribution Channels create- Time- Place- Possession/ownership utility
• Delivered at the right time - time utility• Delivered to the right place - place utility• With appropriate legal requirements -
possession / ownership utility
Channels and key players
• Channel of distribution
• Intermediary
• Merchant
• Functional middleman
Channel design decisions
• Analyse customer service needs - marketing channels deliver appropriate value to the customer
• Defining channel objectives and constraints - which segments to serve and which channel to use for each
• Identifying key channel alternatives - direct marketing, broker, agent, intermediary, wholesaler, retailer, e-commerce
• Evaluating alternatives - economic, control, level of flexibility criteria
A vertical marketing channel
A vertical marketing channel
Members
Manufacturer
Wholesaler
Retailer
Consumer
Functions
DesignMakeBrandPricePromoteBuyStockDisplaySellDeliverFinance
Manufacturer
Wholesaler
Retailer
Consumer
A conventional marketing channel
A conventional marketing channel
Members FunctionsDesignMakeBrandPricePromoteSell
BuyStockPromoteDisplaySellDeliverFinance
BuyStockPromoteDisplaySellDeliverFinance
Figure 12.5 Comparison of a conventional marketing channel and a vertical marketing system
SOURCE: Adapted from Strategic Marketing, by David J. Kollat et al., copyright 1972. Reprinted by permission.
Control of resources
Size of company
Reward power
Expert power
Referent power
Legitimate power
Coercive power
Economic sources of power
Non-economic sources of power
Level of power
Dependency of other channel members
Willingness to lead
Channel leadership
Figure 12.8 Determinants of channel leadership
SOURCE: R.D. Michman and S. D. Sibley, Marketing Channels and Strategies, 2nd edn (Worthington, Ohio: Publishing Horizons, Inc., 1980), p.413. Reproduced by permission.
ACTIVITY DESCRIPTION
Table 13.1 Major wholesaling activities
Wholesale Management
Negotiating with suppliers
Promotion
Transport
Inventory control and data-processing
Planning, organising, staffing and controlling wholesaling operations
Serving as the purchasing agent for customers by negotiating supplies
Providing a sales force, advertising, sales promotion and publicity
Arranging and making local and long distance shipments
Controlling physical inventory, book keeping, recording transactions, keeping records for financial analysis
Warehousing and producthandling
Receiving, storing and stock keeping, order processing, packaging, shipping outgoing orders and materials handling
Security Safeguarding merchandise
Pricing Developing prices and providing price quotations
Financing and budgeting Extending credit, borrowing, making capital investments and forecasting cash flow
Management and marketingassistance to clients
Supplying information about markets and products and providing advisory services to assist customers to sell
Producer Buyers
Producer Buyers
Middleman or
intermediary
Figure 12.1 Efficiency in exchanges provided by an intermediary
Marketing channel activities that intermediaries performMarketing channel activities that intermediaries performTABLE 12.1TABLE 12.1
CATEGORY OF MARKETING ACTIVITIES POSSIBLE ACTIVITIES REQUIRED
Table 12.1 Marketing channel activities that intermediaries perform
Marketing information
Marketing management
Facilitating exchange
Price
Physical distribution
Analyse information such as sales data; perform or commission marketing research studies
Establish objectives; plan activities; manage and co-ordinate financing, personnel and risk taking; evaluate and control channel activities
Choose and stock product assortments that match the needs of buyers
Establish pricing policies and terms of sales
Manage transport, warehousing, materials handling, inventory control and communication
PromotionSet promotional objectives, co-ordinate advertising, personal selling, sales promotion, publicity, direct mail and packaging
Classifying heterogeneous supplies into homogeneous groups
Developing a bank or stock of homogeneous products to provide aggregate inventory
Breaking down homogeneous stocks (inventories) into smaller units
Combining products into collections or assortments that buyers want
Sorting out Accumulation Allocation Assorting
Figure 12.2 Sorting activities conducted by channel members.
E F G H
Producer Producer Producer Producer
AgentsAgents
Business-to-business distributors
Business-to-business distributors
Business-to-business buyers
Business-to-business buyers
Business-to-business buyers
Business-to-business buyers
Figure 12.4 Typical marketing channels for industrial products
“A person, or company, that helps direct the activities of a whole channel, and tries to avoid, or solve conflicts…”
However, some older products don’t have such a position.
Can be,,,
• A strong wholesaler
• a market oriented producer
• a large retailer
Sometimes Middlemen have a clear picture of what the customer wants, and who the producers are, so they arrange for producers to be in contact with the retailers, so more product can flow in the channel. The Middlemen makes more money by making nore commission on stuff sold.
• The whole channel focusses on the same target market at the end of the channel
• sometimes a large firm will buy up the smaller companies in the channel to have more control over the distribution
The paths goods follow from consumer to manufacturer or to marketing intermediaries.Common in the recycling industries.
Eg.
- Empty glass bottles
- used batteries
- used tires
- used printer cartridges - Canon
Reverse Channels
Also used for product recalls or for broken products that need to be fixed under Warranty - especially cars, tires and some expensive electronic consumer items.
Reverse Channels
Important to maintain consumer satisfaction and confidence.
STRATEGIC ISSUES IN RETAILINGSTRATEGIC ISSUES IN RETAILING
•Location•Property Ownership•Product Assortment•Retail Positioning•Atmospherics•Store Image•Scrambled Merchandising•The Wheel of Retailing
Recent Trends in Retailing
• Customisation
• Larger outlets
• Own label brands
• Customer expectations
• Category stores
• Relocation of businesses
• e.shopping
• Home delivery
e-commerce
• Basics of doing business
• Market opportunities & the future
• Media
• Branding
• Business to business
• Regulations
• Internet and Society