Marketing Management

1. Marketing Management Dawn Iacobucci © 2010 South-Western, a part of Cengage Learning

2. Channels of Distribution & Business Marketing Networks & Logistics Chapter 9

3. Distribution • Sellers--produce large quantities of limited number of goods • Buyers—want smaller quantities of wider variety of goods • Distribution--realigns discrepancies between quantities and selections • Breaking bulk: making goods available in smaller batches

4. What are Distribution Channels? • Distribution channel • A network of inter-connected firms that provide a way for sellers to get goods to the marketplace, and buyers a way of purchasing those goods, as efficiently and profitably as possible

5. Actors in Distribution Channels • Manufacturing firms • Distributors or wholesalers • Retailers • Consumers

6. What a Distributor/Wholesaler Might Do for Customers • Regroup products—provide quantity and assortment customers need • Anticipate customers' needs—and buy accordingly • Carry products in inventory—which helps reduce customers' inventory costs • Deliver products promptly and economically • Grant credit • Provide information and advice • Provide part of the buying function—make it easy for customers to buy what they want

7. What a Distributor/Wholesaler Might Do forManufacturer/Producer-Suppliers • Provide part of the selling function • Store inventory (cut producer's warehousing costs) • Supply capital (by purchasing producer's output before it is sold to final customers) • Reduce credit risks • Provide marketing information

8. Tension in Distribution Channels • Tension in channels created by contribution of each channel member • Do they provide more benefit than they cost? • Should we do this activity ourselves or have a channel member do it for us?

9. Discussion Question • View the next two slides. Assuming all else is equal, which is the most efficient channel? Why?

10. Manufacturer to Consumer

11. Manufacturer through Channel

12. Forms of Distribution Channels

13. Designing Distribution Channels • Determine distribution intensity • How many intermediaries will be used? • Determine push or pull strategy • Determine how to deal with conflict

14. Push and Pull – Demand Pulls the Product through the Channel

15. Intensive Intensive Distribution • Intensive: widely distribute offerings to all appropriate locations • Drugstores, supermarkets, discount stores, convenience stores, etc. • Usually for simple, inexpensive, easily transported products • Snack food, shampoo, newspapers, etc. • Pull strategy: promote directly to end consumers to pull through channel

16. Pull Strategy • Incentives offered to consumers to pull products through the channel • Advertise to consumers • Distribute widely • Offer price and/or quantity discounts • Offer inexpensive trials or free samples • Offer coupons and/or rebates • Offer financing • Offer loyalty programs/points

17. Selective Selective Distribution • Selective: less widely distributed offerings • Usually for complex and/or expensive products that require assistance • Cars, computers, appliances, etc. • Push strategy: promote to distribution partners to push goods to consumer • Manufacturer has more control due to fewer relationships to manage

18. Push Strategy • Incentives offered to distribution partners to push products through the channel • Advertise to partners • Distribute more selectively • Employ a sales force • Offer incentives to sales force • Offer price and/or quantity discounts • Offer financing • Offer allowances for marketing activities

19. Exclusive Exclusive Distribution • Exclusive: extreme case of selectivity • Manufacturers have the most control • May become monopolistic

20. Intensive Exclusive Intensity Strategies • Intensive distribution usually goes with heavy promotion, lower prices and average or lower quality products • Exclusive distribution usually goes with exclusive promotional efforts, higher prices and higher quality products

21. Channel Conflict • Conflict can arise when channel partners differ in their opinions on how to please customers and maximize profit • Conflict may motivate parties to find alternative solutions

22. Types of Power • Coercive power: Ability to take away benefits or inflict punishment on other party • Information power: Having information other party seeks • Legitimate power: Using size or expertise to encourage other party • Referent power: One party seeks an affiliation with other • Reward power: Ability to provide good outcomes for other party

23. Channel Power and Conflict • Power is usually defined by size and effectiveness • In the long term, power isn’t a great way to resolve conflict because the less powerful player may feel resentful and act accordingly

24. Dealing with Conflict • Try to develop effective communication to enhance trust and satisfaction • Make sure that parties feel that they’re being heard and their needs are understood and being met • Remind channel members of mutual goal of customer satisfaction

25. Building Channel Relationships • If conflict cannot be resolved, two other options: • Mediation • Negotiate through a third party that determines the two parties’ utility functions • Arbitration • The third party makes a binding decision for the two

26. Channel Integration • If a company is currently using a partner to do something, it might wish to bring that function back in-house • Forward Integration • e.g., manufacturer controls its retail stores • Backward integration • e.g., manufacturer controls raw material

27. Private Labels • Many retailers are integrating backward into private label products • Advantages • May give retailers negotiating power with the manufacturer • May offer significant margin opportunities • May allow retailer to distinguish itself as the only place that offers that brand

28. Retailing • Retailers have been gaining power and momentum over the past 10-20 years • Powerful retailers can make or break a new product

29. Importance of Retail Employees • If retailers are not selective in hiring and if employees are not trained or paid well, service will be suboptimal and lead to customer dissatisfaction • Retailers benefit from selecting good people, training them, paying them, rewarding them well, and empowering them

30. Importance of Location • Consider factors needed to be successful • Environmental data • population densities • income and social class distributions • median ages • household composition, etc.

31. Retailer Growth Strategies • Provide additional services (product development) • Reach out to attract additional segments (market development) • Open additional stores • Expand internationally • Exporting, joint ventures, direct foreign investment, license agreements, etc. • Depends upon: talent, costs, labor pool, infrastructure, government’s stance on foreign investment, real estate costs, travel costs, local ethics, etc.

32. Franchising • Company can retain some control without complete ownership or capital expenditure • Franchisor: the company • Franchisee: local owner • Pays fee and royalties • Product franchising • Ford dealer, Coca-Cola bottlers • Business format franchising • McDonalds, Holiday Inn

33. E-commerce • Retail sales online are about $30 billion • Only about 3% of total retail sales • Much potential for growth • What sells well • Computer hardware, software, books, music, DVDs, and travel arrangements • Many business drive their customers online to reduce labor costs • e.g., Retail banks raise fees to those who want to interact with a teller

34. Catalog Sales • E-commerce and catalogs are complementary • Many companies use both successfully • 83 of the top 100 catalogers saw growth • Catalogs are preferred for browsing • Catalogs trigger web visits • Customer databases are utilized for customized catalogs, promotions, etc.

35. Top Catalogers

36. Sales Force • Utilized extensively by companies utilizing a push strategy • For more undifferentiated products, a company’s sales force is its most important driver of its performance

37. What Kinds of Personal Selling Are Needed? Order-Getting Order-Taking Basic Sales Tasks Supporting

38. Training to Meet a Job Description Specific, Written Job Description (what a salesperson is expected to do) Trained, Not Born (learn selling methods, customer needs, organization skills, etc.) All Salespeople Need Training

39. Compensating and Motivating Salespeople Level of Compensation (i.e., amount of money) Method of Payment Straight Salary Straight Commission Combination Plan

40. Key Steps in the Personal Selling Process Prospect for new customers Evaluate needs of established customers and business opportunity Set effort priorities Select target customer Identify who influences purchase decision and/or who is involved in buyer-seller relationship • Preplan sales call and presentation(s) • Prepared presentation • Consultative selling approach • Selling formula approach

41. Key Steps in the Personal Selling Process Prospect Set effort priorities Evaluate needs Select target customer Preplan sales call and presentation(s) Feedback Make sales presentation Close the sale (get action) Follow up after sales call to establish relationship Follow-up after the purchase to maintain and enhance relationship

42. Study Question 1 • Selling Company produces its product in batches of 100, yet its average customer only purchases ten at a time. In order to encourage sales, Selling Company must make their product available to be sold in smaller batches. This process is known as • a. quantities. • b. limited goods. • c. breaking bulk. • d. none of these.

43. Study Question 2 • The extreme case of selectivity is the • a. distribution channel. • b. monopolistic channel. • c. exclusive channel. • d. intensively channel.

44. Study Question 3 • Giant Grocery Retailer tells Small Cereal Manufacturer that it will not stock or sell Small Cereal Manufacturer’s product line until and unless a better trade margin is provided. What type of power is Giant Grocery Retailer exhibiting? • a. purchasing power • b. coercive power • c. information power • d. distribution power

45. Study Question 4 • Tech Gadgets Co. is revamping its distribution strategy. If the goods manufactured by Tech Gadgets Co. are simple, inexpensive, easily transported, it is typical that they would be distributed widely, or • a. selectively. • b. intensively. • c. comparatively. • d. pushed.

46. Study Question 5 • Consumers are said to pull goods through the channel, whereas trading partners _____ the goods from the manufacturer on down the food chain. • a. hold • b. push • c. throw • d. select

47. Video • http://www.cengage.com/marketing/book_content/0324784430_iacobucci/videos/ch09.html