Principles of Marketing

11 Principles of Marketing Marketing Channels & Supply Chain Management Retailing & Wholesaling

Retailing Retailing includes all the activities in selling products or services directly to final consumers for their personal, non-business use Retailers are businesses whose sales come primarily from retailing

Retailing Non-store retailing includes selling to final consumers through: • Direct mail • Catalogs • Telephone • Internet • TV shopping • Home and office parties • Door-to-door sales • Vending machines

Types of Retailers: Amount of Service Self-service retailers serve customers who are willing to perform their own locate-compare-select process to save money. Wal-Mart, Supermarkets. Limited service retailers provide more sales assistance because they carry more shopping goods about which customers need more information. Sears, JC Penney. Full-service retailers assist customers in every phase of the shopping process, resulting in higher costs that are passed on to the customer as higher prices. Department stores, Specialty stores table 13.1, page 367

Retailing Types of Retailers Relative Prices Discount stores sell standard merchandise at lower prices by accepting lower margins and selling higher volume. (Wal-mart) Off-price retailers buy at less than regular wholesale prices and charge customers less than retail. These retailers can be found in all areas, from food, clothing, electronics etc.

Retailing Franchise organizations are based on some unique product or service; on a method of doing business; or on the trade name, good will, or patent that the franchisor has developed • Pizzahut • KFC

Retailing Retailer Marketing Decisions Place Decision Central business districts are located in cities and include department and specialty stores, banks, and movie theaters Shopping center is a group of retail businesses planned, developed, owned, and managed as a unit. • Regional shopping centers • Community shopping centers • Neighborhood shopping centers • Lifestyle centers

Retailing The Future of Retailing Wheel-of-retailing concept states that many new types of retailing forms begin as low-margin, low-price, low-status operations and challenge established retailers. As they succeed, they upgrade their facilities and offer more services, increasing their costs and forcing them to increase prices, eventually becoming the retailers they replaced.

Wholesaling Wholesaling Wholesalers add value by performing channel functions: • Selling and promoting • Buying assortment building • Bulk breaking • Warehousing • Transportation • Financing • Risk bearing • Market information • Management services and advice

Wholesaling Wholesaling Selling and promoting involves the wholesaler’s sales force helping the manufacturer reach many smaller customers at lower cost Buying and assortmentbuilding involves the selection of items and building of assortments needed by their customers, saving the customers work

Wholesaling Wholesaling Bulk breaking involves the wholesaler buying in larger quantity and breaking into smaller lots for its customers Warehousing involves the wholesaler holding inventory, reducing its customers’ inventory cost and risk

Wholesaling Wholesaling Transportation involves the wholesaler providing quick delivery due to its proximity to the buyer Financing involves the wholesaler providing credit and financing suppliers by ordering earlier and paying on time

Wholesaling Wholesaling Risk bearing involves the wholesaler absorbing risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence Market information involves the wholesaler providing information to suppliers and customers about competitors, new products, and price developments

Wholesaling Wholesaling Management services & advice involves wholesalers helping retailers train their sales clerks, improve store layouts, and set up accounting and inventory control systems

Supply Chains and the Value Delivery Network Supply chain management is the process of managing upstream & downstream value-added flows of materials, final goods, & related information among suppliers, the company, resellers, & final consumers Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or service Downstream partners include the marketing channels or distribution channels that look toward the customer

Supply Chains and the Value Delivery Network Supply Chain Views Supply chain “make and sell” view includes the firm’s raw materials, productive inputs, and factory capacity Demand chain “sense and respond” view suggests that planning starts with the needs of the target customer and the firm responds to these needs by organizing a chain of resources and activities with the goal of creating customer value

The Nature and Importance of Marketing Channels Supply Chain Views Matching refers to shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging Negotiation refers to reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred

The Nature and Importance of Marketing Channels Number of Channel Members Channel level refers to each layer of marketing intermediaries that performs some work in bringing the product and its ownership closer to the final buyer Direct marketing channel has no intermediary levels; the company sells directly to consumers Indirect marketing channels contain one or more intermediaries

Channel Behavior and Organization Channel Behavior Channel conflict refers to disagreement over goals, roles, and rewards by channel members • Horizontal conflict is conflict among members at the same channel level • Vertical conflict is conflict between different levels of the same channel

Channel Behavior and Organization Conventional distribution systems consist of one or more independent producers, wholesalers, & retailers. Each seeks to maximize its own profits & there is little control over the other members & no formal means for assigning roles & resolving conflict. Vertical Marketing System: A distribution channel structure in which producers, wholesalers & retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate. The VMS can be dominated by the producer, wholesaler or retailer. Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones

Channel Design Decisions Types of intermediaries refers to channel members available to carry out channel work. Examples include: • Company sales force • Manufacturer’s agency (agents) • Industrial distributors

Channel Design Decisions • Number of marketing intermediaries Strategies: • Intensive distribution: is a strategy used by producers of convenience products and common raw materials in which they stock their products in as many outlets as possible • Exclusive distribution: giving a limited number of dealers the exclusive right to distribute the company’s products in their territories. • Selective distribution: the use of more than one, but fewer than all, of the intermediaries who are willing to carry the company’s products.

Marketing Logistics and Supply Chain Management Warehousing is the storage function that overcomes differences in need quantities & timing, ensuring that the products are available when customers are ready to buy them • Storage warehouses are designed to store goods for moderate or long periods, not move them • Distribution centers are designed to move goods, rather than just store them

Marketing Logistics and Supply Chain Management Inventory management balances carrying too little and too much inventory • Just-in-time logistics systems allow producers and retailers to carry small amounts of inventories of parts or merchandise • RFID (radio frequency identification devices) are small transmitter chips embedded in or placed on products or packages to provide greater inventory control

Marketing Logistics and Supply Chain Management Third-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs) • Provide logistics functions more efficiently • Provide logistics functions at lower cost • Allow the company to focus on its core business • Are more knowledgeable of complex logistics

Principles of Marketing