Chapter

1. Chapter 15 Distributing Products 15-1

2. What Are Marketing Intermediaries? • Marketing Intermediaries -- Organizations that assist in moving goods and services from businesses to businesses (B2B) and from businesses to consumers (B2C). • They are called intermediaries because they’re in the middle of a series of firms that distribute goods.

3. Types of Marketing Intermediaries • Wholesaler -- An intermediary that sells products to other organizations such as retailers, manufacturers, and hospitals. • Retailer -- An organization that sells products to ultimate customers. • Agents and Brokers -- Intermediaries who bring buyers and sellers together and assist in negotiating an exchange but do not take title to the goods they offer.

4. Marketing intermediaries can be eliminated but their activities cannot. • Intermediaries perform marketing tasks faster and cheaper than most manufacturers could provide them. • Marketing intermediaries add costs to products but they are generally offset by the values they provide. Why Marketing Needs Intermediaries 15-4

5. Utility -- The want-satisfying ability, or value, that organizations add to goods and services by making them more useful or accessible to consumers. • Six types of utilities: • Form • Time • Place • Possession • Information • Service INTERMEDIARIES CREATE UTILITY 15-5

6. How Marketers Use Utility • Form Utility -- Changes raw materials into useful products; producers generally provide form utility. • Starbucks makes coffee the way the customers want it. • Levi-Strauss transforms denim into clothes. • Time Utility -- Makes products available when customers want them. • Many Walgreen’s stores are open 24-hours a day. • Colleges offer day and evening classes.

7. How Marketers Use Utility • Place Utility -- Adds value to products by placing them where people want them. • Banks place ATMs at convenient locations. • Pepsi is available in campus vending machines. • Possession Utility -- Helps transfer ownership from one party to another, including providing credit. • Pay for lunch at McDonald’s with your Visa card. • Car dealers offer loans to buyers.

8. How Marketers Use Utility • Information Utility -- Opens two-way flows of information between marketing participants. • Dell’s website offers advice to PC buyers. • Local government maps show tourist locations. • Service Utility -- Provides service during and after a sale and teaches customers how to best use products. • Apple offers classes to help computer buyers. • College placement offices help students find jobs.

9. Types of Marketing Intermediaries • Wholesalers • Retailers • Agents / Brokers

10. Wholesale Intermediaries • Wholesalers normally make B2B sales, however, stores like Staple’s and Costco also have retail functions. • Retail sales are sales of goods and services to customers for their own use. • Wholesale sales are sales of goods and services to other businesses for use in the business or resale.

11. Wholesale Intermediaries • Merchant Wholesalers -- Independently owned firms that take title to the goods they handle. There are two types: • Full-service wholesalers perform all distribution functions. (transportation, storage, risk bearing, credit, market information, standardizing, grading, buying, and selling) • Limited-function wholesalers perform only selected distribution functions. • About 80% of wholesalers are merchant wholesalers.

12. Types of Limited-Function Wholesalers • Rack Jobbers -- Furnish racks or shelves of merchandise such as music, magazines, and hosiery for retailers for display and sell them on consignment. • Cash-and-Carry Wholesalers -- Serve mostly smaller retailers with a limited assortment of products. • Drop Shippers -- Take orders from retailers and other wholesalers and have the merchandise shipped from producer to buyer.

13. Roles of Agents and Brokers • Brokers/Agents Provide services in exchange for commissions • Do not take title

14. Roles of Agents • Agents generally maintain long-term relationships with the clients they represent. • Manufacturers’ Agents – may represent several manufacturers in a specific territory • Sales Agents – represent a single manufacturer in a larger territory

15. Roles of Brokers Brokers are usually hired on temporary basis

16. Retail Intermediaries • Sell to Consumers

17. Types of Retail Stores

18. Types of Retail Stores, cont. • Off-Price Retailing • Single/One-Price Policy Store

19. They All Started in 1962 Source: Business 2.0, June 2003, p. 38.

20. Forms of Non-Store Retailing • Electronic Retailing -- Selling goods and services to ultimate consumers over the Internet. • Telemarketing -- The sale of goods and services via the telephone. • Vending machines -- Dispense convenience goods when consumers deposit sufficient funds. • Kiosks and Carts

21. Forms of Non-Store Retailing, cont. • Direct Selling -- Selling goods and services to customers in their homes or workplaces. • Multilevel Marketing uses salespeople who work as independent contractors. • Direct Marketing -- Any activity that directly links manufacturers or intermediaries with ultimate customers.

22. The Four Systems ofChannel Relationships • Corporate Distribution Systems • Contractual Distribution Systems • Administered Distribution Systems • Supply Chains 15-22

23. Corporate Distribution • All of the organizations in the channel of distribution are owned by the same firm • Sherwin-Williams • Goodyear

24. Contractual Distribution Members are bound to cooperate through contractual agreements • Franchise Systems • McDonald’s, Subway, AAMCO • Wholesaler-Sponsored Chains • ACE Hardware, IGA food stores • Retail Cooperatives • Associated Grocers, True Value

25. Administered Distribution • Producers manage all the marketing functions at the retail level. • Retailers cooperate because they get so much free help. • Kraft • Ralph Lauren

26. Channel of Distribution • Channel of Distribution -- A group of marketing intermediaries that joining together to transport and store goods from producers to consumers.

27. Intermediaries and the Channel of Distribution

28. The Supply Chain vs. The Channel of Distribution

29. The Supply Chain

30. Logistics Marketing activity that involves planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption

31. Logistics You are here

32. Logistics Applications • Inbound Logistics -- Brings raw materials, packaging, other goods and services and information from suppliers to producers. • Materials Handling -- Movement of goods within a warehouse, from warehouse to the factory floor and from the factory floor to workstations.

33. Logistics Applications • Outbound Logistics -- Manages the flow of finished products and information to business buyers and consumers. • Reverse Logistics -- Brings goods back to the manufacturer because of defects or for recycling.

34. Logistics Marketing activity that involves planning, implementing, and controlling the physical flow of materials, finalgoods, and related information from points of origin to points of consumption

35. Channel of Distribution • Channel of Distribution • Transport and Store

36. Transportation & Storage Modes

37. Transportation Modes

38. Transportation • Transportation: mode by which products move among channel members • Modes differ in their-- • Dependability (safety and punctuality) • Cost • Speed of delivery • Accessibility (different locations served) • Capability (variety of products handled) • Traceability (ability to locate goods in shipment)

39. Railroad 35-40 % Motor Vehicles 25% Water 15-17% Pipeline 20% Air Small fraction Intermodal Transportation

40. Intermodal Shipping • Intermodal Shipping -- Uses multiple modes of transportation to complete a single long-distance movement of freight.

41. Types of Intermodal Shipping • Piggybacking: Truck trailers placed on trains • Fishybacking: Truck trailers placed on ships • Birdybacking: Truck trailers placed on planes

42. Logistics Specialists • Freight Forwarder -- Puts many small shipments together to create a single large shipment that can be transported cost-effectively by truck or train.

43. Storage Modes

44. Warehousing 25-30% of cost of logistics Storage Distribution Storage Modes

45. Storage Warehouses • Storage Warehouses hold products for a relatively long period of time. • Distribution Warehouses are used to gather and redistribute products.