FHBM1124 Marketing Chapter 10 11-Marketing Channels

8/18/2019 FHBM1124 Marketing Chapter 10 11-Marketing Channels

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Distribution Decision:

Marketing channels and Supply Chain

Management (SCM)

CHAPTER 10

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Learning Objectives

Explain Key Channel Members Functions

Discuss Supply Chain Management

Explain Major Logistics Functions

Discuss Retailing and Wholesaling

Functions Provided by Wholesalers

Explain Key Channel Members Functions

Discuss Supply Chain Management Explain Major Logistics Functions

Discuss Retailing and Wholesaling

Functions Provided by Wholesalers

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INTRODUCTION CHAPTER 10

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1. Marketing channel2. 2 types of intermediaries

Retailers

Wholesalers

3. Key functions performed by channel members

4. Types of channel Direct channel

Indirect channel

5. Supply Chain Management (SCM)

Benefits

Marketing logistics (distribution)

Major Logistics Functions


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INTRODUCTION CHAPTER 10

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1. Retailing

Types of Retailers

2. Wholesaling Functions provided by wholesalers

Types of Wholesalers

3. Primary Differences


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A) Marketing Channel

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Marketing (distribution) channel:

System of marketing institutions thatenhances the physical flow of goods and

services, along with ownership title, from

producer to consumer or business user.

Marketing Channel

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Marketing Intermediaries

Channel Members)

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• Most channel options involve at least one marketingintermediary, an organization that operates between

producers and consumers or business users.

• Service firms market primarily through short channels because

they sell intangible products and need to maintain personal

relationships within their channels.

A retailer owned and operated by

someone other than the manufacturer

of the products it sells.

A wholesaler who takes title to the

goods handles and then distributes these

goods to retailers, other distributors, or

sometimes end consumers.

.

Marketing Intermediaries


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How a Distributor Reduces the Number of Channel

Transactions

LG Sony Sharp Toshiba

LG Sony Sharp Toshiba

HarveyNorman

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How Intermediaries Channel

Members) Add Value

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The role of marketing intermediaries is to transform

the assortments of products made by producers into the

assortments wanted by consumers.

Members of the marketing channel perform many keyfunctions.

Some help to complete transactions:

Information, Promotion, Contact, Matching and Negotiation. Others help to fulfill the completed transactions:

Physical Distribution, Financing and Risk Taking


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(1) Information

Gathering and distributing marketing research

and intelligence information about actors and

forces in the marketing environment needed

for planning and aiding exchange.

(2) Promotion Developing and spreading persuasivecommunications about an offer.

(3) ContactFinding and communicating with prospective

buyers.

(4) Matching

Shaping and fitting the offer to the buyer’s

needs, including activities such as

manufacturing, grading, assembling, and

packaging.

(5) Negotiation

Reaching an agreement on price and other

terms of the offer so that ownership or

Key Functions performed by intermediaries

channel members)

TO COMPLETE TRANSACTIONS


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(6) Physical

DistributionTransporting and storing goods.

(7) Financing Acquiring and using funds to cover the costs

of the channel work.

(8) Risk Taking Assuming the risks of carrying out the channel

work.

• If the manufacturer performs these functions, its costs go up and its

prices must be higher.

• When some functions are shifted to the intermediaries, the

manufacturer’s costs and prices maybe lower.

TO FULFILL COMPLETE DTRANSACTIONS

Key Functions performed by intermediaries

channel members)


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Direct Marketing Channel:

A marketing channel that has no intermediary levels.

Indirect Marketing Channel:

A channel containing one or more intermediary levels.

Number of Channel Levels

Channel Structures)

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Direct

Indirect


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Channels for Consumer Products

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerChannel

RetailerChannel

DirectChannel

Agent/BrokerChannel

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Channels for

Business-to-Business Products

Producer

IndustrialUser

DirectChannel

Producer

Govt.Buyer

DirectChannel

Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor


Agents orBrokers

Agents orBrokers

Agent/BrokerChannel


Agent/BrokerIndustrialChannel

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Channel Strategy Decisions

Selection of a Marketing Channel

Factors which impact the selection of a marketing channel

include:

Market factorsProduct factors

Organizational factors

Competitive factors

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B) Supply Chain Management

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Supply Chain Management

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These include: Sourcing and procurement of raw materials

Stock management

Transportation Warehousing

Customer service Information system External partners such as vendors, carriers,

and third-party companies.

Managing upstream and downstream value-

added flows of materials, final goods, and related

information among suppliers, the company,

resellers and final consumers.


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Supply Chain Management

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Benefits of Supply Chain Management

Reduced Cost

Improved Services

Enhanced Revenues

Stock management, transportation,

warehousing and packaging

Time-based delivery and

make to order

Higher product availability

and more customized

products


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Marketing Logistics (Physical Distribution):

Planning, implementing, and controlling and the physical flow of

materials, final goods, and related information from points of origin to

points of consumption to meet customer requirements at a profit.

Marketing logistics addresses:

Marketing Logistics

Physical Distribution)

1. Outbound distributionmoving products from the factory to resellers and

ultimately to customers

2. Inbound distributionmoving products and materials from suppliers to the

factory

3. Reverse distributionmoving broken, unwanted, or excess products returned

by customers or resellers

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The goal of marketing logistics should be to provide a

targeted level of customer service at the least cost.

Company design a logistics system that will minimize the

cost of attaining maximum profits.

The major logistics functions include:

1. Warehousing

2. Inventory Management3. Transportation

4. Logistics Information Management



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Logistics Types Descriptions

1. Warehousing

Storage

warehouses or

distribution

centers.

A company must decide on how many and what

types of warehouses it needs and where they will be

located.

2. InventoryManagement

Just-in-time andRFID

Companies must balance customer demand withcosts of carrying excess inventory.

3. Transportation

Trucks, Railroads,

Water carriers,

Pipelines, & aircarriers

The choice of transportation carriers affects the

pricing of the products, delivery performance and

conditions of the goods when they arrive that willaffect customer satisfaction.

4. Logistics

Information

Management

Third-Party

Logistics

Emphasizes teamwork, both inside the

company and among all the marketing channel

organizations, to maximize the performance of

the entire distribution system.


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1. Transportation

Examples of Major Logistics Functions

2. InventoryManagement

3. Warehousing

4. Logistics InformationManagement


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Distribution Decision:

Retailing & Wholesaling

CHAPTER 11

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Retailing

Includes all the activities involved in sellingproducts or services directly to final consumers

for their personal, non business use.

What is Retailing


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Types of Retailers

Retailers: Businesses whose sales come primarily fromretailing.

Retailers can be classified based on:

(1) Amount of Service

(2) Product Line

(3) Relative Prices

(4) Organizational

Approach


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FIGURE 17-4 Stores vary in terms of the breadthand depth of their merchandise lines

17-28


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Types Descriptions

1. Specialty

Stores

Carry narrow product lines with deep assortments

within those lines.

E.g.: Books stores (MPH), Florist, Footwear shops

(Vincci), Jewelry Stores (Poh Kong)

2. Department

Stores

Carry a wide variety of product lines—typically

clothing, home furnishings, and household goods.

Each line is operated as a separate department

managed by specialist buyers or merchandisers.

E.g.: Jusco, Isetan, Metrojaya, Parkson & etc

3. Supermarkets Large, low-cost, low-margin, high-volume, self-

service store that carries a wide variety of food,

laundry, and household products.

E.g.: Giant, 99 Speedmart, Billion, Tesco

Types of Retailers

Product Line)


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Types Descriptions

4. Convenience

Stores

Small stores located near residential areas that

are open long hours 7 days a week and carry

a limited line of high-turnover convenience

goods.E.g.: 7-Eleven, Jusco MaxValu, K-Mart & etc.

5. Superstores

(Category

Killer Stores)

Giant specialty stores that carry a very deep

assortment of a particular line and is staffed

by knowledgeable employees.

E.g.: Toys ‘R’ Us, MPH bookstores, Borders, Ikeafurniture stores & etc.

6. Superstores

(Hypermarkets)

Much larger than regular supermarkets and

offer a large assortment of routinely purchased

food products, nonfood items, and services.

E.g.: Tesco, Mydin Stores, Carrefour, & etc.

Types of Retailers

Product Line)


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Examples

Product Line)

Specialty Stores

Department Stores

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Examples

Product Line)

Supermarkets

ConvenienceStores


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Examples

Product Line)

Category Killer Stores

Hypermarkets

E l ( i l d

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Example (specialty stores and

superstore – category killer)

Specialty store Category killer

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E l ( k d


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Example (supermarket and

superstores – hypermarket)

Supermarket Hypermarket

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Wholesaling

Includes all activities involved in selling goods

and services to those buying for resale or

business use.

What is Wholesaling?


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Wholesalers buy mostly from producers and sell mostly to

retailers, industrial consumers, and other wholesalers.

Wholesalers add value by performing one or more of the

following channel functions:

Wholesalers

Selling & PromotingBuying &

Assortment BuildingBulk-Breaking

Warehousing Transportation Financing

Risk BearingMarket

Information

ManagementServices & Advice

Functions provided by

Wholesalers


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Functions Descriptions

1. Selling &Promoting

Their sales forces help manufacturers reachmany small customers at a low cost

2. Buying &

Assortments

Building

Wholesalers can select items and build

assortments needed by their customers, thereby

saving the consumers much

3. Bulk Breaking

Wholesalers save their customers money by

buying in carload lots and breaking bulk

(breaking large lots into small quantities).

4. Warehousing

Wholesalers hold inventories, thereby reducing

the inventory costs and risks of suppliers andcustomers.

5. Transportation

Wholesalers can provide quicker delivery to

buyers because they are closer than the

producers.


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Functions Descriptions

6. Financing

Wholesalers finance their customers by giving

credit, and they finance their suppliers by

ordering early and paying bills on time.

7. Risk Bearing

Wholesalers absorb risk by taking title and

bearing the cost of theft, damage, spoilage, and

obsolescence.

8. Market

Information

Wholesalers give information to suppliers and

customers about competitors, new products, and

price developments.

9. Management

Services &

Advices

Wholesalers often help retailers train their

salesclerks, improve store layouts and displays,

and set up accounting and inventory control

systems.


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Types of Wholesalers

1. Merchant Wholesalers:

The largest single group of

wholesalers, accounting for

roughly 50 percent of all

wholesaling.

2. Brokers & Agents:

They do not take title to

the goods & perform a few

functions.

• A broker brings buyersand sellers together and

assists in negotiation.

• Agents represent buyers

or sellers on a morepermanent basis


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The variety of terms used for marketing intermediariesthat vary in specificity and use in consumer andbusiness markets

15-41


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RETAILING:

Includes all the activities involved in selling products or

services directly to final consumers for their personal,

non business use. WHOLESALING:

Includes all activities involved in selling goods and services

to those buying for resale or business use.

PRIMARY DIFFERENCES: Retailers sell to final consumers while wholesalers do not.

Primary Differences


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1. Retailing can be defined as all activities directly related to the sale of goodsand services to the ultimate consumer for personal, non business use.

2. The retailing industry is dominated by a large number of small- and medium-

sized companies.

3. Ahmad is the store manager of a local retailing establishment that sells a wide

variety of shopping and specialty goods, including apparel, cosmetics, house

wares, and electronics. Ahmad probably manages a department store.

4. Ali operates a retail store that has a wide assortment of electronics with little

depth in any one product line. Ali operates a specialty store.

Exercises True/False)


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The End

FHBM1124 Marketing Chapter 10 11-Marketing Channels

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