Marketing 3.05

Acquire foundational knowledge of channel

management to understand its role in marketing

Acquire foundational knowledge of channel

management to understand its role in marketing

What is channel management? Controlling the movement of the

product(s) through the system. Logistics deals with the movement of

goods and timing of the deliveriesDistribution involves the movement,

storage and inventory control of the product(s).

What is a channel?

The path (channel) a product travels from the producer (manufacturer) to the ultimate consumer

MARKETING MIX & FUNCTIONS

Remember the Marketing Mix?Remember the 6 functions?________ MGMT = _________

Channel management decisions

Select channel membersManage and motivate channel membersEvaluate channel membersWhat is the best means to distribute the

product?

Who is an intermediary (middleman)?

Channel members who assist the producer in getting the goods and services to the final user

ACTIVITY 1

Get with your 10 o’clock and get a Marketing Essential book and got to pp 376-377

Various intermediaries include Wholesalers Retailers Agents

Define and give a

Complete example

What is a direct channel?Distribution that occurs directly

from the producer to the consumer For example: A consumer buys

apples from an apple farmer Cuts out the middleman

What is an indirect channel?

Distribution that occurs through one or more intermediaries before reaching the final user

For example: The apple farmer sells his apples to Harris Teeter and Harris Teeter sells them to the consumer

Indirect channel is used….

When a producer doesn’t want responsibility for the selling activities of a large retailerProducer to agent to retailer to consumer

Because wholesalers usually buy in large quantitiesProducer to wholesaler to retailer to consumer

Transportation is…

Physically moving from

Place A Place B

Methods include:Trucking or motor carriers Railroads Marine shipping Pipelines Air cargo services

Inventory is…..

Storing of merchandise before it is soldPerpetual inventory controlPhysical inventory control

Methods for checking inventoryBlind check method Direct check method Spot check method Quality check method

ACTIVITY 2

Get with your 7 o’clock appointments

Complete “Channels of Distribution Match Up”

You have 10 minutes

Purpose of channel members

Channel members add value to a product by performing certain channel activities expertlyMarketingPackagingFinancingStorageDeliveryMerchandisingPersonal selling

Distribution planning involves…

Decisions about a product’s physical movement and transfer of ownership from producer to consumer.

Some of the major considerations are:Multiple channelsControl vs. costsIntensity of distribution desiredInvolvement in e-commerce

Multiple channels….

Some products meet the needs of both industrial and consumer markets.

J & J Snack Foods sells its pretzels, drinks and cookies using multiple channels to:SupermarketsMovie TheatersStadiumsSchoolsHospitals

Distribution IntensityDistribution intensity is how widely a

product will be distributed; marketers want to achieve the ideal market exposureExclusive distribution – protected territories

for distribution of a product in a given geographic area; business maintains tight control over a product

Ex. Franchisor legally requires a franchisee to sell only the franchisor’s productsIntegrated distribution is where the manufacturer

acts as wholesaler and retailer for its own products. Ex. The Gap sells its clothing in company-owned retail stores.

Distribution IntensitySelective distribution – a limited number of

outlets in a given geographical area are used to sell the product.

Very important to select channel members that can maintain the image of the product and are good credit risks, aggressive marketers and good inventory planners.

Ex. Dana Buckman sells its clothing only through top department stores that appeal to the affluent customers who buy its merchandise. It does not sell in a chain megastore or a variety store.

Distribution Intensity

Intensive distribution – the use of all suitable outlets to sell a product.

The objective is complete market coverage and the ultimate goal is to sell to as many customers as possible, wherever they choose to shop.

Ex. Motor oil is sold in quick-lube shops, farm stores, auto parts retailers, supermarkets, drugstores, hardware stores, warehouse clubs, and other mass merchandisers.

Dual distribution

A manufacturer may sell its products through multiple outlets at the same time:Toll-free phone systemCompany websiteMultiple retailers

Horizontal and Vertical Conflict

Horizontal Conflict: occurs between channel members at the same levelGood, old-fashioned business competitionEx: two retailers selling pet supplies compete to

sell to the same target market

Vertical Conflict: occurs between channel members at different levels within the same channelProducers and wholesalers or producers and

retailers

Customer service and appropriate channel management

Ensures timely delivery of productsEffective communication is important

Order processingCorrect shipping informationCorrect productsHandling complaintsReducing the probability of complaintsNice and friendly people

Customer Service and Channel ManagementGrey-market strategy – selling product

in foreign countries for a lower price than customers can get domestically

Full-line forcing - Producer or supplier insistence that the dealer must carry the full range of products in the line. This policy may not be illegal if it can be established that it serves a legitimate business need.

Bad Customer service and Channel ManagementVendor consistently has back orders

Product not available when ordered

Coercion – large business threatening to stop using a supplier unless given major concessionsTying agreement - Purchase agreement in

which the customer is forced to purchase a slow-selling or unknown brand or product with a fast-selling or well known one. Such coercion is usually illegal.

Use of Technology in Distribution

Some businesses have the capacity to distribute most or all of their products through the internete-commerce: Products are sold to customers

and industrial buyers through the Internet.e-marketplace

Satellite tracking = a dispatcher has current knowledge of a delivery truck’s location and destination

Use of Technology in Distribution

Tracking of packageBar coding on packagePackage scanned at transition points in

distribution chainCustomer uses internet to follow package along

distribution chain; e-mail may be usedGlobal distribution: in some countries the postal

service is not reliable; package tracking facilitates global trade

Activity 3Get with your 3 o’clock Complete 3.05 ReviewWe will review 3.00

questions in 10 minutes!

C1. Sales begin to level off on a 5 year old product because customers are purchasing the competitor's brand. What strategy would be most appropriate to use in this situation?

A. Take the product off the market

B. Do nothing; fluctuations in sales are common

C. Modify the product to renew customer interest

D. Triple the advertising budget for the product

D2. Which activity is addressed in the product/service management function? A. Setting discounts to clear products from inventory

B. Determining where products will be offered for sale

C. Focusing promotions on a new-product release

D. Eliminating products that are slow sellers

B3. Which of the following is a way that a business can extend the life cycle of an established product?

A. By promoting the product to current users

B. By finding new uses for the product

C. By restricting distribution

D. By attracting consumers who are innovators

D4. Why does a company need to know what stage of the product life cycle its products are in?

A. To prevent imitators from entering the market

B. To find new uses for the product

C. To predict the length of the life cycle

D. To adapt its marketing strategies

C5. Why might profits sometimes decline for the company that first introduced the product during the growth stage of a product's life cycle?

A. Because sales decline in the growth stage

B. Because marketing strategies are adjusted

C. Because competitors have entered the market

D. Because production is more efficient

D6. What is a technologically advanced method that allows businesses to produce products that are?

A. Intermittent conversion

B. Automatic production

C. Computerized robotics

D. Mass customization

B7. What is one way businesses use computer technology to obtain information to improve their product/service mix?

A. Mailing questionnaires to customers

B. Tracking visitors to their web sites

C. Compiling detailed databases

D. Preparing interactive software programs

B8. What is an example of an ethical issue that a product/service manager might face?

A. Use of color on the label

B. Use of environmentally friendly packaging

C. Use of packaging as a means of promotion

D. Use of nutrition information on a food label

B9. Why is the quality level of a product an important product/service management decision?

A. It identifies a product's brand.

B. It reflects the image of the business.

C. It protects the consumers.

D. It refers to the way the product works.

B10. A company advertises that its products are durable lightweight, and come in a variety of colors. What strategy is the company using to position its product?

A. Price and quality

B. Features and benefits

C. Unique characteristics

D. Relationship to other products

D11. "Great taste, great price" is what product positioning strategy?

A. Relationship to other products

B. Features and benefits

C. Unique characteristics

D. Price and quality

A12. In what stage of brand loyalty do people become aware of the brand?

A. Recognition

B. Satisfaction

C. Insistence

D. Preference

C13. What costs do businesses usually include in the price of their products?

A. Regulations

B. Inflation

C. Transportation

D. Orientation

D14. What would be the most appropriate pricing strategy for a business in a small town where unemployment has skyrocketed and the economy is in a downturn?

A. Below-cost pricing

B. High-level pricing

C. Odd-cents pricing

D. Flexible pricing

C15. What is the advantage to a business of using bar-code pricing?

A. Easier for customers to read

B. Reduces required business security

C. Easier to change prices

A16. A business charges a small company a higher price for a product than it charges a large company What does this represent?

A. Price discrimination

B. Controlled pricing

C. Price competition

D. Regulated pricing

B17. A group of companies recently decided to sell their products for the same price. In what unethical activity are the businesses engaging?

A. Bait-and-switch

B. Price fixing

C. Loss-leader pricing

D. Gray markets

C18. What is an external factor that affects the price that a business charges for its products?

A. Operating costs

B. Variable expenses

C. Economic conditions

D. Employee benefits

A19. What do marketers want to achieve by determining distribution intensity?

A. Ideal market exposure

B. Complete market coverage

C. Perfect market balance

D. Total market saturation

D20. Which of the following is an aspect of channel management that impacts customer service?

A. Advertising

B. Taxes

C. Protectionism

D. Timeliness

C21. What is one action that customer service can take to facilitate order processing?

A. Negotiate aggressively

B. Oversee assembly

C. Communicate effectively

D. Monitor inventory

B22. What indirect channel of distribution is used to reach large retailers when the producer doesn’t want responsibility for the selling activities?

A. Producer to wholesaler to retailer to consumer

B. Producer to agent to retailer to consumer

C. Producer to wholesaler to consumer

D. Producer to consumer

C23. What factor could determine legal ownership of goods in the distribution process?

A. Country in which the product is

produced

B. Availability of the product

C. Involvement of agents

D. Physical characteristics of the product

D24. What legal example is represented by a manufacturer selling its products through a toll-free phone system, a company web site, and several retailers?

A. Restricted sales territories

B. Exclusive dealing

C. Tying agreements

D. Dual distribution

C25. What is an example of a large business using coercion in the distribution channel

A. Buying products from unauthorized intermediaries

B. Requiring a specific type of packaging material

C. Threatening to stop using a supplier unless given a major concession

D. Returning shipments w/o proper authorization