- THE IMPORTANCE OF
- There are hundreds of
thousands of marketing intermediaries whose job it is to help move goods
from the raw-material state to producers and then on to consumers.
organization that assist in moving goods and services from producer to
industrial and consumer users.
- They are
organizations (formerly called "middlemen") in the middle of a series of
organizations that join together to help distribute goods.
- A CHANNEL OF
DISTRIBUTION is the whole series of marketing intermediaries who
join together to transport and store goods in their path from producers
- A WHOLESALER
is a marketing intermediary that sells to other organizations.
- A RETAILER
is an organization that sells to ultimate consumers.
CHANNELS OF DISTRIBUTION enhance communication flows and the flow of money
and title to goods.
- The latest trend is
to try to eliminate wholesalers and the need for retail stores by selling
over the Internet.
- WHY MARKETING NEED
- Manufacturers don’t
always need marketing intermediaries to sell their goods to consumer and
perform certain functions better than most manufacturers. These functions
include transportation, storage, selling, advertising, and relationship
- Companies often
outsource distribution to others.
- BROKERS are
marketing intermediaries who bring buyers and sellers together and assist
in negotiating an exchange, but do not take title to the goods.
- HOW INTERMEDIARIES
CREATED EXCHANGE EFFICIENCY.
CREATE EXCHANGE EFFICIENCY by decreasing the number of contacts needed
to establish marketing exchanges.
- Not only are
intermediaries more efficient, but they are more effective than
- Intermediaries were
often better at performing their functions than a manufacturer or consumer
technology has made it possible for manufacturers to reach consumers much
manufacturers reach consumers directly on the Internet.
- Retailers are now
so closely linked with manufacturers that they can get delivery several
times a day.
- Wholesalers are not
yet obsolete, but must change their functions to remain viable.
- THE VALUE VERSUS
THE COST OF INTERMEDIARIES.
- Some people think
that if we could get rid of intermediaries, we could greatly reduce the
cost of the things we buy.
- The text uses the
example of Fiberiffic to illustrate how marketing intermediaries
facilitate the movement of goods.
- Values discussed
include: the value of not driving to Michigan to buy a box of cereal, the
value of saving time, and effort by not having to drive to a wholesaler’s
on the outskirts of town.
- The text emphasizes
three basic facts about intermediaries:
CAN BE ELIMINATED, BUT THEIR ACTIVITIES CANNOT BE ELIMINATED.
- Someone else
still has to perform the tasks.
- Today many
activities are being performed on the World Wide Web, and
intermediaries ARE being eliminated.
have survived in the past BECAUSE THEY PERFORM FUNCTIONS MORE
EFFECTIVELY AND EFFICIENTLY THAN MOST MANUFACTURERS.
ADD COSTS TO PRODUCTS, BUT THESE COSTS ARE OFFSET BY VALUES THEY CREATE.
UTILITIES CREATED BY INTERMEDIARIES
is an economic term for the value, or want-satisfying ability, that is added
to goods or services by organizations because the products are made more
useful or accessible to consumers.
- FORM UTILITY.
- FORM UTILITY
consists of taking raw materials and changing their form so that they
become useful products.
- It is performed by
producers; the other forms of utility (time, place, possession, and
information) are performed by marketers.
- TIME UTILITY—Intermediaries,
such as retailers, add TIME UTILITY to products by making them
available when they are needed.
UTILITY—Intermediaries add PLACE UTILITY to products by having them where
people want them.
- POSSESSION UTILITY—Intermediaries
add POSSESSION UTILITY by doing whatever is necessary to transfer
ownership from one party to another, including providing credit.
- Activities include
delivery, installation, guarantees, and follow-up service.
- For those who don’t
want to own goods, possession utility makes it possible for them to use
goods through renting.
INFORMATION UTILITY by opening two-way flows of information between
- SERVICE UTILITY.
- Intermediaries add
SERVICE UTILITY by providing fast, friendly service during and
after the sale and teaching customers how to best use products.
- Service utility is
fast becoming the most important utility for retailers.
- For consumers to
receive the maximum benefit from marketing intermediaries, the organizations
must work together.
BETWEEN WHOLESALERS AND RETAILERS.
- Some producers
won’t sell directly to retailers but only to wholesalers.
- Some organizations
sell much of their merchandise to other intermediaries, but also sell to
- A RETAIL SALE
is the sale of goods and services to consumers for their own use.
WHOLESALE SALE is the sale of goods and services to
businesses and institutions for use in the business to others for resale.
independently-owned firms that take title to goods that they handle.
WHOLESALERS perform all eight
distribution functions: transportation, storage, risk bearing, credit,
market information, standardizing, grading, buying, and selling.
WHOLESALERS perform only
selected functions, but do them especially well.
- RACK JOBBERS
furnish racks or shelves full of merchandise to retailers, display
products, and sell on consignment.
WHOLESALERS serve mostly
smaller retailers with a limited assortment of products.
- DROP SHIPPERS
solicit orders from retailers
and other wholesalers and have the merchandise shipped directly from a
producer to a buyer.
- A FREIGHT
FORWARDER puts many small shipments together to create a single, large
shipment that can be transported more cost-efficiently to the final
BUSINESS-TO-BUSINESS (B2B) WHOLESALING.
- Companies are
building e-commerce sites aimed at small and midsize businesses.
- They hope to sell
PCS and other items to businesses just like they do to consumers.
business-to-business market is bigger than the consumer market.
- RETAIL INTERMEDIARIES
- A RETAILER is
a marketing middleman that sells to consumers.
- The U.S. has about
2.3 million retail stores.
- About 11 million
people work for retail organizations.
- HOW RETAILERS
- Discount stores
such as Wal-Mart succeed with low prices.
organizations, such as Southwest Airlines, also compete on price.
- Price competition
is getting fiercer as Internet firms help consumers find the best prices
on a variety of items.
- Retail service
involves putting the customer first and providing follow-up service.
- Consumers are
frequently willing to pay a little more if the retailer offers
- The benchmark
companies are Dayton’s, Lord & Taylor, Dillard’s, and Nordstrom.
- Many services
compete effectively by having good locations.
- Nothing is more
convenient than shopping online.
between brick-and-mortar retailers and online retailers is intensifying.
- Selection is the
offering of a wide variety of items in the same product category, such
as Toys "R" Us.
KILLER STORES offer wide
selection at competitive prices.
- Smaller retailers
compete with category killers by offering more selection within a
smaller category of items.
- Many category
killer stores are in turn being "killed" by discount department stores
- Internet stores
can offer products from dozens of suppliers and offer almost unlimited
organizations that compete successfully on selection include Blockbuster
Video and most community colleges.
- The Internet
isn’t as much fun as a brick-and-mortar store designed to provide
- More and more
malls are offering this "shoppertainment"
- Different products
call for different retail distribution strategies.
INTENSIVE DISTRIBUTION puts
products into as many retail outlets as possible, including vending
DISTRIBUTION is the use of
only a preferred group of the available retailers in an area.
DISTRIBUTION is the use of
only one retail outlet in a geographic area.
- E-Tailing is another
step in the evolution of retailing away from traditional stores to nonstore
means selling goods and services to ultimate consumers over the Internet.
- Getting customers
is only half the battle; the other half is delivering the goods, providing
service, and keeping your customers.
- E-tailers are often
not adept at SERVICE AFTER THE
- The latest trend in
e-commerce is for the traditional retailers like Kmart to go online.
brick-and-mortar stores are going online; these are sometimes called
is the sale of goods and services by telephone.
- Telemarketing is
predicted to be one of the fastest-growing areas in marketing.
- VENDING MACHINES,
KIOSKS, AND CARTS.
- The benefit of
vending machines is their CONVENIENT LOCATION.
and KIOSKS have lower costs that stores, so they can offer lower
- DIRECT SELLING
- DIRECT SELLING
is selling to consumers in their homes or where they work.
- Because so many
women now work, many companies are sponsoring parties at workplaces and on
weekends and evenings.
- Each MLM
salesperson works as an independent contractor.
- They EARN
COMMISSIONS on their own sales and create commissions for the "upliners"
who recruited them.
- They also
RECEIVE COMMISSIONS from "downliners" who they recruit to sell.
marketing has been successful around the world.
- The main attraction
of multilevel marketing is the LOW COST OF ENTRY.
- Be careful not to
confuse multilevel marketing with "pyramid" schemes that are illegal.
- DIRECT MARKETING
- One of the
fastest-growing aspects of retailing is DIRECT MARKETING, includes
any marketing activity that directly links manufacturers or intermediaries
with the ultimate consumer.
- Direct retail
marketing includes direct mail, catalog sales, telemarketing, and on-line
- Examples are L.L.
Bean, Lands’ End, Dell Computers, and Gateway 2000.
- Direct marketing
has become popular because it is more convenient for consumers.
- Interactive online
selling is expected to provide major competition for retail stores in the
- . BUILDING
COOPERATION IN CHANNEL SYSTEMS.
- Firms are often
linked together in formal relationships to form efficient DISTRIBUTION
- A CORPORATE
DISTRIBUTION SYSTEM is one in which all the organizations in the channel
are owned by one firm.
DISTRIBUTION SYSTEM is one in
which members are bound to cooperate through contractual agreements.
- In FRANCHISING
SYSTEMS (such as McDonald’s, KFC, Baskin-Robbins, and AAMCO), the
franchisee agrees to all of the rules, regulations, and procedures
established by the franchisor.
WHOLESALER-SPONSORED CHAINS (Western Auto and IGA food stores), each
store agrees to use the name, participate in chain promotions, and
cooperate even though each store is independently owned.
Grocers) is like a wholesaler-sponsored chain except it is initiated by
- The management by
producers of all the marketing functions at the retail level is called an
ADMINISTERED DISTRIBUTION SYSTEM.
- Retailers cooperate
because they get so much free help.
- SUPPLY CHAINS.
- The SUPPLY CHAIN
is the sequence of linked activities performed by various organizations to
move goods from the sources to ultimate consumers.
- Channels of
distribution are part of the overall supply chain.
- Software is
available that coordinates the movement of goods so products reach
consumers with the least amount of materials, inventory, and time.
- By sharing
information and providing fast service, these united firms are becoming
competitive entities in the global market.
- SUPPLY CHAIN MANAGEMENT
- SUPPLY CHAIN
MANAGEMENT (SCM) is the
process of managing the movement of raw materials, parts, work in
progress, finished goods, and related information through all the
organizations involved in the supply chain.
LOGISTICS brings raw
materials, packaging, other goods and services, and information from
suppliers to producers.
PROCESSES change raw materials
and parts into outputs.
LOGISTICS manages the flow of
finished products and information to business buyers and consumers.
- THE NEW CHALLENGES
IN SUPPLY-CHAIN MANAGEMENT.
- 1. Outbound
logistics has been the biggest problem for new online retailers.
- The text uses the
example of Peapod Inc. and its problems with order satisfaction.
- Those who best
manage the supply chain will have a real advantage.
- CHOOSING THE RIGHT
MODE AND STORAGE UNITS
- METHODS USED TO
MOVE RAW MATERIALS AND FINISHED GOODS.
- One concern is
selecting a transporting mode that will minimize costs and ensure a
certain level of service.
- The largest volume
of goods is shipped by RAIL.
- Railroad shipment
is best for bulky items.
continue to handle about 35 to 40% of the total volume of goods in the
refers to shipping the cargo- carrying part of a truck on a railroad
- The second-largest
surface transportation mode is MOTOR VEHICLES (a little over 25% of
- Trucks can
deliver almost any commodity door-to-door.
- Now piggybacking
methods involve railroad cars 20 feet high called double-stacks
TRANSPORTATION carries 15 to
17% of the total.
- When truck
trailers are placed on ships, the process is called FISHYBACK.
- When they are
placed in airplanes, the process is called BIRDYBACK.
- About 21% of the
total volume moves by PIPELINE.
- Pipelines are
used primarily for transporting petroleum and petroleum products.
- There have been
experiments with sending other solids in pipelines.
- Only a small part
of shipping is done by AIR.
- The primary
benefit is SPEED.
- The air freight
industry is starting to focus on global distribution.
SHIPPING uses multiple modes
of transportation to complete a single long-distance movement of freight.
- Railroads are
merging with each other and other transportation companies to offer
- THE STORAGE
- Storage accounts
for 25 to 30% of physical distribution costs.
- A STORAGE WAREHOUSE
stores products for a relatively long time.
WAREHOUSE gather and
redistribute products (UPS).
- MATERIALS HANDLING
is the movement of goods within a warehouse, factory, or store.
- WHAT ALL THIS
MEANS TO YOU.
- The success of a
firm often depends on its ability to take orders, process them, and get
the goods to customers.
- There are many new
jobs available in the area of supply-chain management.