MKTG101 Marketing Fundamentals
Week 10 Place
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Place
If the product is not available to the customer, no ‘conventional’ exchange can take place – cf consumatory B2C . Alternative and related terms describing place:
– Placement – Physical distribution – Distribution channels – Logistics
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Military Logistics
The science & discipline involved in getting an army to the right place, at the right time, in the right state of preparation, with the right support, to win a battle.
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Marketing logistics
The process of planning, implementing and controlling the efficient, costeffective flow and storage of materials, in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.
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Logistics mix
Each of the following is essential to achieving a marketing exchange but Marketing cannot ‘directly’ control any of them. Objective: is to optimise.
– – – – – – – Transport Materials handling Warehousing Inventory Service levels Order processing Forecasting etc…
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Marketing distribution channels
Distribution: the process of moving the product from the place and time of creation to consumption. Elements: supplier, consumer and interdependent intermediary, that are organizations aligned to make possible the passage of title or possession of products from supplier to consumer
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Why use intermediaries?
• Many suppliers lack the financial resources to carry out direct marketing or channel functions • Producers can often earn a greater return by increasing their investment in their main business • Intermediaries usually offer a producer or supplier more than the supplier can achieve on their own
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Distribution efficiency
Suppliers S1 S2 S3 9 Transactions Consumers C1 C2 S2 C3
Suppliers
This intermediary has great power over suppliers
S1
S3 6 Transactions C3
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INTERMEDIARY
C1 C2 MKTG101 2005 Week 10
Consumers
Distribution channel functions
Risk Taking
Information
Financing
Promotion
Physical Distribution
Contact
Negotiation
MKTG101 2005 Week 10
Matching
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Distribution Channel Functions
Note that each of the following functions is essential. If the channel does not provide them (disintermediation), the supplier or the customer must. Information: gathering and distributing marketing research and intelligence Promotion: developing and spreading communications about an offer. Contact: finding and communicating with prospective buyers.
Matching:
shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling and packaging.
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Distribution channel functions cont.d
Negotiation: reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.
Physical distribution: transporting and storing goods. Financing: acquiring and using funds to cover the costs of the channel work. Risk taking: assuming the risks of carrying out the channel work.
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Distribution channel options
Consumer Marketing Channels
Channel 1: Direct B2C
M
Channel 2: Retailer M Channel 3: Wholesaler - retailer M
C
B2B2C
R
C
(B2B)3 2C
W
B2B2B2C
R
C
Channel 4: Wholesaler - Broker - Retailer M W
B
R
C
12
MKTG101 2005 Week 10
Conventional and Vertical Networks
Conventional Manufacturer Vertical Manufacturer
Wholesaler
Retailer Consumer
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Wholesaler / Retailer
Consumer
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Channel strategies
Vertical Marketing Networks (VMN): intermediaries at more than one level in the chain acting as a unified network. Types of integration:
– Corporate: one channel member owns another – Contractual: channel members’ actions are covered by a contract – Administered: one channel member has sufficient power to influence the actions of another
Control can be located at any level in the chain
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Channel strategies cont.d
Horizontal Marketing Networks (HMN):
Two or more companies at one level join together to follow a new marketing opportunity Hybrid Marketing Networks ( multi channel networks): Hybrid marketing channels occur when a single firm uses two or more channels
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Distribution intensity
Intensive
Alternative Selective distribution intensities
Exclusive
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Distribution intensity
Intensive: the product is available through every possible suitable outlet in the market Selective: the product is available through more than one but not all outlets in the market Exclusive: the product is available through only one outlet in the market
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Considerations affecting channel choice
Market ‘types’
Product ‘mix’ Quality of Intermediaries The Organization itself
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Retailer
Retailer: An intermediary that deals directly with consumers Retailers are grouped according to several criteria depending on the situation:
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Retailing
Type of Store Cluster Amount of Service
Control of Outlets
Classifications of retail outlets
Product Line Sold
Relative Prices
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Retailer characteristics
Amount of service:
– Self service – Limited service – Full service
Product line sold:
– Merchandise, service categories
Relative prices:
– Premium – Mid-range – Economy/discount
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Control of outlets
Merchandising Conglomerate Corporate Chain
Franchise
Categories by control of outlets
Voluntary Chain
Retailer Cooperative
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Chain stores
Chain: Two or more stores employing central buying and merchandising, selling similar lines
Types:
– Voluntary – Corporate
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Retailer cooperative
Cooperative: An association of independent stores who jointly own and operate a buying, merchandising and promotion group
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Franchise
Franchisee: An independent organization which buys the right to use the name, expertise and resources of an already established business (the franchisor)
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Merchandising conglomerate
Conglomerate – (means made up of many smaller/different parts): an organization combining several different retailing, distribution and management functions under one ownership
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Retailer marketing decisions
Place
Target Market Key Retailer Decisions
Promotion
Product Assortment
Price
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Patterns of retail development
• The Accordion Theory General-Specialist-General • The Wheel of Retailing
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Accordion theory
• 00
Outlet Type Specialist General Specialist Product Range Narrow Wide Narrow
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The Wheel of Retailing
Trading up:
More service, Higher costs, Higher prices Vulnerable to Low cost, Low price entrant
Entry Point:Low cost, Low price
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Wholesaler
Wholesaler: A marketing intermediary engaged in selling in larger quantities of products to other businesses for their use or resale
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Wholesaler functions
Management Advice Selling and Promoting
Market Information
Risk Bearing
Wholesaler Functions
Buying and Assortment
Bulk-Breaking
Financing
Warehousing
Transporting
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Wholesaler functions
Selling and Promoting
Buying and Assortment Bulk-Breaking Warehousing
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Wholesaler functions
Transporting Financing Risk Bearing Market Information Management Advice
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