Chapter 14 Direct Marketing and Marketing Resellers: Retailers and Wholesalers.
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Transcript of Chapter 14 Direct Marketing and Marketing Resellers: Retailers and Wholesalers.
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Chapter 14Chapter 14
Direct Marketing Direct Marketing and Marketing and Marketing
Resellers: Retailers Resellers: Retailers and Wholesalersand Wholesalers
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Chapter ObjectivesChapter Objectives1. Explain the wheel of retailing.2. Explain how retailers select target markets.3. Show how the elements of the marketing mix apply to
retailing strategy.4. Explain the concepts of retail convergence and
scrambled merchandising.5. Identify the functions performed by wholesaling
intermediaries.6. Outline the major types of independent wholesaling
intermediaries and the situations appropriate for each.7. Compare the basic types of direct marketing and non-
store retailing.8. Explain how much the Internet has altered the
wholesaling, retailing, and direct marketing environments.
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RetailingRetailing
Evolution of RetailingEvolution of RetailingTraced to trading posts such as the Hudson
Bay Company and peddlersFirst Retail Institution in the U.S. was the
General StoreSupermarkets appeared in the early 1930sDiscount stores arrived in the 1950sConvenience food stores emerged in the
1960sThe 1980s saw the first off-price retailers
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Wheel of RetailingWheel of RetailingHypothesis that each new type of retailer
gains a competitive foothold by offering lower prices than current retailers, while maintaining profits through reduction of services
Once established, more services are introduced and prices rise
It then becomes vulnerable to new, lower price competitors
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High-end strategy• High prices• Excellent facilities and services
• Upscale consumers
Low-end strategy• Low prices• Limited facilities and services
• Price-sensitive consumers Medium strategy
• Moderate prices• Improved facilities• Broader base of value- and service-conscious consumers
Wheel of RetailingWheel of Retailing
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Retailing StrategyRetailing Strategy
A retailer develops a marketing strategy based on the firm’s goals and strategic plansTwo fundamental steps:
Selecting a target marketDeveloping a retailing mix to satisfy the
chosen target market
Retail image: Consumers’ perceptions of a store and the shopping experience it provides
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Selecting a Target Selecting a Target MarketMarketRetailers analyze
demographic, geographic, and psychographic profiles to segment and select potential markets
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Merchandising StrategyMerchandising StrategyPlanograms: Diagrams of how to exhibit
selections of merchandise within a storeCategory management: Retailing
strategy which views each product category as an individual profit center, and the retailer manages the performance and growth of the entire category
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Exclusively designed products are part of Target’sTarget’s merchandising strategy
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The Battle for Shelf SpaceThe Battle for Shelf SpaceStockkeeping unit (SKU): specific
product offering within a product line that is used to identify items within the line
Slotting allowances: fees paid by manufacturers to secure shelf space from retailers for their products
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Customer Service StrategyCustomer Service StrategyRetailers must decide on the variety of
services they make available for shoppersExamples include gift wrapping, bridal
registry, return privileges, electronic shopping, and delivery and installation
Objectives are to enhance shopper comfort and attract and retain customers
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Pricing StrategyPricing StrategyMarkup: The amount a retailer adds to a
product’s cost to determine its selling priceDetermined by the services the retailer
performs and the inventory turnover rateMarkdown: The amount by which a
retailer reduces a product’s original selling price
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Marshall’sMarshall’sPromoting its
low price strategy
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Location/Distribution StrategyLocation/Distribution StrategyPlanned shopping center: A group of
retail stores planned, coordinated, and marketed as a single unit
Four types of planned shopping centers:Neighborhood – “strip mall”Community – Washington SquareRegional – Mall of AmericaPower – stand-alone stores, single
trading areaLifestyle – BridgeportCompany Outlets - Woodburn
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Mall of AmericaMall of AmericaCombining
shopping with entertainment
Mall of America is one of the most visited destinations in the United States, attracting more visitors annually than Disney World, Graceland and the Grand Canyon combined.
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Promotional StrategyPromotional StrategyRetailers use a variety of promotional
techniques to establish store images and communicate information about their stores
Selling up: retailing selling technique in which salespeople try to persuade customers to buy higher-priced items than originally intended
Suggestive selling: involves salespeople attempting to broaden a customer’s original purchase by adding related items, promotional products, and/or holiday or seasonal merchandise
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Store Store AtmosphericsAtmosphericsPhysical
characteristics and amenities that attract customers and satisfy their shopping needs
Disney Stores borrow from their theme parks to create a familiar shopping environment.
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Types of RetailersTypes of Retailers
Retailers can be categorized by:Form of ownershipShopping effort expended by customerServices provided to customersProduct linesLocation of retail transactions
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Classification of Classification of Retailers by Form of Retailers by Form of OwnershipOwnershipChain storesIndependent
RetailersCooperatives
Ace helps independent retailers compete with chains
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Classification by Shopping EffortClassification by Shopping Effort: Classification system based on the reasons why consumers shop at particular retail outletsRetail stores can be classified as:
Convenience retailers [7/11]Shopping stores [REI]Specialty retailers [Nordstrom]
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Pier 1 ImportsPier 1 ImportsA shopping
store
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The North FaceThe North FaceA specialty
retailer featuring outdoor clothing and equipment
Their products are also sold at other specialty stores
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Classifying by Services ProvidedClassifying by Services ProvidedSelf-service Store (e.g., Kmart)Self-selection Store (e.g., Winn-Dixie or
Kroger grocery stores)Full-service Retailers (e.g., Dillard’s or
Macy’s)
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Classifying by Product LinesClassifying by Product Lines: This classification system groups stores by the product lines they carry.Specialty store: A retailer that typically
handles only part of a single product lineSpecialty retailers carry their particular
products in considerable variety
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Lady Foot Locker -- A specialty store
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Limited-line storeLimited-line store: A retailer that offers a large assortment within a single product line, or within a few related product linesIKEA home furnishings and Levitz furnitureCategory killers: retailers that combine
huge selection and low prices within a single product lineHome Depot and Office Depot
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Lowe’sLowe’sA category
killer which competes with the likes of Home Depot
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General merchandise retailersGeneral merchandise retailers carry a wide variety of product lines, and stock them all in some depthVariety storeVariety store: retailer that offers an
extensive range and assortment of low-priced merchandise
Department storeDepartment store: large store that offers a variety of merchandise, such as men’s and women’s clothing, appliances, linens, and furniture
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SearsSearsThe classic
department store offering clothing, appliances, hardware, etc.
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Mass merchandiserMass merchandiser: store that stocks a wider line of goods than a department store, usually without the same depth of assortment within each lineDiscount houseDiscount houseOff-price retailersOff-price retailersOutlet mallsOutlet mallsHypermarketHypermarketSupercentersSupercentersShowroom and Warehouse Showroom and Warehouse
RetailersRetailers
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KmartKmartDiscount mass
merchandiser selling prestigious brand names
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T.J. MaxxT.J. MaxxAn off-price
retailer
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Classification of Retail Transactions by LocationNon-store retailing – Amazon.com, 800# sales
Retail Convergence: The coming together of shoppers, goods, and prices, resulting in the blurring of distinctions between types of retailer and the merchandise mix they offer. [Similar merchandise available from multiple types of retail outlets.]
Scrambled MerchandisingScrambled Merchandising: concept in which a retailer combines dissimilar product lines in an attempt to boost sales volume. [Walgreens sells groceries, develops photos, sells Hallmark cards and gift items]
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Wholesaling IntermediariesWholesaling Intermediaries
Includes not only wholesalers who assume title to the goods they handle, but also agents and brokers, who conduct wholesaling activities without taking title of the goods.
Functions of Wholesaling IntermediariesFunctions of Wholesaling Intermediaries
Creating UtilityCreating UtilityTime utilityPlace utilityOwnership/possession utility
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Providing ServicesProviding ServicesWholesalers
commonly provide marketing services that reflect the basic marketing functions of buying, selling, storing, transporting, providing market information, financing, and risk taking
Plumbing wholesaler providing selling service
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Lowering Costs by Limiting ContactsLowering Costs by Limiting ContactsIntermediaries that represent multiple
suppliers cut buying and selling costs and reduce transaction time
Firms can increase transaction efficiency by only having to contact one or two intermediaries, rather than hundreds of individual suppliers
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Types of Wholesaling IntermediariesTypes of Wholesaling Intermediaries
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Manufacturer-Owned FacilitiesManufacturer-Owned FacilitiesSales branch – carries inventory and
takes customer ordersSales office – no inventory, manages
sales repsTrade fair – “Trade Show”, in food
industry, FMI, NRAMerchandise mart- large grouping of
permanent showrooms, mainly wholesaling, Chicago Merchandise Mart
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Independent Wholesaling IntermediariesIndependent Wholesaling IntermediariesMerchant wholesaler: An independently owned
intermediary that takes title to the goods it sellsRack Jobbers – specialized lines of
merchandise [M&M Mars]Cash-and-Carry Wholesalers [“Cash & Carry in
Portland]Truck Wholesalers [Frito Lay]Drop Shippers – take title, don’t handle [coal
and lumber]Mail Order Wholesalers [McMaster Carr]
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Table 14.2 – P.466Table 14.2 – P.466Comparison of the Types of Merchant
Wholesalers and Their Services
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Agents and BrokersAgents and Brokers: A second group of independent intermediaries who may or may not take possession of the goods, but never take title. They include:Commission merchants [producers’ agents –
agriculture]Auction houses [used cars]Brokers [don’t control pricing or promotional
funding, operate in specific territories - food industry]
Selling agents [controls total marketing programs, textile industry]
Manufacturer’s agents [independent reps, sell non-competing products, may have marketing responsibilities, paid commission]
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Table 14.3Table 14.3Services Provided by Agents and Brokers
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Retailer-Owned Cooperatives and Buying Retailer-Owned Cooperatives and Buying OfficesOfficesRetailers sometimes assume numerous
wholesaling functions to reduce costs or provide special services
Independent retailers sometimes band together to form buying groups to save through quantity purchases
Large chains often establish centralized buying offices to negotiate large-scale purchases directly with manufacturers
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Direct Marketing and Other Direct Marketing and Other Nonstore RetailingNonstore Retailing
Direct MailDirect Mail is a major component of direct marketingIt comes in many forms, ranging from sales
letters to video cassettes
Direct SellingDirect Selling completely bypasses retailers and wholesalersManufacturers set up their own channels to
sell their products directly to consumers
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Direct-Response RetailerDirect-Response Retailer Customers can order merchandise by mail or telephone, by visiting a mail-order desk in a retail store, by computer or by faxThe Retailer then ships the merchandise to
the customer’s home or to a local store for pickup
TelemarketingTelemarketing refers to direct marketing conducted entirely by telephoneIt is the most frequently used form of direct
marketing
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Internet RetailingInternet RetailingMany retailers operate from virtual
storefronts on the World Wide Web, usually maintaining little or no inventory, ordering directly from vendors to fill customer orders received via E-mail
Automatic MerchandisingAutomatic MerchandisingRetailing through vending machinesAbout $25 billion worth of convenience
goods are sold to Americans through 4.7 million vending machines
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End of Chapter FourteenEnd of Chapter Fourteen