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Transcript of Foundations of Business 3e Pride, Hughes, & Kapoor.
Foundations of Business 3e
Pride, Hughes, & Kapoor
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 2
Distributing and Promoting Products
Chapter
13
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 3
Channel of distribution (marketing channel)• A sequence of marketing organizations that directs
a product from the producer to the ultimate user
Middleman (marketing intermediary)• A marketing organization that links a producer
and user within a marketing channel– Merchant middleman—takes title to products by buying them
– Functional middleman—helps in the transfer of ownership of products but does not take title to the products
– Retailer—buys from producers or other middlemen and sells to consumers
– Wholesaler middleman—sells products to other firms
Distribution Channels and Market Coverage
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 4
Channels for Consumer Products
Producer to consumer (direct channel)• No intermediaries• Used by all services and by a few consumer goods• Producers can control quality and price, do not have
to pay for intermediaries, and can be close to their customers
• Examples: Dell Computer, Mary Kay Cosmetics
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 5
Channels for Consumer Products (cont.)
Producer to retailer to consumer• Producers sell directly to retailers when retailers (e.g.,
Walmart) can buy in large quantities
• Most often used for bulky products for which additional handling would increase selling costs, and for perishable or high-fashion products that must reach consumers quickly
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 6
Channels for Consumer Products (cont.)
Producer to wholesaler to retailer to consumer• The traditional channel• Used when a producer’s products are carried by
so many retailers that the producer cannot deal with them all
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 7
Channels for Consumer Products (cont.)
Producer to agent to wholesaler to retailer to consumer• Agents—functional middlemen that do not take title
to products and are compensated by commissions paid to the producers
• Often used for inexpensive, frequently purchased items, for seasonal products, and by producers that do not have their own sales forces
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 8
Channels for Consumer Products (cont.)
A manufacturer may use multiple channels• To reach different market segments
– When the same product is sold to consumers and businesses
• To increase sales or capture a larger market share
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 9
Distribution Channels
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 10
Channels for Business Products
Producer to business user• Usually used for heavy machinery, airplanes, major
equipment• Allows the producer to provide expert and timely
services to customers
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 11
Channels for Business Products (cont.)
Producer to agent middleman to business user• Usually used for operating supplies, accessory
equipment, small tools, standardized parts
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 12
Channels for Business Products (cont.)
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 13
Level of Market Coverage
Intensity of market coverage• Intensive distribution
– The use of all available outlets for a product to saturate the market
• Selective distribution– The use of only a portion of the available outlets for a
product in each geographic area
• Exclusive distribution– The use of only a single retail outlet for a product in a
larger geographic area
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 14
Partnering Through Supply-Chain Management
Supply-chain management• Long-term partnership among channel members
working together to create a distribution system that reduces inefficiencies, costs, and redundancies while creating a competitive advantage and satisfying customers
• Category management– The retailer asks a supplier how to stock the shelves
• Technology– Has enhanced implementation of supply-chain
management
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 15
Marketing Intermediaries: Wholesalers
Justifications for marketing intermediaries• Intermediaries perform essential marketing services
• Manufacturers would be burdened with additional record keeping and maintaining contact with numerous retailers
• Costs for distribution would not decrease and could possibly increase due to the marketing inefficiencies of producers
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 16
Types of Wholesalers
Merchant wholesalers• Middlemen that purchase goods in large quantities and
then sell them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial users
• Operate in one or more warehouses where they receive, take title to, and store goods
• These wholesalers are sometimes called distributors or jobbers
• Full-service wholesalers– General merchandise wholesaler– Limited-line wholesaler– Specialty-line wholesaler
• Limited-service wholesalers
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 17
Types of Wholesalers (cont.)
Commission merchants, agents, and brokers• Functional middlemen that do not take title to
products• Perform some marketing activities• Paid a commission (percentage of sales price)• Commission merchant
– Carries merchandise and negotiates sales for manufacturers
• Agent– Expedites exchanges, represents a buyer or a seller, and is often
hired permanently on a commission basis
• Broker– Specializes in a particular commodity, represents a buyer or a
seller, and is likely to be hired on a temporary basis
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 18
Types of Wholesalers (cont.)
Manufacturer’s sales branch• Merchant wholesaler owned by a manufacturer• Carries inventory, extends credit, delivers goods,
helps in promoting products• Customers are retailers, other wholesalers, and
industrial purchasers
Manufacturer’s sales office• Sales agent owned by a manufacturer• Sells goods manufactured by its own firm and also
others that complement its own product line
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 19
Marketing Intermediaries: Retailers
Retailers • The final link between producers and consumers
Approx. 2.6 million retail firms in the U.S.
90 percent have sales of less than $1 million
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 20
The Ten Largest Retail Firms in the United States
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 21
Classes of In-Store Retailers
Independent retailer• A firm that operates only one retail outlet
Chain retailer• A company that operates more than one retail outlet
Department store• A retail store that:
– employs twenty-five or more persons– sells at least home furnishing, appliances, family apparel,
and household linens and dry goods, each in a different part of the store
Discount store• A self-service, general-merchandise outlet that sells
products at lower-than-usual prices
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 22
Classes of In-Store Retailers (cont.)
Catalog showroom• A retail outlet that displays well-known brands and
sells them at discount prices through catalogs within the store
Warehouse showroom• A retail facility in a large, low-cost building with large
on-premises inventories and minimal service Convenience store
• A small food store that sells a limited variety of products but remains open well beyond normal business hours
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 23
Classes of In-Store Retailers (cont.)
Supermarket• A large self-service store that sells primarily food and
household products Superstore
• A large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product lines
Warehouse club• A large-scale members-only establishment that
combines features of cash-and-carry wholesaling with discount retailing
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 24
Classes of In-Store Retailers (cont.)
Traditional specialty store• A store that carries a narrow product mix with deep
product lines Off-price retailer
• A store that buys manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts
Category killer• A very large specialty store that concentrates on a
single product line and competes on the basis of low prices and product availability
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 25
Kinds of Nonstore Retailing
A type of retailing whereby consumers purchase products without visiting a store• Direct selling
– The marketing of products to consumers through face-to-face sales presentations at home or in the workplace
• Direct marketing– The use of the telephone, Internet, and
nonpersonal media to introduce products to customers, who can then purchase them via mail, telephone, or the Internet
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 26
Kinds of Nonstore Retailing (cont.)
Catalog marketing• An organization provides a catalog from which
customers make selections and place orders by mail, telephone, or the Internet
Direct-response marketing• A seller advertises a product and makes it available,
usually for a short time period, through mail, telephone, or online orders
Telemarketing• The performance of marketing-related activities by
telephone
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 27
Kinds of Nonstore Retailing (cont.)
Television home shopping• Products are presented to television viewers, who
can buy them by calling a toll-free number and paying by credit card
Online retailing• Makes products available to buyers through
computer connections Automatic vending
• The use of machines to dispense products
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 28
Types of Shopping Centers
A self-contained retail facility constructed by independent owners and consisting of various stores• Lifestyle shopping center
– Has an open-air configuration and is occupied by upscale national chain specialty stores
• Neighborhood shopping center– Consists of several small convenience and specialty stores
• Community shopping center– Includes one or two department stores and some specialty stores,
along with convenience stores
• Regional shopping center– Contains large department stores, numerous specialty stores,
restaurants, movie theaters, and sometimes hotels
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 29
Physical Distribution
All those activities concerned with the efficient movement of products from the producer to the ultimate user• Inventory management• Order processing• Warehousing• Materials handling• Transportation
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 30
Inventory management• The process of managing inventories in such a way as
to minimize inventory costs, including both holding costs and potential stock-out costs
– Holding costs—the costs of storing products until they are purchased or shipped to customers
– Stock-out costs—the costs of sales lost when items are not in inventory when needed
• Technology and software help manage inventory• Efficiency is crucial for firms using just-in-time
(JIT) approach Order processing
• Activities involved in receiving and filling customers’ purchase orders
Physical Distribution (cont.)
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 31
Warehousing• The set of activities involved in receiving and storing
goods and preparing them for reshipment– Receiving goods– Identifying goods– Sorting goods– Dispatching goods to storage– Holding goods– Recalling, picking, and assembling goods– Dispatching shipments
• Types of warehouses– Private warehouses—owned and operated by a firm– Public warehouses—offer their services to all firms
Physical Distribution (cont.)
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 32
Physical Distribution (cont.)
Materials handling• The physical handling of goods, in warehouses as well
as during transportation
Transportation• The shipment of products to customers• Carrier—a firm that offers transportation services
– Common carriers—services available for hire to all shippers– Contract carriers—available for hire by one or several
shippers; not available to the general public– Private carriers—owned and operated by the shipper
• Freight forwarders—agents who facilitate the transportation process for shippers by handling the details of the process
• Railroads—in terms of total freight carried, these are America’s most important mode of transportation
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 33
Physical Distribution (cont.)
Transportation• Trucks
– Tremendous expansion since creation of national highways– Often favored for offering door-to-door service, less stringent
packaging requirements, and flexible schedules
• Airplanes– Fastest but most expensive– Used to ship high-value or perishable goods
• Waterways– Slowest but least expensive– Used mainly for bulky, nonperishable goods– Use limited to cities located on navigable waterways
• Pipelines– used primarily to carry petroleum and natural gas
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 34
Characteristics of Transportation Modes
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 35
Class Exercise
Which channel(s) of distribution would you use for the following products? Why?• A new reduced-fat candy bar• Fine china that costs $550 for a set• A set of encyclopedias that costs $750• A line of jeans that sells between $30 and $50 a pair
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 36
What Is Integrated Marketing Communications?
Coordination of promotion efforts to ensure maximal informational and persuasive impact on customers
Results in a consistent message to customers, long-term customer relationships, and the efficient use of promotional resources− Mass media advertising has given way to targeted
promotional tools (e.g., cable TV, direct mail, and the Internet)
− The overall cost of marketing communications has risen significantly, pressuring managers to make the most efficient use of marketing resources
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 37
The Promotion Mix: An Overview
Promotion• Commonly the object of two misconceptions
– Promotional activities make up the entire field of marketing– Promotional activities are unnecessary and cause higher prices
Role of promotion• To facilitate exchanges directly or indirectly by informing
individuals, groups, or organizations and influencing them to accept a firm’s products or to have more positive feelings about the firm
– Convey product and service information directly to target market segments
– Provide information to interest groups, regulatory agencies, investors, and the general public
• To maintain positive relationships between a company and various groups in the marketing environment
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 38
The Promotion Mix: An Overview (cont.)
The particular combination of promotion methods a firm uses to reach a target market• Advertising
– A paid non-personal message communicated to a select audience through a mass medium
• Personal selling– Personal communication aimed at informing customers and
persuading them to buy a firm’s products
• Sales promotion– The use of activities or materials as direct inducements to
customers or salespersons
• Public relations– Communication activities used to create and maintain favorable
relations between an organization and various public groups, both internal and external
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 39
Possible Elements of a Promotion Mix
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 40
Advertising
Types of advertising by purpose• Primary-demand advertising
– Used to increase demand for all brands of a product in a specific industry
• Institutional advertising– Designed to enhance a firm’s image or build its
reputation
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 41
Advertising (cont.)
Advertising Age is the industry’s preeminent source of marketing, advertising, and media news, information, and analysis.
http://www.adage.com
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 42
Debate Issue: Is It Appropriate for Marketers to Advertise to Children?
Yes
• Children have billions of dollars in discretionary income and spend almost all of it.
• Children buy regularly.
• Children are heavily influenced by television advertising.
• Children directly influence more than $40 billion in adult purchases each year..
No
• Television advertising alters one’s sense of reality, making children more prone to “need gratification” and more susceptible to peer pressure.
• Most purchase decisions are made by parents.
• On certain issues, children are easily deceived.
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 43
Major Steps in Developing an Advertising Campaign
1. Identify and analyze the target audience.
2. Define the advertising objectives.
3. Create the advertising platform.
4. Determine the advertising appropriation.
5. Develop the media plan.
6. Create the advertising message.
7. Execute the campaign.
8. Evaluate advertising effectiveness.
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 44
Who Spends the Most on Advertising?
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 45
Independent firms that plan, produce, and place advertising for their clients
Large agencies also help with sales promotion and public relations
Media usually pay a commission to agencies Firms may use both in-house advertising
departments and an independent agency
Advertising Agencies
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 46
Personal Selling
The most adaptable promotion method The most expensive promotion method Kinds of salespersons
• Order getter– Responsible for creative selling: selling a firm’s
products to new customers and increasing sales to current customers
• Order taker– Handles repeat sales in ways that maintain positive
relationships with customers
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 47
Kinds of Salespersons
Kinds of salespersons• Sales support personnel
– Employees who aid in selling but are more involved in locating prospects, educating customers, building goodwill for the firm, and providing follow-up service
– Missionary salespersons– Visit retailers to persuade them to buy the
manufacturer’s products
– Trade salespersons– Assist customers in promoting products, especially in
retail stores
– Technical salespersons– Assist current customers in technical matters
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 48
The Six Steps of the Personal-Selling Process
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 49
Activities or materials that are direct inducements to customers or salespersons
Sales promotion objectives• To attract new customers• To encourage trial of a new product• To invigorate the sales of a mature brand• To boost sales to current customers• To reinforce advertising• To increase traffic in retail stores• To steady irregular sales patterns• To build up reseller inventories• To neutralize competitive promotional efforts• To improve shelf space and displays
Sales Promotion
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 50
Sales Promotion Methods
Consumer sales promotion method• Designed to attract consumers to particular retail stores
and to motivate them to purchase certain new or established products
Trade sales promotion method• Designed to encourage wholesalers and retailers to stock and
actively promote a manufacturer’s product
Factors influencing the choice of sales promotion method
• Objectives of the sales promotional effort• Product characteristics• Target market profile• Distribution channels• Availability of resellers• Competitive and regulatory forces in the environment
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 51
Sales Promotion Methods (cont.)
Rebate• A return of part of the purchase price of a product
Coupon• Reduces the retail price of a particular item by a stated amount
at the time of purchase
Sample• A free product given to customers to encourage trial and
purchase
Premium• A gift a producer offers to a customer in return for buying its
product
Frequent-user incentives• A program that rewards customers who engage in repeat
(frequent) purchases
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 52
Sales Promotion Methods (cont.)
Point-of-purchase displays• Promotional material in the retail store designed to inform
customers and encourage purchases
Trade shows• Industry-wide exhibits at which many sellers display their
products
Buying allowance• A temporary price reduction to resellers for purchasing
specified quantities of a product
Cooperative advertising• A manufacturer agrees to pay a certain amount of the retailer’s
media cost for advertising the manufacturer’s product
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 53
Types of Public-Relations Tools
A broad set of communication activities used to create and maintain favorable relationships between an organization and various public groups, both internal and external• Customers, employees, stockholders, suppliers,
educators, the media, government officials, society in general
Types of public-relations tools• Written and spoken communications
– Brochures, newsletters, company magazines, annual reports, news releases, corporate-identity materials, speeches
• Event sponsorship– Special events such as concerts and charity functions that the firm
underwrites wholly or partially
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 54
Publicity
Publicity• Communication in news-story form about an
organization, its products, or both– News release– Feature article– Captioned photograph– Press conference
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 55
To promote people, places, activities, ideas
To enhance the reputation of the organization by increasing awareness of company products and activities
To create specific positive company images
The Uses of Public Relations
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 56
Chapter Quiz
1. A women’s apparel manufacturer most likely will use
A. intensive distribution.B. selective distribution.C. exclusive distribution.D. high-style distribution.E. popular-style distribution.
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 57
Chapter Quiz
2. Category management is
A. a producer deciding which category to concentrate on for the next season.
B. a retailer asking the supplier in a particular category how to stock the shelves.
C. when suppliers tell the manufacturer which category to produce more of.
D. when Home Depot decides which category sells the best and decides to concentrate on that category of goods.
E. the combined efforts of producers and wholesalers to manage the wholesaler’s inventory.
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 58
Chapter Quiz
3. Which activity combines inventory management, order processing, warehousing, material handling, and transportation?
A. MarketingB. MerchandisingC. WarehousingD. Physical distributionE. Transporting
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 59
Chapter Quiz
4. Salespeople may be identified as
A. experts, order makers, and support personnel.B. order preparers, order trackers, and order receivers.C. order getters, order takers, and support personnel.D. order getters, order makers, and order receivers.E. order getters, order dictators, and support personnel.
© 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 13 | Slide 60
Chapter Quiz
5. The first step in the personal selling process is
A. product display.B. prospecting.C. approaching the prospect.D. organizing the sales pitch.E. making the presentation.