MKTG350 Test 4 Study Guide - PDF PDF

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1 Anything highlighted in THIS COLOR is stuff she said in class Anything highlighted in THIS COLOR is stuff we DO NOT NEED TO KNOW Chapter 14: Marketing Channels and Supply Chain Management Supply chain: all the organizations and activities involved with the flow and transformation of products from raw materials through to the end consumer. • A distribution system involves firms that are “upstream” in the supply chain (e.g., producers and suppliers) and “downstream” (e.g., wholesalers and retailers) working together to serve customers and generate competitive advantage. Supply chain management (SCM): the coordination of all the activities involved with the flow and transformation of supplies, products, and information throughout the supply chain to the ultimate consumer. • Integrates the functions of operations management, logistics management, supply management, and marketing channel management so that products are produced and distributed in the right quantities, to the right locations, and at the right times. • Includes activities such as manufacturing, research, sales, advertising, and shipping. • Involves all entities that facilitate product distribution and benefit from cooperative efforts. • Supply chain management should begin with a focus on the customer, who is the ultimate consumer and whose satisfaction should be the goal of all the efforts of channel members. • When the buyer, the seller, marketing intermediaries, and facilitating agencies work together, the cooperative relationship results in compromise and adjustments that meet customers’ needs regarding delivery, scheduling, packaging, or other requirements. • Each supply chain member requires information from other channel members • Customer relationship management (CRM) systems exploit the information in supply chain partners’ information systems and make it available for easy reference • CRM systems can help all channel members make better marketing strategy decisions that develop and sustain desirable customer relationships • Technology has improved supply chain management capabilities globally • Advances in information technology, in particular, have created an almost seamless distribution process for matching inventory needs to manufacturer requirements in the upstream portion of the supply chain and to customers’ requirements in the downstream portion of the chain. • With integrated information sharing among chain members, firms can reduce costs, improve services, and provide increased value to the end customer. • Information is a crucial component in operating supply chains efficiently and effectively • Managing the flow of material Significance of Marketing Channels • Marketing channel (distribution channel): a group of individuals and organizations that direct the flow of products from producers to customers within the supply chain • Marketing channel decisions can have a strong influence on the other elements of the marketing mix • Channel decisions are critical because they determine a product’s market presence and accessibility • Marketing channel decisions have strategic significance because they generally entail longterm commitments among a variety of firms • It is the least flexible component of the marketing mix • Once a firm commits to a distribution channel, it is difficult to change • Marketing channels serve many functions, including: • Creating utility • Facilitating exchange efficiencies • Although some of these functions may be performed by a single channel member, most functions are accomplished through both independent and joint efforts of channel members • Marketing Channels Facilitate Exchange Efficiencies

2 • Marketing intermediaries can reduce the costs of exchanges by performing certain services or functions efficiently • Intermediaries are specialists in facilitating exchanges • They provide valuable assistance because of their access to and control over important resources used in the proper functioning of marketing channels • Critics accuse wholesalers of being inefficient and adding to costs • While eliminating wholesalers may lower prices for customers, it would not eliminate the need for the services the wholesalers provide Other channel members would have to perform those functions, perhaps not as • efficiently, and customers still would have to pay for them Typical Marketing Channels for Consumer Products • A long channel may be the most efficient distribution channel for some consumer goods • When several channel intermediaries perform specialized functions, costs are likely to be lower than when one channel member tries to perform them all • Efficiencies arise when firms that specialize in certain elements of producing a product or moving it through the channel are more effective at performing specialized tasks than the manufacturer • This results in added value to customers and reduced costs throughout the distribution channel Channel A: producer ➔ consumers • • Direct movement of products from producer to consumers • Ex: a haircut received at a barber shop. • Channel B: producer ➔ retailers ➔ consumers • Frequent choice of large retailers because it allows them to buy in quantity from manufacturers. • Ex: retailers like Target and Walmart sell many items that were purchased directly from producers. • Channel C: producer ➔ wholesalers ➔ retailers ➔ consumers • Common distribution channel for consumer products • Practical option for producers that sell to hundreds of thousands of customers through thousands of retailers. • Ex: home appliances, hardware, and many convenience goods are marketed through this type of channel. • Channel D: producer ➔ agents of brokers ➔ wholesalers ➔ retailers ➔ consumers • Used frequently for products intended for mass distribution • Ex: processed foods like Wheat Thins crackers • Multiple Marketing Channels • Strategic channel alliance: an agreement whereby the products of one organization are distributed through the marketing channels of another • The products of the two firms are often similar with respect to target markets or uses. • Multichannel distribution: the use of a variety of marketing channels to ensure maximum distribution • Ex: L.L. Bean markets products through its long-standing catalog, its website, and through its own retail stores. • Digital distribution: delivering content through the Internet to a computer or other device • Ex: when you watch a TV show on Netflix or Hulu or listen to music on Pandora or Spotify, those networks stream the content to your device so that you can consume them at the same time that they are streamed. Selecting Marketing Channels • Selecting appropriate marketing channels is important because they are difficult to change once chosen • Channel selection decisions are usually affected significantly by a number of factors: • (1) CUSTOMER CHARACTERISTICS

3 • (2) PRODUCT ATTRIBUTES • Marketers of complex and expensive products, perishable products, and fragile products that require special handling will likely employ short channels • Less-expensive standardized products with long shelf lives can go through longer channels with many intermediaries • (3) TYPE OF ORGANIZATION • (4) COMPETITION • (5) MARKETING ENVIRONMENTAL FORCES • (6) CHARACTERISTICS OF INTERMEDIARIES Intensity of market coverage: the number and kinds of outlets in which a product will be sold • Variables that affect the intensity of market coverage: • (1) REPLACEMENT RATE • (2) PRODUCT ADJUSTMENT (SERVICES) • (3) DURATION OF CONSUMPTION • (4) TIME REQUIRED TO FIND THE PRODUCT • Levels of market coverage: • (1) INTENSIVE DISTRIBUTION: using all available outlets to distribute a product • Is appropriate for products that: • Have a high replacement rate • Require almost no service • Are bought based on price cues • To satisfy consumers seeking to buy these products, they must be available at a store nearby and be obtained with minimal search time • Ex: convenience products, such as Coca-Cola, Pringles, and Duracell batteries. • Available in many outlets • (2) SELECTIVE DISTRIBUTION: using only some available outlets in an area to distribute a product • Is appropriate for shopping products • Is desirable when a special effort, such as customer service from a channel member, is important to customers • Is often used to motivate retailers to provide adequate service • Ex: shopping products, such as iPhones, televisions, smartwatches, and shoes • Available in some outlets • (3) EXCLUSIVE DISTRIBUTION: using a single outlet in a fairly large geographic area to distribute a product • Is suitable for products: • Purchased infrequently • Consumed over a long period of time • That require a high level of customer service or information • Is used for expensive, high-quality products with high profit margins • Is not appropriate for convenience products and many shopping products • Is often used as an incentive to sellers when only a limited market is available for products • Ex: specialty products, such as haute couture, Montblanc pens, BMWs, and Fendi handbags • Available in very few outlets Channel Leadership, Cooperation, and Conflict • Each channel member holds certain expectations of other channel members • Any one organization’s failure to meet expectations can disrupt the entire supply chain • Channel partnerships can facilitate effective supply chain management when partners agree on objectives, policies, and procedures for physical distribution efforts associated with the supplier’s products

4 • Such partnerships eliminate redundancies and assign tasks for maximum system-wide efficiency • Channel cooperation reduces wasted resources, such as time, energy, or materials • A coordinated supply chain can also be more environmentally friendly Channel captain (channel leader): the dominant leader of a marketing supply channel • May be a producer, wholesaler, or retailer • To attain desired objectives, the captain must possess channel power • Channel power: the ability of one channel member to influence another member’s goal achievement Channel Integration • Various channel stages may be combined, either horizontally or vertically, under the management of a channel captain • Such integration may: • (1) stabilize supply • (2) reduce costs • (3) increase channel member coordination • Vertical channel integration: combining two or more stages of the marketing channel under one management • May occur when one member of a marketing channel purchases the operations of another member or simply performs the functions of another member, eliminating the need for that intermediary • Can be more effective against competition because of increased bargaining power and the ease of sharing information and responsibilities • Vertical marketing system (VMS): a marketing channel managed by a single channel member to achieve efficient, low-cost distribution aimed at satisfying target market customers • Three forms of VMS: • (1) CORPORATE VMS: combines all stages of the marketing channel, from producers to consumers, under a single owner • (2) ADMINISTERED VMS: channel members are independent, but informal coordination achieves a high level of inter-organizational management • (3) CONTRACTUAL VMS: channel members are linked by legal agreements spelling out each member’s rights and obligations • Most popular type of vertical marketing system • Franchise organizations, such as McDonald’s and KFC, are contractual VMSs. Stockouts: shortage of products; we don’t have the product in stock and thus we are losing business and sales. Electronic data interchange (EDI): a computerized means of integrating order processing with production, inventory, accounting, and transportation • Functions as an information system that links marketing channel members and outsourcing firms together • EDI is very common in B2B sales • Helps with inventory management, accounting, tracks transportation — all done by computer • Benefit: it is efficient and prevents you from having stockouts. • Automatically tracks when you get to the point where you need to re-order before you run out and will automatically order it for you so you’re never completely out of a product and thus never lose business or sales. Just-in-time (JIT): an inventory-management approach in which supplies arrive just when needed for production or resale • Usually there is no safety stock • Requires a high level of coordination between producers and suppliers • Eliminates waste • Reduces inventory costs

5 • Talking about how a manufacturer is going to receive raw materials just in time to put them on the production floor and run that item; nice thing: inventory never sits there. Raw material is immediately made into a finished good and shipped off for sale Chapter 15: Retailing, Direct Marketing, and Wholesaling Retailing: all transactions in which the buyer intends to consume the product through personal, family, or household use. • Buys from a producer or wholesaler and turn it around and sell it to the ultimate customer Retailer: An organization that purchases products for the purpose of reselling them to ultimate consumers. • Retailing is vital to the US economy • There are more than 1 million retail establishments in the US, and they employ nearly 16 million people. • Retailers contribute $1.1 trillion, or 5.9%, directly to the US GDP. • Retailers add value for customers by providing services and assisting in making product selections • They can enhance customers’ perceptions of the value of products by making buyers’ shopping experiences easier or more convenient • Retailers can facilitate comparison shopping, which allows customers to evaluate different options • Retail sales personnel are trained to be able to demonstrate to customers how products can satisfy their needs or solve problems • Retailers can add significant value to the supply chain, representing a critical link between producers and ultimate consumers by providing the environment in which exchanges occur • Retailers play a major role in creating time, place, and possession and, in some cases, form utility • They perform marketing functions that benefit ultimate consumers by making available broad arrays of products that can satisfy their needs • Retailers make shopping more convenient • Retailers facilitate comparison shopping • Retail sales people assist in that buying experience, trained and add value Multichannel retailing: employing multiple distribution channels that complement their brick-and-mortar stores with websites, catalogs, and apps where consumers can research products, read other buyers’ reviews, and make actual purchases • Many retailers see significant growth potential in international markets • Multichannel retailing uses multiple distribution channels, enables retailers to supplement their store sales. This concept has been important during the pandemic. IMPORTANT: allows them to make a lot more money. Online retailing: retailing that makes products available to consumers through computer connections • Never going to completely replace in-person retailing. • People like to shop in stores if they possibly can, but online retailing is convenient. General-merchandise retailers: a retail establishment that offers a variety of product lines that are stocked in considerable depth • Carry a wide variety of products and lots of brands per product category • Types of general-merchandise retailers: • (1) SUPERMARKETS: large, self-service stores that carry a complete line of food products and some non-food products • Are arranged by department for maximum efficiency in stocking and handling products • Have central checkout facilities • Offer lower prices than smaller neighborhood grocery stores • Usually provide free parking • May also provide services such as check cashing, pharmacies, and curbside pickup of groceries

6 • EXAMPLES: Kroger, Safeway, Publix • Hard discounters, another type of supermarket, maintain a no-frills environment and have a minimal assortment of goods they can sell at very low prices • Growing • (Supermarkets) Mostly self-service, mostly carry food items • Challenge supermarkets are facing: lot of competition from convenience stores, discount stores, superstores, and warehouse clubs • (2) SUPERSTORES: giant retail outlets that carry food and non-food products found in supermarkets, as well as most routinely purchased consumer products • Combine features of discount stores and supermarkets • Generally carry about four times as many items as supermarkets • Also offer additional services, including dry cleaning, automotive repair, check cashing, and bill paying • Use sophisticated operating techniques and often have tall shelving that displays entire assortments of products • Basically a discount store on steroids. • Replacing many of the discount stores • Mostly have non-food items • EXAMPLES: Walmart Supercenters, SuperTarget • (3) WAREHOUSE CLUBS (BUYING CLUBS): large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing. • Offer the same types of products as discount stores but in a limited range of sizes and styles • Offer a broad product mix • Offer few services in order to keep prices lower than those of supermarkets and discount stores • Keep advertising to a minimum • Merchandise is stacked on pallets or displayed on pipe racks • First started as wholesale clubs for small businesses, popularized with retailers — sell to both wholesale customers as well as the final retail consumers EXAMPLES: Sam’s Club, Costco • • Carry a large variety — every product under the sun — however, each category is not very deep, i.e. you can only buy large packages of Starbucks or Folger and there aren’t many flavor selections • Set up in a large warehouse so they keep their costs down, offer few services. • Type of format is increasing in popularity because people like the discounts • DON’T NEED TO KNOW THESE FOR THE TEST: • (4) DEPARTMENT STORES: large retail organizations characterized by a wide product mix and organized into separate departments to facilitate marketing efforts and internal management • Department stores have the biggest decline in sales, largest risk for closure • (5) DISCOUNT STORES: self-service, general-merchandise stores that offer brand-name and private-brand products at low prices (i.e. Target, Walmart) • Sell a lot of merchandise which is how they make up for discounted items. • (6) EXTREME VALUE STORES: retailers that are a fraction of the size of conventional discount stores and typically offer very low prices on smaller size name-brand nonperishable household items • (7) CONVENIENCE STORES: a small self-service store that is open long hours and carries a shallow assortment and narrow variety of products, usually convenience items (little assortment) • Typically opened 24 hours a day 7 days a week • Characterized by high prices Specialty Retailers

7 • In contrast to general-merchandise retailers with their broad product mixes, specialty retailers emphasize narrow and deep assortments • Despite the name, they do not sell specialty items but instead offer substantial assortments in a few product lines • Much more narrow variety but a very deep assortment • Three types of specialty retailers: • (1) TRADITIONAL SPECIALTY RETAILERS: stores that carry a narrow mix with deep product lines • Sometimes called limited-line retailers and may be referred to as single-line retailers if they carry unusual depth in one product category • Commonly sell such shopping products as apparel, jewelry, sporting goods, fabrics, computers, and pet supplies • Usually offer better selections and more sales expertise than department stores • All have higher prices because they have higher cost — only buying for their one store • Have excellent sales people and outstanding service • Nice, deep selection • EXAMPLES: Sunglass Hut, Footlocker, Gap • (2) CATEGORY KILLERS: a very large specialty store that concentrates on a major product category and competes on the basis of low prices and product availability • Expand rapidly and gain sizable market shares, taking business away from smaller, highcost retail outlets • They are not going to have the sales people that have the expertise and will not have the outstanding service • Example: Home Depot, Lowes, PetSmart, Staples, and Best Buy • Cover so many things i...