Chapter 10 - Done Flashcards
What is distribution?
Placing products in the hands of the consumer is the marketing function known as ‘distribution’ or ‘place’
What are intermediaries
The key organisations that make up the distribution channel between the producer and the consumer are called intermediaries
What are the main intermediaries?
The main intermediaries are wholesalers, industrial buyers, agents or brokers, and retailers
What is direct distribution?
Where the manufacturer/producer of the product deals directly with the consumers of their products. Farmers, Dell, Zara. Higher profits when there is a good network
What is indirect distribution?
This is where there are organisations who act in the distribution chain between the producer and the end user. Grocery products, durable products. Profits are more spread, however they do allow for greater spread
What are the benefits of an effective intermediary
They:
- Make products available to the consumer at the time that the consumer wants to purchase them
- Make products available in the locations that the consumer wants to purchase them
- Customise products to the consumer’s particular needs
- Make transactions as efficient, simple and cheap as possible for consumers, producers and other intermediaries by establishing and managing efficient exchange processes
What are the different types of distribution?
- Intensive distribution: Distributes products via every suitable intermediary. Often convenience is a consideration. One example is milk
- Exclusive distribution: Distributes products through a single intermediary for any given geographic region. Used when there is great appeal for a product. One example is prestige cars
- Selective distribution: Distributes products through intermediaries chosen for some specific reason. Falls somewhere between intensive and exclusive distribution. Furniture brands usually use this
What are the different distribution channels and what are some examples?
Producer —–> Consumer (Dell & Apple)
Producer —–> Retailer —–> Consumer (Byron Bay Cookie Company)
Producer —–> Wholesaler —–> Retailer —–> Consumer (Grocery items or mass-marketed clothing)
Producer —–> Agent/Broker —–> Wholesaler —–> Retailer —–> Consumer
Producer —–> Agent/Broker —–> Consumer (Financial services)
Who are the intermediaries in the B2B product market?
Agents and/or Industrial Distributors
What are the different B2B distribution channels and what are some examples?
Producer —–> Agent —–> Organisational buyer
Producer —–> Industrial distributor —–> Organisational buyer
Producer —–> Agent —–> Industrial distributor —–> Organisational buyer
What is supply chain management?
When the producer and the intermediaries fully understand the goals and needs of the other parties and work together to find efficiencies
What does the supply chain consist of?
Formally, the supply chain consists of the producer and marketing intermediaries as well as all of the other parties that play direct or indirect roles in getting products to consumers
What is horizontal channel integration?
Occurs when organisations at the same level of operation are combined under one management structure
For example, horizontal channel integration occurs when a retailer (Freedom furniture) buys out a competitor (Bay Swiss)
What is vertical integration?
Occurs when different stages of the distribution channel are combined under one management structure
For example, vertical channel integration occurs when a wholesaler buys a retailer or a transport business
* At its most extensive, vertical integration brings all stages of the marketing channel under one management structure which is known as a Vertical Marketing System (VMS)
* One example of such a system is AusPost
What is franchising?
It is a type of business where the right to sell products or rights to use the main elements of a business model are licensed by one party to another
What is physical distribution?
Physical distribution involves order processing, inventory management, warehousing and transportation
What are the different steps in physical distribution?
Order processing
Inventory management
Warehousing
What is order processing?
Order processing is the term used to describe all of the activities involved in managing the information required to receive, handle and fill a sales order
First step is placing the order and the next step is order handling
What is inventory management?
Involves managing stocks of products to ensure availability to customers while minimising holding costs
Most businesses have this based on:
Order lead time
Usage rate
Safety Stock
Some businesses also try to do “Just-in-time” which minimises inventory holding costs as they aim to only meet near-term demand
What is warehousing?
The use of facilities (generally a building) to store and move goods
A variation on the warehouse is the distribution centre, a type of warehouse that focuses on moving rather than storing goods
Cross docking is a practice which aims to receive goods, assemble them and then ship them to customers with minimum handling
Materials Handling is the effective physical management of goods in a warehouse and on to transport
What is transportation?
Transportation is the process of moving products from their place of manufacture to their place of consumption.
There are many modes of transportation and choosing the correct one is key and comes down to factors such as availability, cost, speed, flexibility, reliability and environmental impacts
How is the distribution of services different to physical distribution?
Services products are usually produced at the time of consumption and so the notion of ‘service distribution’ is quite different to physical distribution
What are the components needed for distribution of services?
Physical inputs
Delivery infrastructure
Scheduling
What are physical inputs?
The physical things that are required for the creation and delivery of most services
For example, the hair products that are required for producing a hairdresser service
What is delivery infrastructure?
Some services are distributed via a physical infrastructure
Some service providers bring the service to you
For example, the electricity supply to your home is delivered via an extensive network of above‐ground, underground and undersea cables
What is scheduling?
Scheduling in service businesses is designed to smooth demand
Just as producers and sellers of physical products must manage inventory to minimise holding costs yet maximise availability to consumers, service businesses must manage their capacity to ensure customers can be served but that there is not excess labour
For example, a restaurant might be able to serve 50 customers a night with three kitchen staff and two waiters
What is retailing?
Describes any exchange in which the buyer is the ultimate consumer of the product.
Retailing excludes transactions in which the buyer intends to resell the product or use it in the making of another product
What are the two retailing strategies?
Location and Position
What is location (with regards to retailing) and what does it do?
It determines
- The natural geographic area from which customers will be drawn
- Proximity to competitors
- Proximity to complimentary retailers
- Customer access to public transport and parking
Positioning
Retail positioning refers to the practice of identifying a gap in the market and targeting it by creating some distinguishing feature in the mind of customers
Benefits of retailers
Time utility: Saving time
Place utility: Having everything in one place
Form utility: Sometimes stores can customise certain products to the wants and needs of a customer
Advice and service: These can be provided by the retailers
Exchange efficiencies: Reduces the number of parties that producers and wholesalers must deal with and the number of sellers that consumers must deal with
What are the different types of retailers?
Specialty retailers
General merchandise
What are and what are the different types of specialty retailers?
They usually carry just one or a small number of different types of products, but within that product line, they carry a great deal of variety Specialty stores Category killers Off-price retailers Pop-up stores
What are and what are the different types of general merchandise retailers?
They offer a wide variety of products The main general‐merchandise retail stores are: Convenience stores Showrooms Department stores Discount stores Supermarkets Superstores Hypermarkets
What is the wheel of retailing theory?
The wheel of retailing is a theory about how retailers evolve in the market
- Retailers enter the market using some innovation to achieve low costs and use that to charge low prices
- Other new and existing retailers copy the low‐cost innovation and compete directly with the new entrants
- To distinguish itself, the retailer adds extra services, improves its location and store image, and so on, which results in higher costs and higher prices
- New retailers enter the market using some new innovation to achieve low costs and then compete with the original, now high‐price, retailer
What is online retailing?
Online retailing (or e‐tailing) involves selling to customers via the internet
What are other forms of retailing?
Direct marketing (Avon) Telemarketing (Solar companies) Catalogue marketing Direct-response marketing Door-to-door selling Automatic vending (Vending machines)
What is direct marketing?
A type of non‐store retailing that uses mail, telephone or the web to promote products directly to potential customers and requires the customer to respond in the same way
What is telemarketing?
Telemarketing is the performance of marketing‐related activities over the telephone
What is catalogue marketing?
Catalogue marketing might sound old‐fashioned, but it is still an effective direct marketing approach
What is direct response marketing?
Similar to catalogue marketing, direct‐response marketing requires customers to use the mail, internet or telephone to make a purchase
What is door-to-door selling?
Door-to-door selling sometimes known as direct selling, is an approach taking its name from the old practice of a salesperson walking door to door to promote products to people at home
What is automatic vending?
Relies on machines to accept payments and then dispense products
What are agents?
Agents are engaged by buyers or sellers on an ongoing basis to represent them in negotiations with other marketing channel participants
What are the main types of agents?
Manufacturers’ agents
Selling Agents
Buying Agents
Commission merchants
What are manufacturer agents?
Act in a similar way to a salesperson for multiple producers, selling specified, non‐competing products in a particular region under standard terms and conditions
What are selling agents?
Are commonly used by small producers that cannot afford a salesforce or marketing department
What are buying agents?
Make specialist purchases and handle goods for long‐term partners, such as retailers
What are commission agents?
Receive goods on consignment and negotiate the best possible price in centralised markets
What are brokers?
They are engaged on a short‐term or one‐off basis to negotiate on behalf of buyers or sellers
* They have a more limited role than agents, but their value is in their specialist knowledge and well‐established contacts in the industries in which they work
What is wholesaling?
Comprises exchanges in which products are bought for resale, for use as inputs in other products, or for some other use in a business
What do wholesalers do?
- Act as a salesforce, promoting and selling its products to retailers
- Hold and manage inventory, relieving the producer’s warehousing and transport burden
- Assume the risk when retailers are given products on credit
- Provide cashflow by paying for and taking possession of inventory shortly after it is produced
- Communicate producer and market issues to retailers
What are the different types of wholesalers?
Merchant wholesalers
Manufacturer’s wholesalers
What are merchant wholesalers?
- Are independently owned
* They take ownership of the product from producers and sell it on to retailers
What are full service wholesalers?
A type of merchant wholesalers who perform the full gamut of wholesaling activities, and retailers and producers rely heavily on them for numerous services
What are the different types of full-service wholesalers?
- General‐merchandise wholesalers — wholesalers that carry a wide variety of product lines, but relatively little depth within those product lines
- Limited‐line wholesalers — wholesalers that carry only a few different product lines, but have considerable depth in each line
- Specialty‐line wholesalers — wholesalers that carry a single product line and only a few items within that line
What are limited-service wholesalers?
Limited‐service wholesalers specialise in a narrow range of wholesaling services, leaving it to producers and retailers to perform for themselves many of the functions provided by full‐service wholesalers
What are the different types of limited-service wholesalers?
- Cash and carry wholesalers — wholesalers that supply a limited number of lines of high‐turnover products to small businesses, which pay in cash and transport the products themselves
- Drop shippers — wholesalers that purchase from producers and sell to retailers, but organise shipment directly between those two parties rather than take possession of the products
- Mail‐order wholesalers — wholesalers that use catalogues and mail or courier services rather than salespeople and their own transport to promote, sell and deliver goods to retailers
What are manufacturer’s wholesalers?
- Also known as manufacturers’ sales branches and offices, are similar to merchant wholesalers, but are owned by the producer itself and thus represent a form of vertical integration
- Manufacturers’ wholesalers are either sales branches or sales offices
What is the different between sales offices and sales branches
Sales offices do not carry inventory, but otherwise function in much the same way as sales branches
What is freight forwarders?
Specialist transportation companies (mainly for companies with small batches and to keep it safe)
