Week 7 Flashcards
Physical Distribution Focus
A term used “to move good between the vendor marketing organisation and it’s intermediaries (wholesalers & retailers)”
Marketing Logistics Network Management
The system used to efficiently and effectively make and get products to the end user
Starts at the inputs stage, and goes through to the converting into finished goods, and delivery to point of use
Supply chain
We use the term supply chain when describing the systemof efficiently and effectively producing, making and getting products to end-users. Suggesting a make-and sell view (raw materials, productive inputs and factory capacity serves as the starting point for marketing planning)
Supply chain management
We also use the term supply chain management to encompass the management of upstream and downstream value-added flows of materials, final goods and related information among suppliers, the company, resellers and final consumers.
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Logistics is a subset of supply chain management
Demand chain
Demand Chain
is more appropriate
Suggesting a sense-and-respondview
(distribution/placement planning starts by identifying the needs of the target consumer, and the company responds by organisingthe chain of resources and activities to create value)
marketing channels
marketing channels are part of the marketing logistics system –also called physical distribution
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Marketing logistics (physical distribution)
Marketing logistics (physical distribution) are the tasks involved in planning, implementing and controlling the physical flow of materials and final goods from points of origin to points of consumption in order to meet the needs of customer at a profit. Right product, to the right customer, at the right time!
Value delivery network
Value delivery network is the networkmade up of the marketing organisation, suppliers, and distributors and, ultimately, customers who partner with each other to improve the performance of the entire system.
Supply Chain Goals
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When making marketing logistics decisions that aim to provide a targeted level of customer service at the least cost, there are trade-offs!
Supply chain decision trade-offs
Supply chains typically add value through the following decisions or activities: • Cycle-time reductions • Conversion operations location • Purchasing decisions • Manufacturing and operations process decision • Warehouse numbers and costs • Inventory levels and costs • Transport type and costs • Restructuring marketing channels
Major supply chain functions
Warehousing
Inventory management
Transportation & logistics
Information management
Warehousing
Key warehousing decisions: • How many warehouses? • What type of warehouses? – Storage (store goods for moderate to longer periods of time) – Distribution (move goods rather than store) • Where to locate warehouses?
Inventory management
Marketers are always looking for new ways to make inventory management more efficient.
Techniques for improving efficiency:
Just-in-time (JIT) logistics networks
Radio frequency identification (RFID)
Transportation
The choice of transportation carriers affects the pricing of products, delivery performance and condition of the goods when they arrive –all of which will affect customer satisfaction.
Main modes of transport Trucks Railroad Pipelines Sea carriers Air carriers Internet
Road transport
– most flexible (most extensive infrastructure) – more expensive than rail – more prone to accidents and delays.
Rail transport
best suited to bulky items that need to travel long distances over land.
Sea freight
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takes advantage of the massive cargo capacity
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used for bulky items that do not need to be rushed
Air freight
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is fast but expensive
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most suitable for perishables, lightweight items, urgent deliveries and high-value items.
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Like sea freight, -necessary to transfer products to rail or road to complete their journey.
Pipelines
specifically used for water, oil and gas and are usually owned by the businesses that produce the product.
Intermodal transport
Fishyback
Piggyback
Airtruck
Trainship
Widely used method of transportation
Electronic data interchange (EDI)
Computerisedexchange of data between organisations
Other methods of transportation
Vendor managed inventory (VMI) systems or Continuous Inventory Replenishment systems
Customer or Retailer sharing real-time data on sales and current inventorywith a supplier
The nature of marketing channels
A marketing channel (or distribution channel) is a network of interdependent organisations –intermediaries involved in the process of making goods and services available for use or consumptionby the consumer or business user.
The nature of marketing channels illustartion
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Channel member functions
Channel members add value by performing a variety of functions: Negotiation Matching Financing Risk taking Information Promotion Physical distribution Contact
Negotiation
reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred
Matching
shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling and packaging
Financing
acquiring and using funds to cover the costs of the channel work
Risk taking
assuming the risksof carrying out the channel work.
Information
gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange
Promotion
developing and spreading persuasive communications about an offer
Physical distribution
transporting and storing goods
Contact
finding and communicating with prospective buyer
Channel level:
A layer of intermediaries who perform some work in bringing the product and its ownership closer to the final buyer
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Channel Conflict
Disagreement among marketing channel members on goals, roles and rewards –on who should do what for what reward.
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Two types of conflict:
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Horizontal (occurs between firms at the same level of the channel)
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Vertical (occurs between firms at different levels of the channel)
Channel organisation
Each channel member is a separate business seeking to maximise its own profits, even at the expense of the system as a whole.
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No channel member has much control over the other members
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No formal means exist for assigning roles and resolving channel conflict.
Conventional marketing channel
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Channel organisation VMN
A vertical marketing network (VMN) consists of producers, wholesalers and retailers acting as a unified system.
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One channel member owns the others, has contracts with them or wields so much power that all channel members cooperate.
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The VMNcan be dominated by the producer, the wholesaler or the retailer.
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Multichannel distribution system
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Key trends in channel organisation:
Growth in online marketing • Growth in direct marketing • Disintermediation – The removal of marketing channel intermediaries by goods or service producers, or the displacement of traditional resellers by new and different types of intermediaries.
Marketing channel design
1.
Analysing consumer needs -customer value delivery network
2.
Setting channel objectives –targeted levels of customer service
3. Identifying major channel alternatives: – Types – Number (intensive, exclusive, selective) – Responsibilities
4.
Evaluating the major alternatives
Analysing consumer needs
Analysing consumer needs -Marketing channels are part of the customer value delivery network. Each channel member must deliver value.
Designing a marketing channel:
Find out what the target consumer want from the channel
Setting channel objectives –targeted levels of customer service
The company should decide:
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which segments to serve and the best channels to use in each case.
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In each segment, the company wants to minimise the total channel cost of meeting customer service requirements.
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The company’s channel objectives are also influenced by the nature of the company, its products, its marketing intermediaries, its competitors and the environment.
Identifying major channel alternatives
• Types of intermediaries • Number (intensive, exclusive, selective) • Responsibilities
Intensive distribution
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A distribution strategy in which companies stock their products in as many outlets as possible.
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Typically used for convenience goods
Selective distribution
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A distribution strategy in which companies use more than one but fewer than all of the intermediaries that are willing to carry their products
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Typically used for shopping goods
Exclusive distribution
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A distribution strategy in which companies give only a limited number of dealers the exclusive right to distribute the companies’ products in the dealers’ territories.
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Typically used for specialty goods
Evaluating the major alternatives
When selecting intermediaries, the company should determine what characteristics distinguish the better ones. • Evaluate each channel member’s years in business • Other lines carried • Location • Growth and profit record • Cooperativeness • Reputation
Retailing
Retailing refers to all the activities involved in selling goods or services directly to final consumers for their personal, non-business use.
Shopper marketing
Shopper marketing involves activities that focus on turning shoppers into buyers at the point of sale. They may utilise:
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Point-of-purchase promotions and advertising to encourage favourable point-of-purchase decisions.
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Omni-channel retailing: Creating a seamless cross-channel buying experience integrating in-store, online and mobile shopping.
Retail stores can be classified by one or more of four characteristics:
Amount of service
Product line
Relative prices
Organisational approach
Amount of service
- Full-service
- Limited service
- Self-service
Product line
- Specialty stores, combination stores, department stores
* Supermarkets, convenience stores, mass merchants, superstores, hypermarkets
Relative prices
- Discount store
- Off-price retailers
- Direct factory outlet (DFO)
- Warehouse club (wholesale club)
Organisational approach
- Chain stores
- Corporate chains
- Voluntary chains
- Retailer cooperatives
Major store retailer types
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Types of retailers by amount of service
Self-service retailer
A retailer that provides few or no services to shoppers; shoppers perform their own locate–compare–select process.
Limited-service retailer
A retailer that provides only a limited number of services to shoppers.
Full-service retailer
A retailer that provides a full range of services to shoppers
Types of retailers by relative prices
Discount store
Off price retailer
DFO
Warehouse club (wholesale club)
Discount store
A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.
Off price retailer
A retailer that buys at less than regular wholesale prices and sells at less than retail, usually carrying a changing and unstable collection of higher-quality merchandise, often leftover goods.
DFO
An off-price retailing operation owned and operated by manufacturers, normally carrying the manufacturers’ surplus, discontinued or irregular goods.
Warehouse club (wholesale club)
An off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing and a hotchpotch of other goods at deep discounts to members who pay an annual membership fee.
Retailer marketing decisions Segmentation, targeting, differentiation and positioning decisions
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Should the store focus on upscale, midscale or downscale shoppers?
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Do target shoppers want variety, depth of assortment, convenience or low prices?
Retailer marketing decisions Product and service assortment decision
Retailers must decide on three main product variables:
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Product assortment -differentiate the retailer
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Services mix -set one retailer apart from another
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Store atmosphere-create a unique store experience
Retailer marketing decisions Price and promotion decision
Price policy
Markups
Promotion tools
Price policy
must fit its target market and positioning, productand service assortment, and competition.
Markups
Most retailers seek either high markupson lower volume or
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low markupson higher volume.
Promotion tools
advertising, personal selling, sales promotion, public relationsand direct marketing.
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Newspapers, magazines, radio, television, internet.
Retailer marketing decisions Placement decision
Often point to three critical factors in retailing success:
Location, location, location!
Location, location, location!
Central business district
The area of business at the heart of a city or town.
Shopping centre
A group of retail businesses planned, developed, owned and managed as a unit.
Strip shopping centre
A group of retail businesses located along an arterial road.
Retailer marketing decisions People, digital processes and physical evidence decisions
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The retailer must design an atmosphere that suits the target market and moves customers to buy.
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The key for store retailers is to convert showrooming shoppers into buyers when they visit the store.
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The internet and digital devices have spawned a whole new breed of shoppers and way of shopping.
Retailing trends and developments
Down economy
Some retailers actually benefit from a down economy -retail house-brand sales increase as shoppers seek bargains.
Retailing trends and developments
Shorter lives
Retailers need to choose target segmentscarefully and position themselves in order to meet head-on the challenges posed by new retail forms with shorter life cycles.
Retailing trends and developments
Technologies
Meet new consumer expectations by bringing technologies into their stores: touch-screen kiosks, hand-held shopping assistants, customer-loyalty cards and self-scanning checkout systems.
