BSBMKG502B – Establish and adjust the marketing mix

Presentation Five

Place (Distribution)Fourth of the Four P’s

Product (and service)PricePromotionPlace(ment)

1

Physical placement

• The process of planning, implementing and controlling the physical flow of materials from point of origin to points of use for the purpose of conforming to customer requirements at a profit. (Kotler)

2

Marketing Logistics Networks

• Logistics• The process of planning, implementing and controlling the

efficient, cost-effective flow & storage of materials in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of conforming to customer requirements ( U.S. Council of Logistics)

3

Demand Chain Management

• Value-adding by coordinating flows from suppliers to ultimate users

• Coordinating suppliers, purchasing agents, manufacturers, marketers, channel members, customers & end-users

• Managing information systems such as:• computers, point-of-sale (P.O.S.) terminals, uniform

product codes, satellite tracking, electronic data interchange (EDI) and electronic funds transfer (EFT)

4

Demand Chain Management

• Sales Forecasting:• production schedules, inventory levels, and distribution

• Production planning:• materials to be ordered by purchasing

• Inbound materials management:• inbound transportation, goods receiving, storage and raw-materials inventory

5

Demand Chain Management(cont)• Production: Raw materials converted to finished goods, recorded in finished-goods inventory, for order by customers

• Customer OrdersFinished goods flow off the assembly line, pass through packaging, in-plant warehousing, shipping-room processing, outbound transportation, field warehouse, customer delivery and servicing

6

Marketing Channels

• A marketing channel is a set of interdependent organisations involved in making a product or service available for use or consumption by the consumer or end user.

7

Distribution channel Functions• Information – gathering & distributing marketing

research & intelligence• Promotion – developing & spreading promotional

communication• Matching – shaping and fitting the offer to the buyer’s

needs• Negotiation – reaching a price and agreeing terms

8

Marketing Channel Functions (cont)• Physical Distribution – transporting & storing goods• Financing – covering the cost of channel work, often

extending credit to retailers• Risk Taking – assumes the risk of channel work.

9

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Marketing 5th Ed Copyright 2001 Prentice HallKotler Brown Adam Armstrong

Marketing Channel Functions

ContactContact

FinancingFinancing

InformationInformationRisk TakingRisk Taking

PromotionPromotion

MatchingMatchingNegotiationNegotiation

PhysicalDistribution

PhysicalDistribution

10

Number of Marketing Channel Levels – see slides 12 & 13• Consumer Market Channels terms:

• M = Manufacturer, W = Wholesaler• J = Jobber, R = Retail• C = Customer

• Industrial Marketing Channels terms:• M = Manufacturer, • MR = Manufacturer’s Representative,• ID = Industrial Distributor• IC = Industrial Consumer

11

Number of Marketing Channel Levels

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Marketing 5th Ed Copyright 2001 Prentice HallKotler Brown Adam Armstrong

Channel Levels and Channel ConflictConsumer Marketing Channels

M W J R C→ → → →

M W R C→ →

M R C→

M C

Channel 1

Channel 2

Channel 3

Channel 4

12

Number of Marketing Channel Levels

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Marketing 5th Ed Copyright 2001 Prentice HallKotler Brown Adam Armstrong

Channel Levels and Channel Conflict

Industrial Marketing Channels

M MR ID IC→ →

M ID IC→

M IC

Channel 1

Channel 2

Channel 3

13

Channel Design Decisions• Types of middle channel members

• Company sales Force• Manufacturer’s Agency• Industrial Distributors

• Number of middle channel members• Intensive Distribution – as many outlets as possible• Exclusive Distribution – high prestige• Selective Distribution – good market coverage

14

Responsibility of Channel Members

•Agreement on Price Policies•Conditions of Sale•Territory rights (who is authorised to sell in a particular area)

•Specific services to be performed by each member

15

Evaluating Major Alternatives• Economic Criteria - Different levels and cost for each

alternative• Control Criteria – benefits of directing channel against

benefits of using outside businesses• Adaptive Criteria – benefits of each criteria against loss

of flexibility of long-term contracts

16

Channel Management Decisions• Selecting Channel Members – to value-add to process

• Motivating Channel Members – high margins, special deals, premiums, advertising & promotional allowances, sales contests

• Evaluating Channel Members – measurement against criteria for sales, inventory control, customer delivery time, training, customer service

17

Channel Management Decisions (cont)• Cycle time reduction decisions – reduce time to develop new products & to manufacture & distribute finished products

• Quick response-systems solution: EDI (electronic data

interchange), EFTPOS, Quick Response Retail Technology (QRRT), Quick Response Service Technology (QRST) to reduce cycle time and increase efficiency and improve customer service

18

Channel Management Decisions (cont)• Conversion Operations Location Decisions – location has major impact on costs

• Make or Buy Vertically Integrated or Network Decisions

• Input Suppliers Networks - closer economic relationships between channel members

• Manufacturing & Operations Decisions –to order or to develop an inventory

19

Channel Management Decisions (cont)• Order Processing Decisions – mail, telephone, fax,

salespersons, online, EDI, internet• Warehousing Decisions – if inventory carried: storage,

distribution, company or intermediary owned• Inventory Decisions – reduce unnecessary inventory

costs

20

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Marketing 5th Ed Copyright 2001 Prentice HallKotler Brown Adam Armstrong

Process

PeoplePrice

Product

Promotion

Placement

(Customer

Service)Inventory

carrying costs

Conversion lot

quantity costs

Warehousing costs -

throughput costs, not

storage costs

Transportation

costs

Order-processing

& information

costs

Physicalevidence

Logistics Trade-offs

Placement

21

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Marketing 5th Ed Copyright 2001 Prentice HallKotler Brown Adam Armstrong

Transportation

TransportationModes

TransportationModes

RailAir

Pipeline Truck

Water

22

Choosing Modes of Transport• Speed – measured in door-to-door time• Dependability – Meeting Schedules on time• Capability – The ability to handle various products• Availability – the number of geographic locations served• Cost – usually in tons-per-mile (US)

23

Conclusion

24

• Logistics management requires great trade-offs between functional units

• Management must focus on communication and strategic objectives to ensure co-operation

• Distribution can often be that part of the mix which irritates the customer the most e.g. failed deliveries, damaged goods, wrong orders ....