Chapter 1

Foundations of Business 3ePride, Hughes, & Kapoor

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #1

Distributing and Promoting ProductsChapter 13 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #2Learning ObjectivesIdentify the various distribution channels and explain the concept of market coverage.Understand how supply-chain management facilitates partnering among channel members.Discuss the need for wholesalers, describe the services they provide, and identify the major types of wholesalers.Distinguish among the major types of retailers and shopping centers.Explain the five most important physical distribution activities.Explain how integrated marketing communications works to have the maximum impact on the customer. 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #3Understand the basic elements of the promotion mix.Explain the three types of advertising and describe the major steps of developing an advertising campaign.Recognize the kinds of salespersons, the steps in the personal selling process, and the major sales management tasks.Describe sales promotion objectives and methods.Understand the types and uses of public relations.Learning Objectives (cont.) 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #4Channel of distribution (marketing channel)A sequence of marketing organizations that directs a product from the producer to the ultimate userMiddleman (marketing intermediary)A marketing organization that links a producer and user within a marketing channelMerchant middlemantakes title to products by buying themFunctional middlemanhelps in the transfer of ownership of products but does not take title to the productsRetailerbuys from producers or other middlemen and sells to consumersWholesaler middlemansells products to other firmsDistribution Channels and Market Coverage 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #5Channels for Consumer ProductsProducer to consumer (direct channel)No intermediariesUsed by all services and by a few consumer goodsProducers can control quality and price, do not have to pay for intermediaries, and can be close to their customersExamples: Dell Computer, Mary Kay Cosmetics

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #6Channels for Consumer Products (cont.)Producer to retailer to consumerProducers sell directly to retailers when retailers (e.g., Walmart) can buy in large quantitiesMost 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 #7Channels for Consumer Products (cont.)Producer to wholesaler to retailer to consumerThe traditional channelUsed when a producers 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 #8Channels for Consumer Products (cont.)Producer to agent to wholesaler to retailer to consumerAgentsfunctional middlemen that do not take title to products and are compensated by commissions paid to the producersOften 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 #9Channels for Consumer Products (cont.)A manufacturer may use multiple channelsTo reach different market segmentsWhen the same product is sold to consumers and businessesTo increase sales or capture a larger market share

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #10Distribution Channels

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #11Channels for Business ProductsProducer to business userUsually used for heavy machinery, airplanes, major equipmentAllows the producer to provide expert and timely services to customers

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #12Channels for Business Products (cont.)Producer to agent middleman to business userUsually used for operating supplies, accessory equipment, small tools, standardized parts

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #13Channels for Business Products (cont.)

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #14Level of Market CoverageIntensity of market coverageIntensive distributionThe use of all available outlets for a product to saturate the marketSelective distributionThe use of only a portion of the available outlets for a product in each geographic areaExclusive distributionThe 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 #15Partnering Through Supply-Chain ManagementSupply-chain managementLong-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 customersCategory managementThe retailer asks a supplier how to stock the shelvesTechnologyHas enhanced implementation of supply-chain management 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #16Marketing Intermediaries: WholesalersJustifications for marketing intermediariesIntermediaries perform essential marketing servicesManufacturers would be burdened with additional record keeping and maintaining contact with numerous retailersCosts 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 #17Types of WholesalersMerchant wholesalersMiddlemen that purchase goods in large quantities and then sell them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial usersOperate in one or more warehouses where they receive, take title to, and store goodsThese wholesalers are sometimes called distributors or jobbersFull-service wholesalersGeneral merchandise wholesalerLimited-line wholesalerSpecialty-line wholesalerLimited-service wholesalers 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #18Types of Wholesalers (cont.)Commission merchants, agents, and brokersFunctional middlemen that do not take title to productsPerform some marketing activitiesPaid a commission (percentage of sales price)Commission merchantCarries merchandise and negotiates sales for manufacturersAgentExpedites exchanges, represents a buyer or a seller, and is often hired permanently on a commission basisBrokerSpecializes 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 #19Types of Wholesalers (cont.)Manufacturers sales branchMerchant wholesaler owned by a manufacturerCarries inventory, extends credit, delivers goods, helps in promoting productsCustomers are retailers, other wholesalers, and industrial purchasersManufacturers sales officeSales agent owned by a manufacturerSells 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 #20Marketing Intermediaries: RetailersRetailers The final link between producers and consumersApprox. 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 #21The Ten Largest Retail Firms in the United States

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #22Classes of In-Store RetailersIndependent retailerA firm that operates only one retail outletChain retailerA company that operates more than one retail outletDepartment storeA retail store that:employs twenty-five or more personssells at least home furnishing, appliances, family apparel, and household linens and dry goods, each in a different part of the storeDiscount storeA 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 #23Classes of In-Store Retailers (cont.)Catalog showroomA retail outlet that displays well-known brands and sells them at discount prices through catalogs within the storeWarehouse showroomA retail facility in a large, low-cost building with large on-premises inventories and minimal serviceConvenience storeA 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 #24Classes of In-Store Retailers (cont.)SupermarketA large self-service store that sells primarily food and household productsSuperstoreA large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product linesWarehouse clubA 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 #25Classes of In-Store Retailers (cont.)Traditional specialty storeA store that carries a narrow product mix with deep product linesOff-price retailerA store that buys manufacturers seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discountsCategory killerA 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 #26Kinds of Nonstore RetailingA type of retailing whereby consumers purchase products without visiting a storeDirect sellingThe marketing of products to consumers through face-to-face sales presentations at home or in the workplaceDirect marketingThe 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 #27Kinds of Nonstore Retailing (cont.)Catalog marketingAn organization provides a catalog from which customers make selections and place orders by mail, telephone, or the InternetDirect-response marketingA seller advertises a product and makes it available, usually for a short time period, through mail, telephone, or online ordersTelemarketingThe performance of marketing-related activities by telephone 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #28Kinds of Nonstore Retailing (cont.)Television home shoppingProducts are presented to television viewers, who can buy them by calling a toll-free number and paying by credit cardOnline retailingMakes products available to buyers through computer connectionsAutomatic vendingThe use of machines to dispense products 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #29Types of Shopping CentersA self-contained retail facility constructed by independent owners and consisting of various storesLifestyle shopping center Has an open-air configuration and is occupied by upscale national chain specialty storesNeighborhood shopping centerConsists of several small convenience and specialty storesCommunity shopping centerIncludes one or two department stores and some specialty stores, along with convenience storesRegional shopping centerContains 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 #30Physical DistributionAll those activities concerned with the efficient movement of products from the producer to the ultimate userInventory managementOrder processingWarehousingMaterials handlingTransportation

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #31Inventory managementThe process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stock-out costsHolding coststhe costs of storing products until they are purchased or shipped to customersStock-out coststhe costs of sales lost when items are not in inventory when neededTechnology and software help manage inventoryEfficiency is crucial for firms using just-in-time (JIT) approachOrder processingActivities 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 #32WarehousingThe set of activities involved in receiving and storing goods and preparing them for reshipmentReceiving goodsIdentifying goodsSorting goodsDispatching goods to storageHolding goodsRecalling, picking, and assembling goodsDispatching shipmentsTypes of warehousesPrivate warehousesowned and operated by a firmPublic warehousesoffer their services to all firmsPhysical Distribution (cont.) 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #33Physical Distribution (cont.)Materials handlingThe physical handling of goods, in warehouses as well as during transportationTransportationThe shipment of products to customersCarriera firm that offers transportation servicesCommon carriersservices available for hire to all shippersContract carriersavailable for hire by one or several shippers; not available to the general publicPrivate carriersowned and operated by the shipperFreight forwardersagents who facilitate the transportation process for shippers by handling the details of the processRailroadsin terms of total freight carried, these are Americas most important mode of transportation 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #34Physical Distribution (cont.)TransportationTrucksTremendous expansion since creation of national highwaysOften favored for offering door-to-door service, less stringent packaging requirements, and flexible schedulesAirplanesFastest but most expensiveUsed to ship high-value or perishable goodsWaterwaysSlowest but least expensiveUsed mainly for bulky, nonperishable goodsUse limited to cities located on navigable waterwaysPipelinesused primarily to carry petroleum and natural gas 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #35Characteristics of Transportation Modes

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #36What Is Integrated Marketing Communications?Coordination of promotion efforts to ensure maximal informational and persuasive impact on customersResults in a consistent message to customers, long-term customer relationships, and the efficient use of promotional resourcesMass 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 #37The Promotion Mix: An OverviewPromotionCommonly the object of two misconceptionsPromotional activities make up the entire field of marketingPromotional activities are unnecessary and cause higher pricesRole of promotionTo facilitate exchanges directly or indirectly by informing individuals, groups, or organizations and influencing them to accept a firms products or to have more positive feelings about the firmConvey product and service information directly to target market segmentsProvide information to interest groups, regulatory agencies, investors, and the general publicTo 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 #38The Promotion Mix: An Overview (cont.)The particular combination of promotion methods a firm uses to reach a target marketAdvertisingA paid non-personal message communicated to a select audience through a mass mediumPersonal sellingPersonal communication aimed at informing customers and persuading them to buy a firms productsSales promotionThe use of activities or materials as direct inducements to customers or salespersonsPublic relationsCommunication 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 #39Possible Elements of a Promotion Mix

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #40AdvertisingTypes of advertising by purposePrimary-demand advertisingUsed to increase demand for all brands of a product in a specific industryInstitutional advertisingDesigned to enhance a firms image or build its reputation 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #41Major Steps in Developing an Advertising CampaignIdentify and analyze the target audience.Define the advertising objectives.Create the advertising platform.Determine the advertising appropriation.Develop the media plan.Create the advertising message.Execute the campaign.Evaluate advertising effectiveness. 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #42Who Spends the Most on Advertising?

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #43Independent firms that plan, produce, and place advertising for their clientsLarge agencies also help with sales promotion and public relationsMedia usually pay a commission to agenciesFirms may use both in-house advertising departments and an independent agencyAdvertising Agencies 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #44Personal SellingThe most adaptable promotion methodThe most expensive promotion methodKinds of salespersonsOrder getterResponsible for creative selling: selling a firms products to new customers and increasing sales to current customersOrder takerHandles repeat sales in ways that maintain positive relationships with customers 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #45Kinds of SalespersonsKinds of salespersonsSales support personnelEmployees who aid in selling but are more involved in locating prospects, educating customers, building goodwill for the firm, and providing follow-up serviceMissionary salespersonsVisit retailers to persuade them to buy the manufacturers productsTrade salespersonsAssist customers in promoting products, especially in retail storesTechnical salespersonsAssist current customers in technical matters 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #46The Six Steps of the Personal-Selling Process

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #47Activities or materials that are direct inducements to customers or salespersonsSales promotion objectivesTo attract new customersTo encourage trial of a new productTo invigorate the sales of a mature brandTo boost sales to current customersTo reinforce advertisingTo increase traffic in retail storesTo steady irregular sales patternsTo build up reseller inventoriesTo neutralize competitive promotional effortsTo improve shelf space and displaysSales Promotion 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #48Sales Promotion MethodsConsumer sales promotion methodDesigned to attract consumers to particular retail stores and to motivate them to purchase certain new or established productsTrade sales promotion methodDesigned to encourage wholesalers and retailers to stock and actively promote a manufacturers productFactors influencing the choice of sales promotion methodObjectives of the sales promotional effortProduct characteristicsTarget market profileDistribution channelsAvailability of resellersCompetitive and regulatory forces in the environment 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #49Sales Promotion Methods (cont.)RebateA return of part of the purchase price of a productCouponReduces the retail price of a particular item by a stated amount at the time of purchaseSampleA free product given to customers to encourage trial and purchasePremiumA gift a producer offers to a customer in return for buying its productFrequent-user incentivesA program that rewards customers who engage in repeat (frequent) purchases 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #50Sales Promotion Methods (cont.)Point-of-purchase displaysPromotional material in the retail store designed to inform customers and encourage purchasesTrade showsIndustry-wide exhibits at which many sellers display their productsBuying allowanceA temporary price reduction to resellers for purchasing specified quantities of a productCooperative advertisingA manufacturer agrees to pay a certain amount of the retailers media cost for advertising the manufacturers product 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #51Types of Public-Relations ToolsA broad set of communication activities used to create and maintain favorable relationships between an organization and various public groups, both internal and externalCustomers, employees, stockholders, suppliers, educators, the media, government officials, society in generalTypes of public-relations toolsWritten and spoken communicationsBrochures, newsletters, company magazines, annual reports, news releases, corporate-identity materials, speechesEvent sponsorshipSpecial 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 #52PublicityPublicityCommunication in news-story form about an organization, its products, or bothNews releaseFeature articleCaptioned photographPress conference

2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #53To promote people, places, activities, ideasTo enhance the reputation of the organization by increasing awareness of company products and activitiesTo create specific positive company images

The Uses of Public Relations 2013 South-Western, a part of Cengage Learning. All rights reserved.Chapter 13 | Slide #54