Comprehensive Marketing and Distribution Channel Concepts for Students

Allocated fixed costs

Fixed costs (rent, salaries) assigned to a specific product, department, or channel for accounting purposes

Channel of distribution

A set of intermediaries (wholesalers, retailers, agents) that move a product from producer to consumer

Physical distribution

Movement of goods from producer to customer — covers transportation, warehousing, inventory, and order processing

Direct marketing

Selling directly to consumers without intermediaries — examples: online stores, catalogs, telemarketing

Bulk breaking

Breaking large quantities into smaller units for resale

Sorting

Organizing products by size, quality, or type

Vertical marketing system (VMS)

Producers, wholesalers, and retailers acting together as one unified system

Vertical integration

A company owns multiple levels of the supply chain — example: owning both production and retail

Omni-channel

Integrated use of multiple channels — online, in-store, and mobile — working seamlessly together

Reverse channel

Moving products back from consumers to producers — used for returns and recycling

Inventory

Stored goods waiting to be sold or used

Mass merchandising concept

Selling large volumes at low prices to maximize overall profit

Wheel of retailing

New retailers enter as low-cost operations and gradually become more upscale over time

Brick-and-mortar stores

Physical retail locations as opposed to online-only stores

Which P is hardest to change and why?

Place — long-term contracts, relationships, and infrastructure make distribution channels very difficult to switch

Logistics is related to which P?

Place — moving and storing products is part of the distribution strategy

Home delivery falls under which P?

Place — it is a method of delivering the product to the customer

Intensive distribution

Sell the product in as many outlets as possible — goal is maximum market coverage (example: Coca-Cola)

Selective distribution

Use a limited number of outlets in a given area (example: Nike shoes in select stores only)

Exclusive distribution

One or very few sellers carry the product in a territory — used for luxury or specialized products

What drives channel conflict?

Goal differences, role disagreements, competition between members, and poor communication

Truck transport

Flexible and door-to-door delivery at moderate cost — most common for short and medium distances

Rail transport

Cheap for bulk and heavy goods but slower and less flexible than trucks

Air transport

Very fast but most expensive — best for high-value or time-sensitive shipments

Water transport

Very cheap but very slow — best for large international bulk shipments

Pipeline transport

Used only for liquids and gases — very low cost per unit (examples: oil, natural gas)

Limited-line store

Narrow product range but deep selection within that category (example: a clothing-only store)

Specialty store

Deep assortment in one specific category with high expertise and service

Convenience store

Quick purchases, limited items, longer hours — customers pay more for the convenience

Supermarket

Wide variety of food and household products, self-service, competitive pricing

What do time-pressed dual-career families benefit from?

Convenience stores + online shopping + home delivery — they prioritize saving time over saving money

Retailers vs. wholesalers vs. intermediaries

Retailers sell to consumers. Wholesalers sell to retailers. Intermediaries are any middle channel member.

5-step marketing research process

1. Define problem 2. Develop research plan 3. Collect data 4. Analyze data 5. Present results

Primary data

Collected firsthand for this specific research problem — obtained through surveys, interviews, observations, experiments

Secondary data

Already exists, collected for another purpose — sources include reports, databases, and government data

Marketing dashboard

Visual display of key performance metrics — sales, ROI, market share — for quick performance tracking

Marketing model

Framework showing relationships between variables such as inputs, outputs, and influences

Scientific method

Observe → Hypothesis → Test → Analyze → Conclude

Product line

A group of related products sold by the same company

Product assortment

The complete mix of ALL products a company offers

Convenience product

Bought quickly and frequently with little thought — purchases are often unplanned (examples: gum, snacks, gas)

Shopping product

Compared before buying on price, quality, or style — homogenous = very similar; differentiated = distinct features

Specialty product

Unique items where brand loyalty is strong — customers seek it out and won't accept substitutes

Unsought product

Not actively sought by consumers — examples: life insurance, funeral services — requires heavy promotion

Private brand

A brand owned by a retailer rather than a manufacturer (example: Kirkland by Costco)

Generic brand

No branding, minimal packaging, lowest cost option

Raw materials

Basic inputs used in production — examples: wood, minerals, agricultural products

Brand preference levels (in order)

Awareness → Recognition → Preference → Loyalty

How do we build brand familiarity?

Advertising, repetition, consistent messaging, and positive customer experiences

Homogenous shopping product strategy

Provide enough service to differentiate — since products are similar, service becomes the key differentiator

4 stages of the product life cycle

Introduction → Growth → Maturity → Decline

Promotion strategy in the PLC

Heaviest during Introduction and Growth to build awareness and gain market share

Distribution strategy in the PLC

Distribution expands during the Growth stage as demand increases

When is profit lowest in the PLC?

Introduction — high startup costs and low sales volume, often resulting in losses

When is profit highest in the PLC?

Growth — sales surge while costs begin to stabilize

What happens to profit in Maturity and Decline?

Profit declines — price competition increases in Maturity and sales fall in Decline

Continuous innovation

Minor improvements to existing products — no behavior change needed (example: improved shampoo formula)

Dynamically continuous innovation

Moderate changes that require some new behavior from consumers (example: smartphones requiring touchscreen use)

Discontinuous innovation

Completely new product that changes consumer behavior entirely (example: the internet, the automobile)

New product development process (7 steps)

1. Idea generation 2. Screening 3. Concept testing 4. Business analysis 5. Product development 6. Test marketing 7. Commercialization

How do we evaluate new ideas?

Assess feasibility, profit potential, market demand, and alignment with company goals

How do we evaluate marketing performance?

Sales performance, market share, profitability, ROI, and customer satisfaction