MAR3023: PRINICIPLES OF MARKETING Ch. 13-16

Barter

practice of exchanging product & service for other products & service rather than $$$

Off-Price Retailing

selling brand name merch at a lower than regualr prices

Warehouse Club

large stores that lack elborate displaus, customer service r home delivery

Outlet Store

offer products for 25 to 75% of suggested retail price

Single Price or extreme value retailiers

attract customers who value a corner store

Central Business District (CBD)

communties downtown area

Regional CEnter

typically attract ppl who live/work in 5-10 mil range

Community shopping Center

about 20 to 40 outlets → 10 min dirve

String Mall/Power Center

serve ppl wihtin 5-10 min drive

Power Center

huge shopping strip w/ national stores

Logistics of Supply chain

actitvies that focus on getting the right amount oproducts to the right place at the right time at the lowest possible price

* organizes cost effective flow of raw mateirials, in-process inventory, infused goods & relay info from pt of origin to the pt of consumption

Supply Chain Managment Marketing

1. understand customer
2. understand supply chain
3. harmonize uspply chain w/ marketing strategy

Bullwhip Effect

tenednecy for supply chain mangers at different levels of the supply chian to exaggerate the need to increase or decrease inventory tin response to varaition or lack of predictiability in customer demand

Customer Service

the ability of logisitcs mangament ot satisfy users in terms of time, dependenaibility, communicaiton & convenience

* Time
* Order Cycle Replenishment: time btw orderng of an items & when it is recieved & ready for use or sale
* reduce order time os invenotyr levels may be min
* dependability: consistent replenishment: consistent lead time, safe delviery, complete delievery
* Communication: tracking, moving/storage
* Blockchain Tech: decrenetralized digital system for recording,documenting & ffacialtiies transactions
* Conveneicen: VMI

Wholesaler-sponsored voluntary chains

a wholesales & devlop a contractual relationship w/ small retailiers to standard/coordinate buying practice, purhcase programs & inventory

Retailer Sponsored

small independent retailer form an org that operates a wholesales facilties cooperatively

Franchising

contractual agreement btw parent copmany & indivudal firm which allow franchise to oeprate a certain type of business under the establish name

Manufactured Sponsored Retail Franchise

prominenet where manfuacturers sells products by sales or service

Manufactertuere Sponsored Wholesale Franchise

softdrink → license to buy the product

Service Sponsored Retial Franchise

used firmst hat have design unique apporach for performing a service

Service-sponsored franchise

franchisors license indidvual/firms to dispense service under trade name w/ guidelinesA

Administred Systems

achieve coordination at successive stages of produdction & distriubution by size & influence of one channel member than through ownership

Questions for MArketing Channel Choice & Management

1. Which channel provide best coverage for market
2. will satisfy buying reqiurements
3. most profitable

Intensive Distribution

firm tries to place its products/service in many outlets

* convenience products

Exclusive Distribution

only one retailer carries the firm’s products

* speciality products

Selective Distribution

firm selects a few reailers in a specfiic geographic area to carry its products

Marketing Channel

individuals/firms invovled in the process of making a product or service avaliable for use or consumption or industrial users

Channels create utiltiies(value) to the customer by

1. Time Utility: convenience (24 hrs) & speed = when you want it
2. Place utility: convenience (location in 2 mi radius) & prestige= where you want it
3. Form Utility: downloaded= having the product
4. Possession Utility: warranties/Apple Pay= possess the product

Types of Channel Functions: Logistical Functions

Assorting & transporting from Point A to Point B

* warehousing/materials handling → storage
* Cross Docking helps w/
* reducing inventory costs for holding inventory
* allows product quality to be broken down into smaller quantities
* You need to hire labor to sort/unload the trucks → $$$
* Order Processing
* Electronic Data Interchange
* Inventory Management:
* Just in Time (JIT)
* Vendor Management (VM)
* helps w/ forcasting
* Con: you lose control & reliability from vendor → turnover
* manufacturer still owes the product until it is out the door
* new business try to get spaces on the retailer’s shelves
* high-end stores have their own store & supplier is retialier bc they don’t want the product to be sitting somewhere else

Electronic Data Interchange (EDI)

Cross-Docking

practice that invovles uploading products from suppliers,sorting products for indidvual stores & quicklyrelaoding products onton its trucks

Just in Time

Vendor Management (Convience)

supplier determines the product amount & assortment a customer needs & automatically delivers the appreciatte items

Functions of the Channel: Transaction Functions (Possession Utility)

buying, selling, risk taking of inventory

Functions of the Channel: Logistics

Assorting: crating product assortments

saring: assemlbing & protecting products

Sorting: pruchasing in large quantities & smaller amounts

Transporting

Functions of the Channel: Faciliating Functions (Possession Utility)

financing, market research, grading: inspection

Supply Chain Management

integration & organization of info & logistics activties across firms in a supply chain for the purpose of creating & delivering goods & services to provide value to consumers

* Two types of flows
* downstram: steps invovled in manufactuerer to consumers
* Upstream: steps invovled in the consumer to manufacturer
* manager responsible for translating customer requirements
* tradeoff btw cost & efficiency

Intensive Channel Coverage

firm tries to place its products/ services in many areas

Ex: Starbucks in every mile

for convenience/commodities product

Exclusive Channel Coverage

one retialier carries the firms products

Selective Channel Coverage

firm selects a few retailers in a specfic geographic area to carry its products

Ex: Target or Bestbuy

Direct Channels

manufactuer interacts directly w/ the ulitmate consumer

Ex: Apple

Indirect Channel

an intermeditate btw the manufacuter & ulimate consumer

Types:


1. Midleman: wholesale & retaiiler
2. Wholesaler: they resel products to another intermediary (does sorting/ cross docking)


1. low cost/low unit value


1. coordiante large supply chain
3. Merchant Wholesalers: indepent but has ownership of the product like inventory


1. Distributor: full service for packing/sending it off
2. Jobber: limited service → specific job
4. Agent: they are independent of the manufactuer but has no ownership/authority
5. Manufactuer Sales Branch: have ownership of the product


1. can handle inventory
6. Manufactuer Sales Office: dont have ownership of the product


1. small firms don’ t have warehouses but its a local contact to get orders in retailers for manufactuer order system
7. Retailer:intermeidary that sells to the customer


1. Stores
2. Non-store → catalogs
3. can buy large quanitties or cost of inveotry is $

Types of Channels for Business Products & Service

1. Producer → industrial user: maintian own salesforce, all channel functions w/ large buyeres/ high unit value
2. Producter → industrial Distributor → industrial User


1. selling, stocking, delivering
3. Prducer→ Agent → Industrial User


1. Agent: rep of a producer
4. Producer → Agent → Industrial Distributor → Industrial User

Digital Marketing Channels

products/service avalibale for consumption or use by consumer or organizational buyers

Direct to Consumer Marketing Channel

allows customer to buy product & interact w/ various of print or e-media or w/ sales ppl

* mail order, direct mail, catalogs

Vertical Marketing Systems

professoinal managers & cordinated marekting channel designs to achieve channel economcis & max impact to increase efficiency

Vertical Corporate Systems

successive stages of product & distribution under a single ownership

Administered Vertical Marketing Systems

coordinaiton by the size & influence of 1 channel member

Contractual Systems

independent production & distriubtion firms integrate efforts on a contractual basisi to obtain greater funcitonal economcies & marketing impact

Buyerse Requirement

1. Info: buyers need to know specfiic details
2. convience
3. variety
4. pre-service

Channel Conflict

one channel member beliveve another channel member is engaed in behavior that prevents its goal

Horizontal Level Channel Conflict

conflict that occurs withint he same level

Ex: manufactuers → wholesaler→ horizontal conflict (retailer 1 , retailer 2)

* competinig in smae region

Vertical Level Channel Conflict

conflcit between the different levels

Ex: Manufactuers of McDonalds want to do all-day breakfast but didn’t check in w/ thier franchises

Disintermediation

conflcit arises when channel members by pass another memebr & sells/buys products

Types of Vertical Channels: Contractual

agreement w/ a lot terms

Ex: Franchsing

Types of Vertical Channels: Administered

coordination by the size/influence of 1 channel member

Ex: you can apply to be a supplier of walmart but you have a lot of requirements

Types of Vertical Channels: Vertical Integration

the firm owns the maufactuering & distribution

Channel Captain

channel memebr that cooridnates, directs, supports other channels

* influene through rewards, expertise, idenntification & legitimate right

A tradeoff endured by channels is

cost vs. contorl

* Franchise: it may be a huge cost or lose contorl
* you would have to give up control of the channel strategy
* Channel Captain: establishes the rules for ther terms to spread the cost

Transacations Marketing

* short term
* emphasize price
* product quality
* arms length

Relationship Marketing

long-term relationships w/ suppliers, distributors, & customers

* long term
* mutual satisfiacitn
* interaction quality
* interdependent → “Win/Win”

Old View of Channel Relationships: Mutlichannel

channel is a pipeline that delivers the product in separate ways

* store, web, moblie
* in product → out product

New View of Channel Relationships: Omichannel/Multchannel

Channel as a **value chain:** creating a **consistent** experience regardess of type of channel your customer buys

* 360 degrees
* in product + value → outporduct
* retailer has many touchpoints w/ consumers

 blending of differentiation communications & delivery channels that are mutually reinforcing in attracting, retaining/building relationships w/ consumers who shop & buy traditional intermediaries/online

Dual Distribution

arrangement whereby a firm reaches different buyers by employing 2+ different channels of the same products through its own vertically integrated channel

Exclusive Dealings

suppirs reqiure channel to sell only its products or restricts distriubtos from selling directly compeitive products

Tying Arrangement

supplier requires distributor purchasing some rpoducts ot buy other froms suppliers

Full-Line Forcing

type of tying arrangemnt which requires channel memebrs to carry its full line of products in order to sell a specific item

Resale Restrictions

suppliers’s attempt to stipulate to whom distribuots may resell supplier’s products & in what specfici geographic areas or territories they may sell

Strategic Alliances

firm’s marketing channel is sued o sell another firm’s product → starbucks & pepisco

Retailing

all activites including selling, renting & providing products/services to ulimate consumers

* it is the place where consuemrs meets the product
* have time, place, possessoin, form utility

Types of Retail Outlets

1. Independent: owned by an indivdual→ Pro: boss & convenience
2. Corporate Chain: multiple outlets under common ownership


1. can handle w. manufactuers & buying power, high tech
3. Contractual systems: independently owned stores that band together to act like chain


1. Retail Spnonsored co-op
2. Wholesale Sponsored Whoelsale
3. Franchise


1. pro: ppl can enter a well known business
2. Con: Totoal invesment high

Level of Service

1. Self serrvice: customer perofrm many fucntions during purcahse process
2. Limited Service: customer respnosble for most shopping actitivtes but there are sales ppl
3. Full-Time REtailers: speciality stores provide many services

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Trends of Retail

1. it is a big business & gorwing in mdidle east & asia → 1 in 4
2. E-commerce going bc of online


1. a small portion but it is becoming a bigger proporton of the total retail sales
2. Top e-commerec: amazon & walmart

Retail Functions Add Value by

1. provide assortments


1. ppl can compare prices.quality
2. use CDI/BDI to keep track
2. breaking bulk


1. you can buy products in a smaller quanity 12 rolls vs 24 rolls of toliet paper
3. holding invetory


1. may have finanical cost for holding inventory
2. Omichannel: retialiers can order a product if they don’t have it in stock
4. provide services


1. Ex: Walamart: vision center

Merchandising Line

many differnet types of products a store carries in what assortment

Breadth

type of category

Depth

how much you carry of that one category: brand, color, flavor

Scrambled Merchandising

several unrelated product lines in single store

* drug stores

Hypermarket:

large stores based on “everything under one roof”

Discount Stores

Walmart & Target


1. **Very low price/ low servic**e → not curated 
2. High Breadth but low value/depth
3. Off-Price Retailers: dollar General, Tj Maxxx → not have large selection

Department Stores

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1. Macy’s JCpenney
2. High Breadth/Depth
3. They are experience hard time bc they are experiencing speciality/discount stores

Speciality Stores

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1. Gap , Mimited, Foot Locker 
2. Generally high price, service 
3. Limited breadth/depth for some sotres
4. Could also have high depth & low breadth
5. narrow , average to deep selection

Power Retailers (Category Killers)

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1. Best Buy, Home Depot, Office Depot → expertise → big Box (lower price, high selection)
2. Low Price & Breath/ high depth
3. They go into the category & they are able to leverage more mass → discount stores of a certain type of category 


1. Given the economies of scale, they given lower prices

Retail Strategies

1. **Retail Positioning Mix**:


1. breadth vs. depth
2. Merchandise Mix


1. High Value, borad product: pay attention to store design
2. Low value & broad product: focus on rpice
3. High value , narrow product: slecetive range w/ high status
4. low value & narrow product: self service
3. Price & Service: need to add value/benefits
2. **Location**:


1. Macro Factors:


1. economic cliamte
2. demographics/psycholgoical profile ‘copmeition
3. business climate


1. canibalization of your own chain
2. highy taxes
3. culture
2. Micro Factors:


1. Accessiblity → traffic/ flow
2. Visibility → is there a sign?
3. Traffic Congestion
4. Parking
5. Rent
6. Cannibalization
7. **Workers**
3. **Image/atmospherics**


1. store layout:


1. Grid & Racetrack: finding things
2. Geometric/Free Flow: Ikea
2. Merch isplay


1. Crowded: next to each other
2. curated: spaced
3. Fixtures & signs


1. logos, store mottos
4. Lighting & Color


1. mood/ bright lighting
5. Music/Scents
4. Psuchological: intangibel, sense of beloning
5. shopper marketing : use of dislpay, coupons, samples & other communications

Retail Productivity Measures: Net Sales Per Square Foot:

(Total Sales - Returns)/ size of the store

* making the most out of your store

Retail Productivity Measures: Stockturn Rate

Inventory Turnover: Stockturn Rate= Cost of goods/ avg inventory cost

Avg. Inventory: beginning + ending invetory/2

Could be good or bad but depends on industry

Retail Productivity Measures: Same- Store Sales Growth

Basic measure of retial perfofmance & adjust for expasnion in # of stores

Brand Management:

manufacturer’s perspective- maximizing profit performance of the brand

Category Management

retailer’s perspective - maximizing profit performance of the entire mix of brands ina  product category

* want to offer wide assortments

Key Issue for Future of “Brick & Mortar” Retialing

how to add value for the consumer that cannot be delivery via e-commerce

* recreational shopping
* retailment

Price

money or other consideraitons exchanged for the ownereship or use of a product/service

= list pirce -incentives + allowances + extra fees

Purpose of pricing

a comuincation tool to capture the value of the product in the customer’s mind

* pricing too high may lower deamnd
* pricing too low may be costly

Value

percieved value/ price

* to improve price, increase the benefit (easiest way) or decrease the price
* benefit allows for connection/relationship

Reference price

Internal Price: this is the price in the customer’s mind

External Price: factors that influence how you percieved price → family, friends

Value pricing

practice of increasing products/service while maintiang/decreasing the price

Total Profit

TP= total revenue (TR)-Total cost (TC)

Pricing Approaches: Cost-Based Pricing

Price setter setresses the cost sde of producing to cover the direct expenses, overhead, profit


1. BreakEven Analysis


1. Total Costs = Fixed Costs (FC) + Variable Costs (VC)
2. Break Even = (Total Fixed Costs/Unit) + Unit Varaible Cost ) for the individual unit


1. there’s fixed costs even if you have 0 output
2. as you sell more/ have a higer price, you get more $ but increase costs
2. Markup → Channel


1. Price= (costs of goods)/(100-markup%)/(100)
2. this is the cost the channel is paying the manufactuer
3. Cost-plus prciing: summing total nit cost of a producct providing a product or service & adding a specfic amount ot the cost to arrive at a price


1. Cost Plus Perecentage f Cost: fxxed % + totla unit costs
2. Cost plus fixed fee pricing: suppier is reimbursed for all costs regardless of what they turn out to be
4. Experiecne curve pricing : learning effect which holds that unit cost of many products delcine btw 10-20%

Pricing Approaches: Profit-Based Pricing

1. Total Profit Pricing


1. Price= TFC + TVC + (total profit/total # of units )
2. Target Return on Sales: set typical prcies that will given them a profit that is a percentage
3. Target ROI Pricing


1. Price= TFC + TVC + (investment \* ROI)/Std# units

Problems w/ Cost & Profit Based Pricing

* internal focs
* ignores the demand/compeitive factors
* assumes all that s product is sold at full price
* fails to account for economcies of scales
* large voulme may decrease the variable costs