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Studied by 25 peoplePRINCIPLES OF MARKETING NOTES Chapters 13-15
Chapter XIII: Marketing Channels and Supply Chain Management
Foundations of the Supply Chain
Distribution: The decisions and activities that make products available to consumers when and where they want to purchase them
Supply Chain: All the organizations and activities involved with the flow and transformation of products from raw materials through to the end customer
Procurement: Processes to obtain resources to create value through sourcing, purchasing, and recycling including materials and information
Logistics Management: Planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to consumption in order to meet customers’ needs and wants
Operations Management: The total set of managerial activities used by an organization to transform resource inputs into goods, services, or both
Supply Chain Management (SCM): The coordination of all the activities involved with the flow and transformation of supplies, products, and information throughout the supply chain to the ultimate consumer
Supply chain management should begin with a focus on the customer, who is the ultimate consumer and whose satisfaction should be the goal of all efforts of channel members.
When the buyer, the seller, marketing channel intermediaries, and facilitating agencies work together, the cooperative relationship results in compromise and adjustments that meet customers’ needs.
Supply chain managers can use data available through improved information technology to learn about a firm’s customers.
Technology has improved supply chain management capabilities globally.
Blockchain: a incorruptible digital recordkeeping system
Using blockchain technology, all organizations within a supply chain can record every movement of products and components from where they are sourced, processed, and stored, and when they expire, all the way to the final consumer.
Another technology improving supply chain management is artificial intelligence (AI), which can help firms with complex computing tasks to improve marketing analytics
The Role of Marketing Channels in Supply Chains
Marketing Channel: A group of individuals and organizations that direct the flow of products from producers to customers within the supply chain
Also called a channel of distribution or distribution channel
Goal is to make products available at the right time at the right place in the right quantities
Customer satisfaction should be the driving force behind marketing channel decisions.
Marketing Intermediaries: Middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products
Wholesalers and retailers are examples of Intermediaries.
Play key roles in customer relationship management through distribution activities and by maintaining databases and information systems to help all members of the marketing channel maintain effective customer relationships
Marketing Activities Performed by Intermediaries
The Significance of Marketing Channels
Marketing channel decisions can have a strong influence on the other elements of the marketing mix.
Channel decisions are critical because they determine a product’s market presence and accessibility.
Marketing channel decisions have strategic significance because they generally entail long-term commitments among a variety of firms.
Channel decisions are the least flexible component of the marketing mix; once a firm commits to a distribution channel, it is difficult to change.
Marketing channels serve many functions, including creating utility and facilitating exchange efficiencies.
Selecting appropriate marketing channels is important because they are difficult to change once chosen.
Channel selection decisions are usually affected significantly by a number of factors.
CUSTOMER CHARACTERISTICS
Because of variations in product use, product complexity, consumption levels, and need for services, firms develop different marketing strategies for business customers and consumers.
Business customers often prefer to deal directly with producers and frequently buy in large quantities.
Consumers generally buy limited quantities of a product, purchase from retailers, and often do not mind limited customer service.
PRODUCT ATTRIBUTES
Marketers of complex and expensive products, perishable products, and fragile products that require special handling will likely employ short channels.
Less-expensive standardized products with long shelf lives can go through longer channels with many intermediaries.
COMPETITION
In a highly competitive market, it is important for a company to maintain low costs so it can offer lower prices than its competitors if necessary, to maintain a competitive advantage.
ENVIRONMENTAL FORCES
Economic conditions, technology, and government regulations can affectchannel selection.
CHARACTERISTICS OF INTERMEDIARIES
When an organization believes that an intermediary is not promoting its products adequately or does not offer the correct mix of services, it may reconsider its channel choices.
Intensity of Market Coverage
Intensive Distribution: Using all available outlets to distribute a product
Appropriate for products that have a high replacement rate, require almost no service, or are bought based on price cues
Must be available at a store nearby and be obtained with minimal search time
Selective Distribution: Using only some available outlets in an area to distribute a product
Appropriate for shopping products (Ex: clothing, cell phones, cars)
Desirable when a special effort, such as customer service from a channel member, is important to customers
Often used to motivate retailers to provide adequate service
Exclusive Distribution: Using a single outlet in a fairly large geographic area to distribute a product
Suitable for products purchased infrequently, consumed over a long period of time, or that require a high level of customer service or information
Used for expensive, high-quality products with high profit margins
Not appropriate for convenience products and many shopping products
Used as an incentive to sellers when a limited market is available for products
Some products are appropriate for exclusive distribution when first introduced, but as competitors enter the market and the product moves through its life cycle, other types of market coverage and distribution channels become necessary.
Strategic Issues in Marketing Channels
Competitive Priorities in Marketing Channels
Supply chains can be a source of competitive advantage and a strong market orientation because supply chain decisions cut across all functional areas of business.
Building the most effective and efficient supply chain can sustain a business and help it to use resources effectively and be more efficient.
Supply chains driven by firm-established goals focus on the “competitive priorities” of speed,quality, cost, or flexibility as the performance objective.
Channel Leadership, Cooperation, and Conflict
Each channel member holds certain expectations of other channel members. (Channel Captain)
Partnerships can facilitate effective supply chain management when partners agree on objectives, policies, and procedures for distribution associated with the supplier’s products.
Channel cooperation reduces wasted resources, such as time, energy, or materials.
Channel Conflict
Channel conflict occurs when:
Members disagree about best methods for distributing products profitably and efficiently
Intermediaries overemphasize competing products or diversity into product lines traditionally handled by other intermediaries
Self-interest creates misunderstanding about role expectations of channel members
Communication is poor between channel members
Although there is no single method for resolving conflict, partnerships can be reestablished if two conditions are met:
The role of each channel member is clearly defined and followed
Members of channel partnerships agree on means of coordinating channels, which requires strong, but not polarizing, leadership
Logistics in Supply Chain Management
The internet and technological advancements have revolutionized logistics, bypassing shipping and warehousing considerations and transforming physical distribution by facilitating just-in-time delivery, precise inventory visibility, and instant shipment-tracking capabilities.
Technology enables companies to avoid expensive mistakes, reduce costs, and generate increased revenues.
Information technology enhances the transparency of the supply chain, allowing all marketing channel members to track the movement of goods and improve their customer service.
Speed of delivery, flexibility, and quality of service are often as important to customers as costs.
Companies that offer the right goods, in the right place, at the right time, in the right quantity, and with the right support services are able to sell more than competitors that do not.
Decreasing costs in one area often raises them in another.
Legal Issues in Channel Management
Federal, state, and local laws governing distribution channel management in the United States are based on the principle that the public is best served by protecting competition and free trade.
Under the authority of federal legislation, such as the Sherman Antitrust Act and the Federal Trade Commission Act, courts and regulatory agencies determine under what circumstances channel management practices violate this underlying principle and must be restricted.
Restricted Sales Territories
To tighten control over product distribution, a manufacturer may try to prohibit intermediaries from selling outside of designated sales territories.
Intermediaries often favor this practice, because it provides them with exclusive territories where they can minimize competition.
Courts have conflicting positions regarding restricted sales territories.
Although the courts have deemed restricted sales territoive distribution agreements to maintain brand prestige and control over their product's distribution and customer experience
Chapter XIV: Retailing, Direct Marketing, and Wholesaling
Retailing
Retailer: An organization that purchases products for the purpose of reselling them to ultimate consumers
Retailers are important for many reasons:
They are vital to the U.S. economy
There are more than 1 million retail establishments in the United States, and they employ nearly 16 million people. Retailers contribute $1.1 trillion, or 5.9 percent, directly to the U.S. gross domestic product.
Add value for customers by providing services and assisting in making product selections
Can enhance customers’ perceptions of the value of products by making buyers’ shopping experiences easier or more convenient
Can add significant value to the supply chain (the link between producers & consumers)
Play a major role in creating time, place, and possession and, in some cases, form utility
Perform marketing functions that benefit ultimate consumers
Multichannel Retailing: Employing multiple types of retailing (brick & mortar, online, tv)
Also Referred to as: Omnichannel retailing
When companies utilize different channels to reach their customers (when & where they demand it)
But at the same time, these multi-channel efforts are purposeful and coordinated
Online Retailing
Online Retailing: Retailing that makes products available to buyers through internet connections
Worldwide, online retailing is growing, with online retail sales in the United States at $453 billion (almost 13 percent of all retail sales) and global online sales of more than $2.3 trillion.
It satisfies an increasing expectation among consumers to have multiple channels available to obtain goods and services at their convenience.
Retailers that were primarily catalog retailers are now primarily online retailers
Brick-and-Mortar Retailers
General-Merchandise Retailer: A retail establishment that offers a variety of product lines that are stocked in considerable depth
The primary types of general-merchandise retailers are:
Strategic Issues in Retailing
Consumer purchases are often influenced by social and psychological factors.
Location of Retail Stores
Location is critical to business success.
Retailers consider various factors when evaluating potential locations, including:
Position of the firm’s target market within the trading area
Kinds of products being sold
Availability of public transportation
Customer characteristics
Placement of competitors’ stores
Location is the least flexible variable of the marketing mix.
Location is an important strategic decision that dictates the limited geographic trading area from which a store draws its customers.
Franchising: An arrangement in which a supplier (franchisor) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration ($)
The franchisor may receive a percentage of total sales in exchange for furnishing equipment, buildings, management know-how, and marketing assistance to the franchisee.
The franchisee supplies labor and capital, operates the franchised business, and agrees to abide by the provisions of the franchise agreement.
Because of changes in the international marketplace, shifting employment options in the United States, the large U.S. service economy, and corporate interest in more joint-venture activity, franchising is a very popular retail option.
Store Image
Atmospherics: The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying
Retailers use different elements—music, color, and complexity of layout and merchandise presentation—to influence customer attention, mood, and shopping behavior.
Online retailers are not exempt from concern over atmospherics.
Direct Marketing, Direct Selling, and Vending
Direct Marketing: The use of the telephone, internet, and non-personal media to introduce products to customers, who can then purchase them via mail, telephone, or online
DIRECT-RESPONSE MARKETING
Direct-Response Marketing: A type of marketing in which a retailer advertises a product and makes it available through mail, telephone, or online (Buy Today!)
Direct-response marketing through television remains a multi-billion-dollar industry
TELEMARKETING
Telemarketing: The performance of marketing-related activities by telephone
Telemarketing can help to:
Generate sales leads
Improve customer service
Speed up payments on past-due accounts
Raise funds for nonprofit organizations
Gather marketing data
TELEVISION HOME SHOPPING
Television Home Shopping: A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card
Popular television home shopping products are jewelry, clothing, housewares, and electronics.
Direct Selling
Direct Selling: Marketing products to ultimate consumers through face-to-face sales presentations at home or in the workplace
Although the majority of direct selling takes place on an individual, or person-to-person basis, it sometimes may be carried out in a group, or “party,” plan format.
Wholesaling
Wholesaling: Transactions in which products are bought for resale, for making other products, or for general business operations. However: does not include exchanges with ultimate consumers!
Wholesalers may engage in many supply-chain management activities:
Primary responsibility for physical distribution of products from manufacturers to retailers
May establish information systems that help producers and retailers manage the supply chain from producer to customer
Use information technology and the internet to share information among intermediaries, employees, customers, suppliers, and facilitating agencies
Make databases and marketing information systems available to their supply-chain partners to facilitate order processing, shipping, and product development and to share information about changing market conditions and customer desires
Services Provided by Wholesalers
Chapter XV: Integrated Marketing Communications
The Nature of Integrated Marketing Communications
Integrated Marketing Communications: Coordination of promotion and other marketing efforts for maximum informational and persuasive impact on customers
Coordinating multiple marketing tools to produce this synergistic effect requires a marketer to employ a broad perspective.
A major goal of integrated marketing communications is to send a consistent message to customers.
Integrated marketing communications also enable synchronization of promotion elements and can improve the efficiency and effectiveness of promotion budgets.
The concept of integrated marketing communications is increasingly effective.
Mass media advertising is used less today than in the past because of high cost and unpredictable audiences.
Marketers take advantage of more precisely targeted promotional tools.
Database marketing and marketing analytics allow marketers to target individual customers more precisely.
Marketers and customers have almost unlimited access to data about each other.
Integrating and customizing marketing communications while protecting customer privacy has become a major challenge.
Through digital media, companies can provide product information and services that are coordinated with traditional promotional activities.
The Role and Objectives of Promotion
Promotion: Communication to build and maintain relationships by informing and persuading one or more audiences
Many organizations spend considerable resources on promotion to build and enhance relationships with current and potential customers as well as other stakeholders.
For maximum benefit from promotional efforts, marketers strive for proper planning, implementation, coordination, and control of communications.
Effective management of integrated marketing communication is based on information about and feedback from customers often via: social media, blogs, customer feedback via websites, etc.
Create Awareness
For an organization that is introducing a new product or a line extension, making customers aware of the product is crucial to initiating the product adoption process.
Promotional efforts may aim to increase awareness of:
Brands
Product features
Image-related issues (such as ethical or socially responsive behavior)
Operational characteristics (such as store hours, locations, and credit availability)
Stimulate Demand
Primary Demand: Demand for a product category rather than for a specific brand
New Introductory Promotion: Promotion that informs consumers about a new product
Selective Demand: Demand for a specific brand
Can be stimulated by:
Differentiating the product from competing brands in the minds of potential buyers
Increasing the number of product uses and promoting them through advertising campaigns, price discounts, free samples, coupons, consumer contests and games, and sweepstakes
Encouraging existing customers to use more of the product
Encourage Product Trial
If customers stall during the evaluation stage, marketers can use certain types of promotion—free samples, coupons, test drives, or limited free-use offers, contests, and games—to encourage product trials to move them through the product adoption process.
Identify Prospects
Certain types of promotional efforts aim to identify customers who are interested in the firm’s product and are likely potential buyers.
For example, a marketer may run a television advertisement encouraging the viewer to visit the company’s website and share personal information in order to receive something of value from the company.
The organization can respond with phone calls, email, or personal contact by salespeople.
Retain Loyal Customers
Maintaining long-term customer relationships is a major goal of most marketers.
The costs of retaining customers are usually considerably lower than those of acquiring new ones.
Retention techniques include frequent-user programs and special offers for existing customers.
Facilitate Reseller Support
Strong reseller relationships are important to sustain a competitive advantage.
Various promotional methods can help an organization achieve this goal:
Sharing a portion of retailers’ advertising expenses for promoting the products
Providing wholesalers and retailers with special offers and buying allowances
Working with retailers in the presentation and promotion of the products
Combat Competitive Promotional Efforts
At times, a marketer’s objective in using promotion is to offset or lessen the effect of a competitor’s promotional or marketing programs.
A combative promotional objective is used most often by firms in extremely competitive consumer markets.
Reduce Sales Fluctuations
A business cannot operate at peak efficiency when sales fluctuate widely (holidays, seasonal products, economic changes, etc.).
Promotional activities are often designed to stimulate sales during slumps.
During peak periods, a marketer may refrain from advertising to prevent stimulating sales to the point at which the firm cannot handle all the demand.
A company may advertise customers can be better served by coming in on certain days.
The Promotion Mix
Promotion Mix: A combination of promotional methods used to promote a specific product
Advertising
Advertising is a paid nonpersonal communication about an organization and its products transmitted to a target audience through mass media.
Advertising is changing as consumers’ mass media consumption habits are changing:
Consumers are striving to maximize their presence and impact through digital media.
Ads are being designed that cater to smaller, more personalized audiences.
Traditional media like newspapers are in a decline due to a drop in readership.
Individuals and organizations use advertising to promote goods, services, ideas, issues, and people.
Personal Selling
Personal selling is a paid personal communication that seeks to inform customers and persuade them to purchase products in an exchange situation.
Personal selling is most extensively used in the business-to-business market and in the business-to-consumer market for high-end products such as homes, cars, electronics, and furniture.
Advantages
Involves more specific communication than advertising; has greater impact on customers; provides immediate feedback
Limitations
Expensive to pay salespeople
Public Relations
Public relations is a broad set of communication efforts used to create and maintain favorable relationships between an organization and its stakeholders.
A component of public relations is publicity—nonpersonal communication in news-story form about an organization, its products, or both.
Public relations efforts may be the responsibility of an individual or of a department within the organization, or the organization may hire an external public relations firm.
Public relations should be viewed as an ongoing program rather than a set of tools to be used only during crises.
Sales Promotion
Sales promotion is an activity or material that acts as a direct inducement, offering added value or incentive for the product to resellers, salespeople, or customers.
Marketers spend more on sales promotion than on advertising, and sales promotion is a faster-growing area than advertising.
Marketers frequently rely on sales promotion to improve the effectiveness of other promotion-mix ingredients.
Selecting Promotion Mix Elements
Promotional Resources, Objectives, and Policies
The size of an organization’s promotional budget affects the number and relative intensity of promotional methods included in a promotion mix.
Having more promotional dollars to spend does not necessarily mean using more promotional methods.
Researchers have found that resources spent on promotional activities have a positive influence on shareholder value.
A company’s promotional objectives and policies influence the types of promotion selected.
Different objectives require different promotional mixes.
Characteristics of the Product
Generally, promotion mixes for business products concentrate on personal selling, whereas advertising plays a major role in promoting consumer goods.
Marketers of business products use some advertising and occasionally sales promotion to promote products.
Personal selling is used extensively for consumer durables, such as home appliances, automobiles, and houses, whereas consumer convenience items are promoted mainly through advertising and sales promotion.
A product’s price also influences the composition of the promotion mix:
High-priced products call for personal selling.
For low-priced convenience items, marketers use advertising.
Costs and Availability of Promotional Methods
Cost is a major factor to analyze when developing a promotion mix.
National advertising and sales promotion require large expenditures.
However, if these efforts succeed in reaching extremely large audiences, the cost per individual reached may be quite small.
Many small, local businesses advertise products through local newspapers, magazines, radio and television stations, outdoor displays, internet ads, and signs on mass transit vehicles.
Push and Pull Channel Policies
Push Policy: Promoting a product only to the next institution down the marketing channel
Normally stresses personal selling
Pull Policy: Promoting a product directly to consumers to develop strong consumer demand that pulls products through the marketing channel
Done primarily through advertising and sales promotion
Push and pull policies are not mutually exclusive; at times, an organization uses both simultaneously.
The Growing Importance of Word-of-Mouth Communications
Word-of-Mouth Communication: Personal, informal exchanges of communication that customers share with one another about products, brands, and companies
Most customers are likely to be influenced by friends and family members when they make purchases.
Research has identified a link between word-of-mouth communication and new- customer acquisition when there is customer involvement and satisfaction.
Effective marketers attempt to identify opinion leaders (influencers)and encourage them to try their products in the hope that they will spread favorable publicity about them.
Consumers are more likely to share negative word-of-mouth information than positive word-of-mouth communication.
Electronic word of mouth is communicating about products through websites, blogs, email, social networks, or online forums.
Consumers are increasingly going online for information and opinions about goods and services as well as about the companies.
Buzz Marketing: An attempt to incite publicity and public excitement surrounding a product through a creative event
Viral Marketing: A strategy to get consumers to share a marketer’s message, often through email or online videos, in a way that spreads dramatically and quickly
Word of mouth seems to be most effective for new-to-market and more expensive products.
Product Placement
Product Placement: The strategic location of products or product promotions within entertainment media content to reach the product’s target market
In-program product placements have become a successful method of reaching consumers.
In general, the notion of product placement has not been favorably viewed in Europe and has been particularly controversial in the United Kingdom.
Criticisms and Defenses of Promotion
