Place: Delivering Customer Value - Notes

Place: Delivering Customer Value

Place and Distribution

• "Place" or distribution focuses on making products available to target customers through marketing channels and logistics.
• It's a part of the broader supply chain management.

Supply Chain and Value Delivery Network

• Involves all activities from resource supply to production and distribution to end-users.
• Upstream activities: Supply of resources for production.
• Downstream activities: Distribution of finished goods from manufacturers to resellers to end-users.

Supply Chain

• The entire process, from the supply of resources, production, and the distribution of the product to end-users.

Value Delivery Network

• Includes the firm's suppliers, distributors, and customers who partner to improve the system's performance.

Nature of Marketing Channels - Types of Intermediaries

Roles of Intermediaries in a Marketing Channel

• Each intermediary performs specific functions.

Providing Specialization:

• Information: Gather and distribute details about the market and environment.
• Promotion: Communicate product benefits through marketing materials.
• Negotiation: Discuss price and terms in distribution channel transactions.
• Physical distribution: Move and store goods physically.
• Financing: Fund transactions by giving credits or allowing credit card purchases.
• Risk taking: Take up transaction risks from damages, stolen goods, or unsold products.

Overcoming Discrepancies

• Quantity discrepancy: Difference between economical production amount and the amount end users want to buy.
• Assortment discrepancy: Lack of items needed for full satisfaction from a product.
• Temporal discrepancy: Product is produced, but the consumer isn't ready to purchase at that time.
• Spatial discrepancy: Markets scattered across the globe causing a difference between producer and market locations.

Contact Efficiency

• Marketing channels reduce the number of transactions needed to pass products from manufacturers to consumers.

Marketing Channel Structures - Consumer Market

• Channel length determined by the levels of channel members.
• Direct channel.
• Retailer channel.
• Wholesaler channel.
• Indirect channels.

Marketing Channel Structures - Business Market

• Direct channel.
• Industrial distributor channel.
• Agent/broker – industrial distributor channel.
• Indirect Channels

Marketing Channel Structures - Channel Intensity Design Decision

• Exclusive Distribution:
  • Limited number of intermediaries handling the firm’s products.
  • Used when more control is desired.
  • May involve exclusive dealing where retailers cannot carry competing brands.
• Intensive Distribution:
  • Place goods/services in as many outlets as possible.
  • Used when customer demands great convenience.
• Selective Distribution:
  • Use more than a few, but less than all intermediaries who are willing to carry the product.
  • Enables adequate market coverage with more control and less cost than intensive distribution.

Channel Intensity Design Decision

Functions of Wholesaler

• Bulk breaking
• Warehousing
• Transportation
• Assortment building
• Financing
• Market information
• Buying & selling

Categories of Store Retailers

Retail Categories - Assortment

• Departmental Stores
  • Stand-alone retail stores housing several departments under one roof.
  • Size: Minimum of 10,000 sq. ft.
  • Managed by a single owner.
  • Carries a wide range of shopping and specialty goods.
• Departmental Centres
  • Located in shopping centers or complexes; includes a supermarket.
  • Sizes are more than 30,000 sq ft.
• Hypermarkets
  • Large self-service stores selling wide product lines.
  • Sells furniture, electrical and electronic appliances, food and household goods.
  • Size: 60,000 sq. ft. to 100,000 sq. ft.
• Supermarket
  • Large self-service, low cost, low margin, high volume retailer.
  • Specializes in fresh food, dried food, and daily nonfood household items.
  • Size: 8,000 to 50,000 sq. ft.
• Mini market & Provision Shop
  • Sells similar goods to provision shops but with a more modern look.
  • Located near housing areas.
  • Size: 1,000 to 2,000 sq. ft. (one shop lot).
• Specialty Store
  • Sells a single product line with extensive assortments.
  • Size: 500 sq. ft. to 2,000 sq. ft.
• Category Killers
  • Large-sized specialty stores (e.g., Courts Mammoth, Ikea).
  • Located in shopping centers.
• Specialty Centres
  • Offer single-line products in a multi-tenanted area.
  • Can be part of a shopping complex or a stand-alone furniture center.
• Convenience Stores
  • Small stores near residential areas, open seven days a week.
  • Carries limited lines of high-turnover convenience goods.
  • Price is higher.
• Sundry Toiletry Shops
  • Small shops selling newspapers, magazines, books, and personal necessities.
  • Located under stairs, along pedestrian walks, or next to bus stops.
• Pharmacies
  • Sell medicines, healthcare products like vitamins, treatment oil, and toiletries.
  • Some have pharmacy specialists for advice and prescribed medicines.
• Chinese Medicinal Hall
  • Sells traditional Chinese medicines and FMCGs.
  • Floor area 1,000 to 2,000 sq. ft.

Retail Categories – Relative Prices

• Discount stores:
  • Sell normal merchandise with low prices.
  • Accept lower profit margins but gain high profits from larger volumes.
• Off-price retailers:
  • Buy at less than regular wholesaler prices and charge consumers less than other retailers.
  • Factory outlets: Owned and operated by manufacturers, carry surplus, discontinued, or irregular goods.
  • Independent off-price retailers: Owned by entrepreneurs or divisions of larger retail corporations, sell irregular items or factory overruns.
  • Warehouse clubs: Limited service merchant wholesalers who sell to members.

Retail Categories – Level of Service

• Self-service:
  • Customers handle the whole shopping experience except payment.
  • Customers search, compare, and collect goods for cost savings.
• Full-service:
  • Offers full retail-related customer services.
  • Customers expect service upon entry.
  • Includes special credit terms, flexible returns, arrival notices, tailor-made products, repair, and waiting lounge.
• Limited-service:
  • Offers some services of full-service stores.
  • Suitable for shopping goods as customers need product information.

Retail Categories - Ownership

• Independent ownership:
  • Retailers owning a single outlet managed by owners or family.
• Corporate chain:
  • Two or more commonly owned and controlled outlets.
  • Employ central buying and merchandising and sell similar merchandise.
• Voluntary chain & retailer cooperative:
  • Voluntary chain is a wholesaler-sponsored group of independent retailers engaged in group buying and common merchandise.
  • Retail cooperative is a group of independent retailers that collaborate to form a jointly owned central wholesale operation and conduct joint merchandising and promotion effort.
• Consumer cooperative:
  • Retail stores owned by members of the cooperative.
  • Members vote and decide on management.
• Franchise organization:
  • A contractual agreement between a franchiser and franchisees with rights to own and operate units in the franchise system.
• Merchandise conglomerate:
  • Corporation combining several different retailing firms under central ownership.
  • Share distribution and management functions.

Retail Location

• Shopping Complex:
  • Includes office blocks, hospitality, leisure, medical, and residential units.
  • Number of specialty stores > 200.
  • > 1 anchor tenant.
  • Size > 1,000,000 sq. ft.
• Shopping Centre:
  • Components like shopping complex but smaller.
  • Less retail outlets and common entrance.
  • Size 500,000 sq. ft. to 1,000,000 sq. ft.
  • Number of retail outlets 150 to 200.
• Shopping Mall:
  • Like shopping complex but without a supermarket.
  • Size 300,000 sq ft to 500,000 sq ft
  • Number of retail outlets is 100 to 150.
• Shopping Plaza:
  • Main component is the office block.
  • More than 100 specialty stores and includes F&B services.
• Shopping Arcade:
  • Stand-alone or a single/double floor connecting to a hotel or office building.
  • Size about 150,000 sq. ft.
  • More than 50 specialty stores.
• Housing Area Business Centre:
  • Developed for the convenience of housing area residents.
  • Located within a five-minute drive from residents’ houses.

Non-Store Retailers

• Automatic vending
• Direct selling
• Direct marketing
• Online retailing
• Night markets and farmer markets

Logistics Functions

• Order processing
• Materials handling
• Warehousing
• Inventory management
• Transportation
• Logistics information management