The Distribution Mix

Learning Objective 13-1 Explain the meaning of distribution mix and identify the different channels of distribution.

In addition to a good product mix and effective pricing, the success of any product also depends on its distribution mix, the combination of distribution channels by which a firm gets products to end users. In this section, we look at intermediaries and different kinds of distribution channels. Then we discuss some benefits consumers reap from services provided by intermediaries.

Distribution Mixcombination of distribution channels by which a firm gets its products to end users

Intermediaries and Distribution Channels

Once called middlemen, intermediaries help to distribute goods, either by moving them or by providing information that stimulates their movement from sellers to customers. Wholesalers, like C&S Wholesale, are intermediaries who sell products to other businesses for resale to final consumers. Retailers, such as Walmart and Amazon, sell products directly to consumers.

Intermediaryindividual or firm that helps to distribute a product

Wholesalerintermediary who sells products to other businesses for resale to final consumers

Retailerintermediary who sells products directly to consumers

Distribution of Goods and Services

A distribution channel is the path a product follows from producer to end user. Figure 13.1 shows how four popular distribution channels can be identified according to the channel members involved in getting products to buyers.

Figure 13.1 Channels of Distribution

Figure 13.1 Full Alternative Text

Distribution Channelnetwork of interdependent companies through which a product passes from producer to end user

At this plant of an electrical components supplier, this employee assembles electrical systems according to a process that meets the requirements for its industrial customers. The finished assemblies are shipped from the plant to customers’ facilities, illustrating a direct (producer to customer) channel of distribution.

Keith Dannemiller/Alamy Stock Photo

Channel 1: Direct Distribution

In a direct channel, the product travels from the producer to the consumer or other buyer without intermediaries. Avon, Dell, GEICO, and Tupperware, as well as many online companies, use this type of channel. Most business goods, especially those bought in large quantities, are sold directly by the manufacturer to the industrial buyer.

Direct Channeldistribution channel in which a product travels from producer to consumer without intermediaries

Channel 2: Retail Distribution

In Channel 2, producers distribute consumer products through retailers. Goodyear, for example, maintains its own network of retail outlets. Levi’s has its own outlets but also produces jeans for other retailers. Large outlets, such as Walmart, buy merchandise directly from producers and then resell to customers online and at Walmart retail stores. Consumers can also go online to buy popular products such as book, movie, and music downloads from online retailers. Many industrial buyers, such as businesses buying office supplies from Staples, also rely on this channel.

Channel 3: Wholesale Distribution

Once the most widely used method of nondirect distribution, traditional brick-and-mortar Channel 2 distribution requires a large and costly amount of floor space for storing and displaying merchandise. Wholesalers relieve this space problem by storing merchandise and restocking retailer store displays frequently. With approximately 90 percent of its space used to display merchandise and only 10 percent needed for storage and office facilities, the combination convenience store and gas station’s use of wholesalers is an example of Channel 3.

Channel 4: Distribution by Agents or Brokers

Sales agents or brokers represent producers and receive commissions on the goods they sell to consumers or industrial users. Sales agents, such as online travel agents, generally deal in the related product lines of a few producers, such as tour companies, to meet the needs of many customers. In industries like real estate and stock exchanges, brokers match numerous sellers and buyers as needed to sell properties, often without knowing in advance who they will be.

Sales Agentindependent intermediary who generally deals in the related product lines of a few producers and forms long-term relationships to represent those producers and meet the needs of many customers

Brokerindependent intermediary who matches numerous sellers and buyers as needed, often without knowing in advance who they will be

The Pros and Cons of Nondirect Distribution

One downfall of nondirect distribution is higher prices—the more “stations” in the channel, the more intermediaries there are that need to make a profit by charging a markup or commission, and the higher the final price. Intermediaries, however, can offer added value by providing time-saving information and making the right quantities of products available where and when consumers need them. Figure 13.2 illustrates the problem of making chili without the benefit of a common intermediary, the supermarket. As a consumer, you would obviously spend a lot more time, money, and energy if you tried to gather all the ingredients from separate producers. In short, intermediaries exist because they provide necessary services that move products efficiently from producers to users.

Figure 13.2 The Value-Adding Intermediary

Figure 13.2 Full Alternative Text

Distribution Strategies

Selecting an appropriate distribution network is a strategic decision; it determines both the amount and cost of market coverage that a product gets, or how many of any kind of intermediary will be used. Generally, strategy depends on the type of product and the degree of market coverage that is most effective in getting it to the greatest number of customers. Marketers strive to make a product accessible in just enough locations to satisfy customers’ needs. You can buy milk and bottled water, for instance, in many different retail outlets, but there are very few outlets for buying a new Ferrari. Three strategies, (1) intensive, (2) exclusive, and (3) selective distribution, provide different degrees of market coverage.

Intensive distribution means distributing through as many channels and channel members as possible (both wholesalers and retailers). It is normally used for low-cost consumer goods with widespread appeal, such as candy and magazines. M&M’s candies enter the market through many different retail outlets—supermarkets, vending machines, drugstores, online, and so forth.

Intensive Distributionstrategy by which a product is distributed through as many channels as possible

With exclusive distribution, a manufacturer grants the exclusive right to distribute or sell a product to a limited number of wholesalers or retailers, usually in a given geographic area. Such agreements are most common for high-cost prestige products. Rolex watches are sold only by “Official Rolex Jewelers.”

Exclusive Distributionstrategy by which a manufacturer grants exclusive rights to distribute or sell a product to a limited number of wholesalers or retailers in a given geographic area

Using selective distribution, a producer selects only wholesalers and retailers that will give a product special attention in sales effort, display and promotion advantage, and so forth. Selective distribution is used most often for consumer products such as furniture and appliances. Frigidaire and Whirlpool use selective distribution for appliances to cement relationships with wholesalers who will then market Frigidaire and Whirlpool over other brands.

Selective Distributionstrategy by which a company uses only wholesalers and retailers who give special attention to specific products in its sales efforts

Channel Conflict and Channel Leadership

Manufacturers and services providers (such as Nike, LG Electronics, and Allied Insurance) may distribute through more than one channel, and many retailers (such as Walgreens) are free to strike agreements with as many producers (like the makers of Tylenol, Advil, and Aleve) as capacity permits. In such cases, channel conflict may arise. Conflicts are resolved through better coordination, and a key factor in coordinating the activities of organizations is channel leadership.

Channel Conflict

Channel conflict occurs when members of the channel disagree over roles or rewards. John Deere and State Farm would object to their dealers distributing tractors and insurance products of competing brands. Likewise, a manufacturer-owned outlet store runs the risk of alienating other retailers of its products when it discounts the company’s products. Conflict may arise if one channel member has more power or is perceived as getting preferential treatment. Before Apple started opening its own retail stores, it distributed its products through many non-Apple retail stores. By opening its own retail outlets, channel conflict was created because the Apple stores substantially reduced sales at stores formerly used to distribute and sell Apple products. Such conflicts, of course, can defeat the purpose of the system by disrupting the flow of goods.

Channel Conflictconflict arising when the members of a distribution channel disagree over the roles they should play or the rewards they should receive

Channel Leadership

Usually one channel member—the channel captain—can determine the roles and rewards of the others. The channel captain is often a manufacturer or an originator of a service. Jewelry artisan Thomas Mann is in such demand that wholesalers and retailers wait years for the chance to distribute his Techno Romantic creations. Mann selects channel members, sets prices, and determines product availability. In other industries, an influential wholesaler or a large retailer such as Walmart may be a channel captain because of large sales volume.

Channel Captainchannel member who is most powerful in determining the roles and rewards of other members Wholesaling

Learning Objective 13-2 Describe the role of wholesalers and the functions performed by e-intermediaries.

The roles differ among the various intermediaries in distribution channels. Wholesalers provide a variety of services to buyers of products for resale or business use. In addition to storing and providing an assortment of products, some wholesalers offer delivery, credit, and product information. The range of services depends on the type of intermediary: merchant wholesaler, agent/broker, or e-intermediary.

Merchant Wholesalers

Most wholesalers are independent operations that sell various consumer or business goods produced by a variety of manufacturers. The largest group are the merchant wholesalers, who buy products from manufacturers and sell them to other businesses. They own the goods that they resell and usually provide storage and delivery.

Merchant Wholesalersindependent wholesaler who takes legal possession of goods produced by a variety of manufacturers and then resells them to other organizations

Full-service merchant wholesalers (about 80 percent of all merchant wholesalers) provide value-adding services, including credit, marketing advice, and merchandising services. Limited-function merchant wholesalers provide fewer services, sometimes merely storage. Customers are normally small operations that pay cash and pick up their own goods. Drop shippers don’t even carry inventory or handle products. They take orders from customers, negotiate with producers to supply goods, take title to them, and arrange for shipment. Rack jobbers market consumer goods (mostly nonfood items) directly to retail stores, marking prices and setting up displays in a variety of stores. Procter & Gamble (P&G) uses rack jobbers to distribute products such as its Pampers diapers.

Full-Service Merchant Wholesalersmerchant wholesaler that provides credit, marketing, and merchandising services in addition to traditional buying and selling services

Limited-Function Merchant Wholesalermerchant wholesaler that provides a limited range of services

Drop Shipperslimited-function merchant wholesaler that receives customer orders, negotiates with producers, takes title to goods, and arranges for shipment to customers

Agents and Brokers

Agents and brokers, including online e-agents, serve as independent sales representatives for many companies’ products. They work on commission, usually about 4 to 5 percent of net sales. Unlike wholesalers, agents and brokers do not own their merchandise. Rather, they serve as sales and merchandising arms for producers or sellers who do not have their own sales forces.

The value of agents and brokers lies in their knowledge of markets and their merchandising expertise. They show sale items to potential buyers and, for retail stores, they provide such services as shelf and display merchandising and advertising layout. They remove open, torn, or dirty packages, arrange products neatly, and generally keep goods attractively displayed. Many supermarket products are handled through brokers.

The E-Intermediary

The ability of e-commerce to bring together millions of widely dispersed consumers and businesses has changed the types and roles of intermediaries. E-intermediaries are online channel members—wholesalers—who perform one or both of two functions: (1) They collect information about sellers and present it to consumers (such as kayak.com, which deals with travel services) or (2) they help deliver online products to buyers (such as Amazon).

E-IntermediaryInternet distribution channel member that assists in delivering products to customers or that collects information about various sellers to be presented to consumers, or they help deliver online products to buyers

Syndicated Sellers

Syndicated selling occurs when one website offers another a commission for referring customers. Expedia.com and Dollar Car Rental illustrate syndicated selling perfectly. With millions of users each month, Expedia.com is a heavily visited travel-services website. Expedia has given Dollar Car Rental a special banner on its web page. When Expedia customers click on the banner for a car rental, they are transferred from the Expedia site to the Dollar site. Dollar pays Expedia a fee for each booking that comes through this channel. Although the Expedia intermediary increases the cost of Dollar’s supply chain, it also adds value for customers. Travelers avoid time-consuming online searches and are efficiently guided to a car-rental agency.

Syndicated Sellinge-commerce practice whereby a website offers other websites commissions for referring customers

Shopping Agents

Shopping agents (e-agents) help online consumers by gathering and sorting information. Although they don’t take possession of products, they know which websites and stores to visit, give accurate comparison prices, identify product features, and help consumers complete transactions by presenting information in a usable format—all in an instant. Hotwire.com is a well-known shopping agent for a variety of travel products. When you specify the product—hotels, flights, vacations, cars—Hotwire searches for vendors, does price comparisons, lists prices from low to high, and then transfers you to the websites of different e-stores.

Shopping Agent (E-Agent)e-intermediary (middleman) in the Internet distribution channel that assists users in finding products and prices but does not take possession of products

Business-to-Business Brokers

E-commerce intermediaries provide online value-adding services for business customers. The pricing process between business-to-business (B2B) buyers and sellers of commodities and services can be outsourced, for example, to the online company MediaBids.com. As a pricing broker for advertising services, MediaBids links any large-volume buyer of advertising services with potential suppliers that bid to become the supplier for the industrial customer. Client companies (the buyers of advertising services), such as Biocentric Health Inc., Christian Science Monitor, and Simplicity Sofas, can pay a fixed annual subscription fee and receive networking into MediaBids’s auction headquarters, where real-time bids come in from suppliers at remote locations. The website provides current information until the bidding ends with the low-price supplier. In brokering the auction transactions, MediaBids doesn’t take possession of any products. As a broker, it brings together timely information and links businesses to one another.

Entrepreneurship and New Ventures Dispensing Hope

Though inexpensive compared to major American and European cities, the cost of living in and around Santiago, Chile, is more expensive than almost 65 percent of the rest of the country. The lack of population density and a multitude of low household incomes have resulted in very few supermarkets. Most residents shop at small stores with narrow product lines and prices up to 40 percent higher than those in more populated areas. In the hope of improving the lives of people living in these areas, Algramo, a Santiago-based company, has a unique distribution model. Algramo, whose name means “by the gram,” buys products in bulk, keeping its costs low. The company installs high-tech vending machines in local stores and stocks them with beans, lentils, rice, sugar, and other products. Algramo doesn’t charge the storeowner for installing the machine and shares the profits from all sales equally with the shopkeeper. By 2022, after nine years of operation, Algramo had expanded to more than 2,000 locations in Chile, Jakarta, and New York City.

The company is the brainchild of Chilean student Jose Manuel Moller. He and three friends moved to a small community outside Santiago in hopes of gaining a better understanding of the conditions for residents. While the neighborhood stores are essential meeting places for the communities, high food prices and low wages result in most residents struggling to meet their most basic needs. Moller began to see these high prices as a “poverty tax” imposed on the 70 percent of the Chilean population living outside the major cities, and he was determined to make a difference. The company estimates that its model has allowed buyers to save up to 40 percent per month on household products, allowing them to use the saved funds to obtain better health care or to provide quality educational opportunities for their children. The benefits of Algramo’s business model are not limited to the consumer but also extend to shopkeepers. Algramo’s vending machines generate profits for small stores that operate on narrow margins, allowing them to stay in business and improve the owners’ quality of life.

Algramo

Benefits of the model even extend to the environment—Algramo dispenses its products in reusable containers, reducing the waste associated with disposable packaging.2 The performance of the company and its commitment to reducing waste have resulted in nods from various international environmental conservation organizations and over $11 million USD in venture capital funding. Retailing

Learning Objective 13-3 Describe the different types of retailing and explain how online retailers add value for consumers on the Internet.

There are more than 5 million brick-and-mortar retail establishments in the United States. Many consist only of owners and part-time help. Indeed, more than one-half of the nation’s retailers account for less than 10 percent of all retail sales. Retailers also include huge operations, such as Walmart, the world’s largest corporate employer; Kroger; and Home Depot. Although many other countries have large retailers—Metro and Aldi in Germany, Carrefour in France, and AEON in Japan—most of the world’s largest retailers are U.S. businesses.

Types of Brick-and-Mortar Retail Outlets

U.S. retail operations vary widely by type as well as size. They can be classified by their pricing strategies, locations, range of services, or range of product lines. Choosing the right types of retail outlets is a crucial aspect of distribution strategy. This section describes U.S. retail stores by using three classifications: (1) product-line retailers, (2) bargain retailers, and (3) convenience stores.

Product-Line Retailers

Retailers featuring broad product lines include department stores, which are organized into specialized departments: shoes, furniture, women’s petite sizes, and so on. Stores are usually large, handle a wide range of goods, and offer a variety of services, such as credit plans and delivery. Similarly, supermarkets are divided into departments of related products: fresh food products, frozen food products, household products, and so forth. They often stress low prices, self-service, and large selections.

Department Storelarge product-line retailer characterized by organization into specialized departments

Supermarketlarge product-line retailer offering a variety of food and food-related items in specialized departments

In contrast, specialty stores, such as Lids, a retailer with more than 1,100 stores selling athletic fashion headwear, are small, serve specific market segments with full product lines in narrow product fields, and often feature especially knowledgeable sales associates.

Specialty Storeretail store carrying one product line or category of related products

Bargain Retailers

Bargain retailers carry wide ranges of products at low prices. Discount houses began by selling large numbers of items at substantial price reductions to cash-only customers. As they became more established, they began moving to better locations, improving decor, selling better-quality merchandise at higher prices, and offering services such as credit plans and noncash sales. For example, T.J. Maxx buys clothing, personal care products, toys, and housewares from major brands, high-end designers, and other retailers, which it can offer to consumers at prices that are 20–60 percent lower than the full retail price. Many of their products were either overproduced or overbought, allowing T.J. Maxx to negotiate a low price when buying. As it’s grown, T.J. Maxx has expanded to include online shopping, exclusive merchandise manufactured for their stores, and a credit card that provides rewards to frequent shoppers.3

Bargain Retailerretailer carrying a wide range of products at bargain prices

Discount Housebargain retailer that generates large sales volume by offering goods at substantial price reductions

Catalog showrooms mail catalogs and/or send online ads to attract customers into showrooms to view display samples, place orders, and wait briefly while clerks retrieve orders from attached warehouses. Factory outlets are manufacturer-owned stores that avoid wholesalers and retailers by selling merchandise directly from factory to consumer. Wholesale clubs, such as Costco, offer large discounts on a wide range of brand-name merchandise to customers who pay annual membership fees.

Catalog Showroombargain retailer in which customers place orders for catalog items to be picked up at on-premises warehouses

Factory Outletbargain retailer owned by the manufacturer whose products it sells

Wholesale Clubbargain retailer offering large discounts on brand-name merchandise to customers who have paid annual membership fees

Convenience Stores

Convenience store chains, such as 7-Eleven and Circle K stores, stress easily accessible locations, extended store hours, and speedy service. They differ from most bargain retailers in that they carry fewer products and generally charge somewhat higher prices in exchange for the convenience they provide.

Convenience Storeretail store offering easy accessibility, extended hours, and fast service

Nonstore Retailing

Some retailers sell products without brick-and-mortar stores. Certain types of products, such as snack foods, bottled water, and soft drinks, sell well from card- and coin-operated machines. The same can be said for some forms of entertainment (pinball, video games, and billiards) when placed in certain venues (such as movie theater lobbies, bowling alleys, and so forth). In 2019, Kylie Cosmetics began selling makeup via vending machines in the Las Vegas airport, and has since expanded this strategy to include airports across the United States.4 Best Buy was an early adopter of this approach, targeting on-the-go travelers looking to buy headphones, chargers, electric razors, and GoPro cameras from its Best Buy Express machines.5 For all products, global vending market size was valued at $51.91 billion in 2021 and is expected to see a compound annual growth rate of 10.7 percent from 2022 to 2030. Still, vending machine sales make up less than 1 percent of all U.S. retail sales.6

Nonstore retailing also includes direct-response retailing, in which firms contact customers directly to inform them about products and to solicit sales orders. Mail order (or catalog marketing) is a popular form of direct-response retailing practiced by Orvis, The J. Peterman Company, and Garnet Hill. While many catalog marketers do not have brick-and-mortar stores, almost all of them offer online shopping. Even e-commerce giants like Amazon and mall anchor stores like Cabela’s mail catalogs to their customers. Less popular in recent years because of do-not-call registries, outbound telemarketing uses phone calls to sell directly to consumers. However, telemarketing also includes inbound toll-free calls from customers, a service that most catalog and other retail stores make available. Finally, more than 600 U.S. companies, including Mary Kay cosmetics, use direct selling to sell door-to-door or through home-selling parties. Avon Products, one of the world’s largest direct sellers, has approximately 6 million door-to-door sales representatives in more than 50 countries.7

Direct-Response Retailingform of nonstore retailing in which firms directly interact with customers to inform them of products and to receive sales orders

Mail Order (Catalog Marketing)form of nonstore retailing in which customers place orders for catalog merchandise received through the mail

Telemarketingform of nonstore retailing in which the telephone is used to sell directly to consumers

Direct Sellingform of nonstore retailing typified by door-to-door sales

Finding a Better Way The Store of the Future May Be Coming to You

Experts have long predicted that retail shopping would inevitably involve no checkout, no cash, and no unwanted waiting, all for a better customer shopping experience. In 2019, most brick-and-mortar stores were still using some form of checkout counter and cash register. However, the pandemic of 2020 rapidly changed all that as stores across the country moved to curbside delivery and remote payment systems, taking advantage of the innovations developed by trendsetters like Amazon.

A few pioneers were early in challenging tradition. Amazon opened its first cashier-less store on December 5, 2016, branded as Amazon Go in Seattle for Amazon employees only as they tested the concept and the technology. The store opened to the general public on January 22, 2018, and by 2023, despite Amazon scaling back its physical presence in most cities, there were still 26 Amazon Go stores in four different states. The stores use computer vision and deep learning algorithms like the ones used in autonomous driving vehicles to watch what customers are putting into their shopping bags. Customers scan a QR code when they enter the store through an app, which is connected to their Amazon.com account. After shopping, customers can simply leave the store. Amazon automatically charges the customers’ Amazon account, and the receipt is sent to the app.

Even the savviest small-business owners used to have some trouble taking credit cards. Fees were high, processing cumbersome, and payments slow to arrive. Now they have access to card readers and apps like Square, PayPal, Venmo, and a multitude of other online processing tools, many of which integrate with the company’s accounting software, making it possible for even a single-person shop to take advantage of a much wider array of payment options. Further, an iPad that includes a credit card reader costs far less than a cash register, and the financial data are easily integrated with financial and customer management systems. For instance, a small restaurant can seamlessly place an order, send it to the kitchen for processing, and accept payment from a card reader, all on the same system.

Alex Cimbal/Shutterstock

Though the pandemic created a boom in contactless shopping, with an explosion of online ordering apps and other options, it also created obstacles for companies like Wheelys, which was developing an autonomous convenience store contained in a self-driving vehicle the size of a bus.8 When funding for new projects dried up, so did its opportunity. Mega-retailers like Walmart and Amazon continue to lead innovations in contactless shopping, with smaller companies working to differentiate themselves. As technology and demand both drive continued and faster progress, we can expect to see more consumers taking advantage of and even demanding these developments.

Online Retailing

In 2021, global business-to-consumer (B2C) sales amounted to $3.67 trillion, and they are projected to exceed the $6.5 trillion level by 2030. More than 2.14 billion consumers have made online purchases. Apple’s iTunes outsells brick-and-mortar music retailers, and Amazon is the world’s largest online retailer, selling nationally and internationally, with total revenues in 2022 of $502.19. Online retailing allows sellers to inform, sell to, and distribute to consumers using online technology. Some of the largest U.S. “e-tailers” are shown in Table 13.1. In addition to large companies, millions of small businesses around the globe also have their own websites.9

Table 13.1 Leading Online Retailers in Selected Consumer Products Categories*

Consumer Product Category

Online Retailer

Mass merchandise

Amazon.com

Office supplies

Staples Inc.

Computers and electronics

Apple Inc.

Video and audio entertainment

Netflix Inc.

Home repair and improvement

Home Depot

Apparel and accessories

L.L. Bean Inc.

Home furnishings and housewares

Williams-Sonoma Inc.

Health and beauty

Bath & Body Works

Sporting goods

Cabela’s Inc.

*Adapted from “Top 500 Guide,” Internet Retailer (2021), https://www.internetretailer.com/top500/list/.

Online Retailingnonstore retailing in which information about the seller’s products and services is connected to consumers’ computers, allowing consumers to receive the information and purchase the products in the home

Social Media

Social media companies offer functionality so companies can sell directly to consumers within the platform. Instagram and Facebook offer businesses and sellers a way to create a digital storefront and shop, group collections of merchandise, post photos of products, and offer a seamless checkout experience right from inside the apps. Sellers can also create searchable product tags, purchase reminders, and announcements about upcoming sales and promotions. TikTok’s partnership with Shopify allows in-app shopping as well. In 2022, 28 percent of Millennial and Gen Z consumers reported buying products directly in a social media app in the past three months.10

Electronic Catalogs

E-catalogs use online displays of products to give millions of retail and business customers instant access to product information. The seller avoids the costs of printing and mail distribution, and once an online catalog is in place, the costs of maintaining and updating it are lower. About 90 percent of all catalogs are now online, with digital sales accounting for more than 50 percent of all catalog sales. Even IKEA discontinued its iconic print catalog in 2020, but it continues to provide a range of e-catalogs and digital brochures on its website.11

E-Catalognonstore retailing in which the Internet is used to display products

E-catalogs have become increasingly popular and are quickly replacing traditional paper catalogs. These are especially effective when combined with a strong social media strategy. This E-catalog, for instance, has been distributed through Instagram and can be accessed on smartphones and other connected devices.

Source: Free Vector | Creative instagram puzzle feed with 9 templates. (2020, September 22). Freepik. https://www.freepik.com/free-vector/creative-instagram-puzzle-feed-with-9-templates_10212968.htm

13.3-9 Full Alternative Text

Electronic Storefronts and Cybermalls

Each seller’s website is essentially an electronic storefront (or virtual storefront) from which shoppers collect information about products and buying opportunities, place orders, and pay for purchases. Producers of large product lines, such as Dell, dedicate storefronts to their own product lines. Other sites, such as Newegg.com, which offers computer and other electronics equipment, are category sellers whose storefronts feature products from many manufacturers.

Electronic Storefrontcommercial website at which customers gather information about products and buying opportunities, place orders, and pay for purchases

Search engines such as Google Shopping and Dogpile serve as cybermalls, collections of virtual storefronts and links representing diverse products and offering speed, convenience, 24-hour access, easy price comparison, and efficient searching. After entering a cybermall, shoppers can navigate by choosing from a list of stores (L.L.Bean, Lids, or Macy’s), product listings (sporting goods, women’s fashion, or mobile devices), or departments (apparel or bath/beauty) or search for a specific product.

Cybermallcollection of virtual storefronts (business websites) representing a variety of products and product lines on the Internet

Interactive and Video Retailing

Today, retailers and B2C customers interact with multimedia sites using voice, graphics, animation, video, and chat. Many e-tailers provide real-time sales and customer service that allow customers to enter a live chat room with a service operator who can answer their specific product questions.

Video retailing, a long-established form of interactive marketing, lets viewers shop at home from channels on their TVs or other digital devices. QVC, for example, displays and demonstrates products, allows viewers to phone in or e-mail orders, and is available on Facebook, YouTube, and Twitter. Current-generation televisions are available with online capabilities as well, allowing online networking. A television with Wi-Fi network access thus becomes a platform for comfortable at-home online shopping with a large-screen visual display.

Video Retailingnonstore retailing to consumers via home television Physical Distribution

Learning Objective 13-4 Define physical distribution and describe the major activities in the physical distribution process.

Physical distribution refers to the activities needed to move products from an intermediary or a manufacturer to customers and includes warehousing and transportation operations. Its purpose is to make goods available when and where customers want them, keep costs low, and provide services to satisfy customers. Because of its importance for customer satisfaction, some firms have adopted distribution as their marketing strategy of choice.

Physical Distributionactivities needed to move a product efficiently from manufacturer to consumer

Consider, for example, the pioneering global distribution system of National Semiconductor, one of the world’s largest microchip makers. Finished microchips were produced in plants around the world and shipped to hundreds of customers, such as IBM, Toshiba, and HP, which also operated factories around the globe. Chips originally traveled 20,000 different routes on as many as 12 airlines and sat waiting at one location after another—on factory floors, at customs, in distributors’ facilities, and in warehouses—before reaching customers. National streamlined the system by air-freighting chips worldwide from a single center in Singapore. Every activity—storage, sorting, and shipping—was centralized and run by FedEx. By outsourcing the activities, National’s distribution costs were reduced, delivery times were cut by half, and sales increased substantially. Acquired in 2011 by Texas Instruments (TI), National Semiconductor and its innovative global distribution system is TI’s Silicon Valley Analog division that remains a world leader for producing high-performance analog components.

Warehousing Operations

Storing, or warehousing, is a major part of distribution management. In selecting a strategy, managers must keep in mind both the different characteristics and costs of warehousing operations. Private warehouses are owned by a single manufacturer, wholesaler, or retailer that deals in mass quantities and needs regular storage. Most are run by large firms that deal in mass quantities and need regular storage. Walmart, for example, maintains its own warehouses (as well as its own trucking fleet) to facilitate the movement of products to its retail stores.

Warehousingphysical distribution operation concerned with the storage of goods

Private Warehousewarehouse owned by and providing storage for a single company

Independently owned and operated public warehouses, which rent to companies only the space they need, are popular with firms needing storage only during peak periods and with manufacturers who need multiple storage locations to get products to multiple markets.

Public Warehouseindependently owned and operated warehouse that stores goods for many firms

The digital age has brought with it massive quantities of data that need to be safely stored, preserved, organized, and accessible to users. Many companies, to protect their valuable data resources, rely on remote off-site digital storage services such as ZipCloud for Business as a safety net. Home users, too, use daily online backup services, such as Carbonite and SOS Online Backup, to protect against losing data when their computers crash. In the event of any physical catastrophe—floods, fires, earthquakes—at the client’s facility, data can be restored online from the backup system.

Transportation Operations

Physically moving a product creates the highest cost many companies face. In addition to transportation methods, firms must also consider the nature of the product, the distance it must travel, the speed with which it must be received, and customer wants and needs.

Differences in cost among the major transportation modes—trucks, railroads, planes, digital transmission, water carriers, and pipelines—are usually most directly related to delivery speed.

With 3.5 million professional truck drivers and a fleet of approximately 15 million vehicles, trucks haul more than two-thirds of all tonnage carried by all modes of U.S. freight transportation. The advantages of trucks include flexibility for any-distance distribution, fast service, and dependability. Increasing truck traffic, however, raises concerns about highway safety and traffic congestion.12

Air is the fastest but also the most expensive mode of transportation for physical goods. Air-freight customers benefit from lower inventory costs by eliminating the need to store items that might deteriorate. Shipments of fresh fish, for example, can be picked up by restaurants each day, avoiding the risk of spoilage from packaging, storing, and/or extended delivery times.

For downloads of music, software, books, movies, and other digital products, the transportation mode of choice, online transmission, is newer, faster, and less expensive than all other modes. Of course, it is also restricted to products that exist in digital form that can be transmitted over communication channels.

Aside from digital transmission, water is the least expensive mode but, unfortunately, also the slowest. Networks of waterways—oceans, rivers, and lakes—let water carriers reach many areas throughout the world. Boats and barges are used mostly for moving bulky products (such as oil, grain, and gravel). Railroads can economically transport high-volume, heavy, bulky items, such as cars, steel, and coal. However, their delivery routes are limited by fixed, immovable rail tracks. Pipelines are slow and lack flexibility and adaptability, but for specialized products, such as liquids and gases, they provide economical and reliable delivery.

Distribution Through Supply Chains as a Marketing Strategy

Instead of just offering advantages in product features, quality, price, and promotion, many firms have turned to supply chains that depend on distribution as a cornerstone of business strategy. This approach means assessing, improving, and integrating the entire sequence of activities—upstream suppliers, wholesaling, warehousing, transportation, delivery, and follow-up services—involved in getting products to customers.

Specializing in long-haul shipping, US Xpress employs over 3,000 drivers to operate a fleet of 6,400 trucks and 13,600 trailers. Trucks have satellite capabilities, anti-collision radar, vehicle-detection sensors, computers for shifting through 10 speeds, and roomy cabs with sleepers, refrigerators, and microwaves.

Chris Salvo/Salvo Photography

Since the 1960s, starting with Toyota in Japan, the industrial world has seen the rise of the just-in-time (JIT) inventory system, discussed in Chapter 7. Initially used for quality improvement and cost savings, it was primarily adopted by U.S. manufacturing firms coming by way of Ford Motor Company in the early 1980s. Along with JIT, the past few decades have seen dramatic improvements in supply chain technology and management, and its adoption by the retail sector. In the 1980s, Walmart decided to build its own distribution system using the best practices of both JIT and supply chain processes instead of the industry practice of relying on outside freight haulers and wholesalers. Let’s look at how this has enabled Walmart to dominate its competition and made it the leading retailer in the world:

Suppose you are shopping at Walmart and decide to pick up a Mr. Coffee eight-cup coffee maker. When you check out, the scanner reads the barcode on the box, and Walmart’s inventory system is updated instantly, showing that a replacement coffee maker is needed on the shelf. The replacement comes from “the back” of that store, where the remaining on-hand supply count is reduced in Walmart’s information system. Once the back-room supply dwindles to its automatic triggering number, Walmart’s distribution warehouse receives a digital signal notifying that this store needs more Mr. Coffee eight-cup coffee makers. At the same time, the computer system also notifies the manufacturer that Walmart’s distribution warehouse needs a replenishment supply. The manufacturer’s suppliers, too, are notified, and so on, continuing upstream with information that enables faster resupply coordination throughout the supply chain. Walmart’s data mining system determines the reorder number for every product based on sales (daily, weekly, and even by time of the year). Because of Walmart’s constant rapid restocking from upstream sources, its store shelves are resupplied without having to keep large inventories in its warehouses and retail stores, thus reducing inventory costs and providing lower prices.

Walmart’s JIT system and supply chain efficiency have allowed it to achieve as low as a two-day turnaround from manufacturer to the store shelf, thus providing cost control and product availability. It maintains lower levels of inventory, meets customer demand, and keeps prices among the lowest in the retail industry. Another retailer that has been able to adopt this method on a similar scale and compete effectively with Walmart (but only in groceries) is the H-E-B Grocery Company’s chain of stores in Texas. Its data mining software can evaluate what products are purchased when and with what other products (so, for example, it knows to have tamales available at Christmas with accompanying coupons for enchilada sauce) and uses this information for forecasting upcoming demand. The Importance of Promotion

Learning Objective 13-5 Identify the objectives of promotion and the considerations in selecting a promotional mix and discuss the various kinds of advertising promotions.

Promotion refers to techniques for communicating information about products and is part of the communication mix, the total message any company sends to customers about its product. Promotional techniques, especially advertising, must communicate the uses, features, and benefits of products, and marketers use an array of tools for this purpose.

Promotionaspect of the marketing mix concerned with the most effective techniques for communicating information about and selling a product

Promotional Objectives

The ultimate objective of any promotion is to increase sales. In addition, marketers may use promotion to communicate information, position products, add value, and control sales volume.

As we saw in Chapter 11, positioning is the process of establishing an easily identifiable product image in the minds of consumers by fixing, adapting, and communicating the nature of the product itself. First, a firm must identify which market segments are likely to purchase its product and how its product measures up against competitors. Then, it can focus on promotional choices for differentiating its product and positioning it in the minds of the target audience. As an example, if someone says, “facial tissue,” most people respond with . . . Kleenex. “The Ultimate Driving Machine” is . . . BMW. These ubiquitous associations are indicative of successful positioning.

Positioningprocess of establishing an identifiable product image in the minds of consumers

Promotional mixes are often designed to communicate a product’s value-added benefits to distinguish it from the competition. Mercedes automobiles and Ritz-Carlton hotels, for example, promote their products as upscale goods and services featuring high quality, style, and performance, all at a higher price.

Promotional Strategies

Once its larger marketing objectives are clear, a firm must develop a promotional strategy to achieve them. Two prominent types of strategies are considered here:

A pull strategy appeals directly to consumers who will demand the product from retailers. Pharmaceutical companies use direct-to-consumer advertising (DTC) to persuade consumers to aggressively request a product rather than to wait passively until the doctor suggests trying it. “Talk to your doctor about Allegra-D” is just one example of the vast number of television and online ads for prescription drugs, knee replacement systems, and other medical products. The resulting demand by end users stimulates demand for the product from wholesalers and producers.

Pull Strategypromotional strategy designed to appeal directly to consumers who will demand a product from retailers

Using a push strategy, a firm markets its product to wholesalers and retailers, who then persuade customers to buy it. Brunswick Corp., for instance, uses a push strategy to promote Bayliner pleasure boats, directing its promotions at dealers and persuading them to order more inventory. Dealers are then responsible for stimulating demand among boaters at outdoor shows and through other promotions in their market districts.

Push Strategypromotional strategy designed to encourage wholesalers or retailers to market products to consumers

Many large firms combine pull and push strategies. General Mills, for example, advertises to create consumer demand (pull) for its breakfast cereals, including Lucky Charms, Cheerios, and Count Chocula. At the same time, it pushes wholesalers and retailers to stock and display them.

The Promotional Mix

Five of marketing’s most powerful promotional tools are advertising, personal selling, sales promotions, direct or interactive marketing, and publicity and public relations. The optimal combination of these tools—the best promotional mix—depends on many factors. The most important is the target audience. As an example, two generations from now, 25 percent of the U.S. workforce will be Latina/o/x. With an estimated 52 million American Latin/o/xs, the rise in this group’s disposable income has made them a potent economic force, and marketers are working to redesign and promote products to appeal to them with Spanish-language commercials and ads. Several major cable networks such as HBO and ESPN offer separate Spanish-language channels.

Promotional Mixcombination of tools used to promote a product

In establishing a promotional mix, marketers match promotional tools with the five stages in the buyer decision process:

When consumers first recognize the need to make a purchase, marketers use advertising and publicity, which can reach many people quickly, to make sure buyers are aware of their products.

As consumers search for information about available products, advertising and personal selling are important methods to educate them.

Personal selling can become vital as consumers compare competing products. Sales representatives can demonstrate product quality, features, benefits, and performance in comparison with competitors’ products.

When buyers are ready to purchase products, sales promotion can give consumers an incentive to buy. Personal selling can help by bringing products to convenient purchase locations.

After making purchases, consumers evaluate products and assess (and remember) their strengths and deficiencies. At this stage, advertising and personal selling can remind customers that they made wise purchases.

Figure 13.3 summarizes the effective promotional tools for each stage in the consumer buying process.

Figure 13.3 The Consumer Buying Process and the Promotional Mix

Figure 13.3 Full Alternative Text

Advertising

Advertising is paid, nonpersonal communication by which an identified sponsor informs an audience about a product. In 2021, firms in the United States spent over $175 billion on advertising—almost $35 billion by just 10 companies.13 Figure 13.4 shows U.S. advertising expenditures for the top-spending firms. Let’s take a look at the different types of advertising media, noting some of the advantages and limitations of each.

Figure 13.4 Top 10 U.S. National Advertisers

Source: https://www.statista.com/statistics/275446/ad-spending-of-leading-advertiser

Figure 13.4 Full Alternative Text

Advertisingany form of paid nonpersonal communication used by an identified sponsor to persuade or inform potential buyers about a product

Advertising Media

Consumers tend to ignore the bulk of advertising messages that bombard them—they pay attention only to what interests them. Moreover, the advertising process is dynamic, reflecting the changing interests and preferences of both customers and advertisers. One recent customer survey, for example, reports that mail ads are rated as most irritating and boring, and newspaper and magazine ads are least annoying. Yet, although newspaper ads are rated as more informative and useful than some other media, advertisers continue to shift away, using instead more online advertising because newsprint readership (the audience) is dwindling.14 Of course, in a few instances, most prominently the Super Bowl, advertising has become an attraction in itself. Polls track the most popular ads, and some people even acknowledge that they watch the game only to see the commercials. Advertisers also create special ads and often use them to promote “big events.” Not surprisingly, of course, ads during the Super Bowl are also very expensive—$6.5 million was the fee for a single 30-second commercial during the 2022 game.

During the 2020 COVID-19 pandemic, some advertisers developed new ads (TV, online, and print) to promote their products and services in the context of the pandemic. For instance, AT&T promoted itself as a way for people to stay in touch while social distancing. State Farm advertised that since driving was being reduced, so, too, were accidents, and therefore it was lowering insurance premiums. And many restaurant chains like Olive Garden advertised their new curbside and delivery options for people wanting their favorite food while social distancing.

Real-Time Ad Tracking

Advertisers always want better information about who looks at ads and for how long. Which target audiences and demographics are more attracted to various ad contents? Accurate ad-watching behavior of shoppers in malls, theaters, and grocery stores is on the increase, with assistance from high-tech real-time surveillance. As passing consumers watch ads on video screens, cameras watch the shoppers, and software analyzes the viewers’ demographics and reactions to various ad contents and formats. The makers of the tracking system claim accuracy of up to 90 percent for determining gender, approximate age, and ethnicity. Once perfected, the system might measure your demographics, identify you with a target audience, and then instantly change the presentation to a preferred product and visual format to attract and hold your attention. Marketers must find out, then, who their customers are, to which media they pay attention, what messages appeal to them, and how to get their attention. Thus, marketers use several different advertising media, specific communication devices for carrying a seller’s message to potential customers. The combination of media through which a company advertises is called its media mix. Table 13.2 shows the relative sizes of media usage and their strengths and weaknesses.

Table 13.2 Total U.S. Media Usage, Strengths, and Weaknesses

Advertising Medium

Percentage* of Advertising Outlays

Strengths

Weaknesses

Television

35%

Program demographics allow for customized ads

Large audience

Most expensive

Internet

20%

Targeted audience

Measurable success

Nuisance to consumers

Easy to ignore

Direct mail

10%

Targeted audience

Personal messages

Predictable results

Easily discarded

Environmentally irresponsible

Newspapers

10%

Broad coverage

Ads can be changed daily

Quickly discarded

Broad readership limits ability to target specific audience

Radio

8%

Inexpensive

Large audience

Variety of ready market segmentation

Easy to ignore

Message quickly disappears

Magazines

8%

Often reread and shared

Variety of ready market segmentation

Require advanced planning

Little control over ad placement

Outdoor

3%

Inexpensive

Difficult to ignore

Repeat exposure

Presents limited information

Little control over audience

A combination of additional unmeasured media, such as yellow pages, catalogs, special events, sidewalk handouts, ads on transport vehicles, skywriting, movies, and door-to-door communications, are not included.

*Estimated.

Advertising Mediavariety of communication devices for carrying a seller’s message to potential customers

Media Mixcombination of advertising media chosen to carry a message about a product

Marketers are also getting increasingly sophisticated by blending their media mix across different platforms. This often comes in the form of marketing partnerships. For example, suppose you are thinking about taking a trip to New York City. As part of your preliminary planning, you check out a new backpack on Amazon, look at airfares on United.com, and compare hotel rates at Marriott.com and Hilton.com. A few hours later you decide to check out what’s happening with your friends on Instagram or Facebook. Scattered among the posts from your friends you are likely to see ads for the same hotels, flights, and backpacks you were checking out earlier. That’s because Amazon, United, Hilton, and Marriott each pay Meta Facebook a fee to link your shopping searches back to your Instagram or Facebook feed. Personal Selling

Learning Objective 13-6 Outline the tasks involved in personal selling and describe the various types of sales promotions.

In the oldest and most expensive form of sales, personal selling, a salesperson communicates one-on-one with potential customers to identify their needs and align them with products. Salespeople gain credibility by investing time getting acquainted with potential customers and answering their questions. This professional interaction is especially effective in relationship marketing. It gives the seller a clearer picture of the buyer’s business and allows salespeople to provide buyers with value-adding services.

Personal Sellingperson-to-person sales

Salespeople must consider the ways in which personal sales activities are affected by the differences between consumer and industrial products:

Retail selling is selling a consumer product for the buyer’s personal or household use.

Retail Sellingselling a consumer product for the buyer’s personal or household use

Industrial selling is selling products to other businesses, either for the purpose of manufacturing or for resale. Levi’s, for instance, sells jeans to Walmart (industrial selling). In turn, consumers purchase Levi’s jeans at Walmart stores (retail selling).

Industrial Sellingselling products to other businesses, either for the purpose of manufacturing or for resale

Each of these situations has distinct characteristics. In retail selling, the buyer usually comes to the seller, whereas the industrial salesperson typically calls on the prospective buyer. An industrial decision usually takes longer than a retail decision because it involves more money, decision makers, and weighing of alternatives. As we saw in Chapter 11, organizational buyers are professional purchasing agents accustomed to dealing with salespeople. Consumers in retail stores, in contrast, may actually be intimidated or irritated by salespeople, especially if they are too aggressive.

Personal Selling Tasks

Salespeople must be adept at performing three basic tasks of personal selling. In order processing, a salesperson receives an order and sees to its handling and delivery. Route salespeople, who call on regular customers to check inventories, are often order processors. With the customer’s consent, they may decide on the sizes of reorders, fill them directly from their trucks, and even stock shelves. Frito-Lay, Coca-Cola, and many beer distributorships use this approach.

Order Processingpersonal-selling task in which salespeople receive orders and see to their handling and delivery

In other situations, however, when potential customers may be less certain that they need or want a product, creative selling involves providing information and demonstrating product benefits to persuade buyers to complete a purchase. Creative selling is crucial for industrial products and high-priced consumer products, such as cars, for which buyers comparison shop. Finally, a salesperson may use missionary selling to promote a company and its products rather than simply to close a sale. Pharmaceutical companies often use this method to make doctors aware of the company and its products so they will recommend the company’s products to others, or so the doctor will prescribe the products to patients. The sale of the product, then, is actually made at the pharmacy. In missionary selling, the goal may be to promote the company’s long-term image as much as any given product. Another activity in missionary selling is after-sale technical assistance for complex products. IBM uses after-sale selling to ensure that industrial customers know how to use IBM equipment and services.

Creative Sellingpersonal-selling task in which salespeople try to persuade buyers to purchase products by providing information about their benefits

Missionary Sellingpersonal-selling task in which salespeople promote their firms and products rather than try to close sales

Depending on the product and company, sales jobs usually require individuals to perform all three tasks—order processing, creative selling, and missionary selling—to some degree.

Managing in Turbulent Times Finding the Right Balance

Advertising campaigns have been alive as long as there has been mass media. Today, however, the tried-and-true marketing formula of a celebrity or “expert” defining a problem and presenting the solution no longer holds sway with viewers. Younger generations, many of whom have never watched a show with ads or according to a broadcaster’s schedule, are accustomed to clicking “Skip Ad” and have little patience with traditional advertising techniques. Instead, these consumers will look for personal testimony and the creative selling of influencers. Brands are increasingly eager to develop partnerships with not only celebrities from music, film, and television but also social media figures who amass hundreds of thousands of followers. Going into 2023, the influencer marketing industry was worth $16.4 billion.15

Occasionally, however, these relationships can backfire. Anheuser-Busch saw immediate backlash from anti-trans and right-wing customers over a Bud Light promotion with trans TikTok artist Dylan Mulvaney. In response, the brand distanced itself from Mulvaney, which resulted in a surge of criticism from the LGBTQIA+ community.

Teton Trade Cloth made a name for itself as a company that honored Indigenous artists. The textile company contracted with Indigenous artists to produce fabric designs, which would then be available for small-batch direct purchase by retailers, other artists, and the general public. Cast members of the Hulu show Reservation Dogs wore the firm’s fabrics, and during one episode, the camera panned across a wall where viewers could see one of the company’s stickers.

Teton’s brand ambassador Devan Kicknosway, a longtime friend of cofounder Craig Jones, had long supported and represented the company. In the fall of 2022, Kicknosway, who had been hosting regular Facebook Live events with other Indigenous artists, was accused of sexual assault by a young Indigenous woman. Jones posted a simple comment amid the controversy in what he thought was a small show of support for Kicknosway and his family. A single hashtag—#teamkicknosway—created a backlash that resulted in a demand for accountability from the brand and personal attacks on Jones, whose identifying information, including his home address and photos of his home, was posted publicly. Six months later, though the brand had been sold to the Delaware Tribe of Oklahoma, it was still addressing the controversy.16

Torontonian/Alamy Stock Photo

Partnering with social media influencers can offer companies a way to promote their brands without creating a costly media campaign or hiring a celebrity spokesperson. But, like all advertising, it risks alienating the very customers they hope to attract. As social media platforms and influence grow, brands must weigh the pros and cons of these relationships.

The Personal Selling Process

Perhaps the most complex and challenging of these three sales tasks is creative selling. The creative salesperson is responsible for starting and following through on most of the steps in the personal selling process:

Prospecting and qualifying. A salesperson must first have a potential customer, or prospect. Prospecting is the process of identifying potential customers. Salespeople find prospects through company personnel records, from social and professional networking on sites such as LinkedIn, and customers, friends, and business associates. In qualifying, prospects must be assessed to determine whether they have the authority to buy and the ability to pay.

Prospectingstep in the personal selling process in which salespeople identify potential customers

Qualifyingstep in the personal selling process in which salespeople determine whether prospects have the authority to buy and ability to pay

Approaching. The approach refers to the first few minutes of a salesperson’s contact with a qualified prospect. Because it affects the salesperson’s credibility, the success of later stages depends on the prospect’s first impression. A salesperson must, therefore, present a professional appearance and greet prospects in a manner that instills confidence.

Presenting and demonstrating. Next, the salesperson makes a presentation, a full explanation of the product, its features, and its uses. Most important, the presentation links product benefits to the prospect’s needs. A presentation may or may not include a demonstration. During the 2020 COVID-19 pandemic, much of this kind of work was quickly moved online using platforms like Zoom and Microsoft Teams.

Handling objections. No matter what product is for sale, prospects will have some objections. At the very least, they may open the door to negotiate for discounts by objecting to price. Objections, however, not only indicate that the buyer is interested but also pinpoint the parts of the presentation that trouble the buyer.

Closing. The most critical part of the selling process is the closing, in which the salesperson asks the prospect to buy the product. Successful salespeople recognize the signs that a customer is ready to buy. Prospects who start to figure out monthly payments are clearly indicating readiness to buy. Salespeople should then try to close the sale, either asking directly for the sale or implying a close indirectly. Questions such as “Could you take delivery Tuesday?” and “Why don’t we start off with an initial order of 10 cases?” are implied closes. Indirect closes place the burden of rejecting the sale on the prospect, who may find it a little harder to say no.

Closingstep in the personal selling process in which salespeople ask prospective customers to buy products

Following up. Follow-up is a key activity, especially in relationship marketing. For lasting relationships with buyers, good salespeople don’t end the sales process with the closing. They want sales to be so successful that customers will buy from them again. Thus, they supply additional services, such as after-sale support that provides convenience and added value. Follow-ups include quick processing of customer orders, on-time delivery, speedy repair service, and timely answers to user questions.

Sales Promotions

Sales promotions are short-term promotional activities designed to encourage consumer buying, industrial sales, or cooperation from distributors. They can increase the likelihood that buyers will try products, enhance product recognition, and increase purchase size and sales revenues.

Sales Promotiondirect inducements such as premiums, coupons, and package inserts to tempt consumers to buy products

Successful sales promotions provide potential customers with convenience and accessibility when the decision to buy occurs. If Harley-Davidson holds a 1-week motorcycle promotion but you, an interested buyer, have no local dealer and no access to a test ride, the promotion may be useless to you and so you won’t buy a motorcycle. In contrast, if Tide detergent offers a $1-off coupon that you can save and use on your next trip to the supermarket, the promotion is both convenient and accessible for you.

Personal selling is still very common, especially for expensive items such as automobiles and houses. This realtor, for example, is congratulating the buyers of a house that her firm had listed.

D. Hurst/Alamy Stock Photo

Most consumers have taken part in a variety of sales promotions such as free samples (giveaways), which let customers try products without risk, and coupon promotions, which use certificates entitling buyers to discounts to encourage customers to try new products, lure them away from competitors, or induce them to repurchase (buy more of a product). Coupons are available from many sources, including in mailings and at checkout counters when shopping. For example, Kohl’s department stores offer Kohl’s Cash, which is a coupon that buyers receive upon checkout to encourage them to return within a certain time period to make an additional purchase. Online coupon sites such as Coupons.com, RetailMeNot.com, and Groupon provide access to printable cost-saving coupons and to some free coupons.

Couponsales-promotion technique in which a certificate is issued entitling the buyer to a reduced price

Premiums are free or reduced-price items, such as pencils, coffee mugs, and six-month low-interest credit cards, given to consumers in return for buying a specified product. Contests can boost sales by rewarding high-producing distributors and sales representatives with vacation trips to Hawaii or Paris. Consumers, too, may win prizes by entering their pets in the IGA-Purina Pet Photo Contest, for example, by submitting pictures of their pets to win coupons.17

Premiumsales-promotion technique in which offers of free or reduced-price items are used to stimulate purchases

Loyalty programs reward frequent buyers for making repeat purchases. Oceania Cruises and Tauck (a tour company) offer vacation specials with significant price reductions to loyal customers. Online and mail promotions, for example, may announce two-for-one prices on upcoming cruises and reduced prices for upgrading to more luxurious accommodations. Tour specials may feature reduced airfares, along with free Wi-Fi and shore excursions for repeat customers. Bargain retailers also offer loyalty programs to frequent buyers. For example, discount chain Ollie’s invites customers to join their loyalty program, Ollie’s Army, which increases its rewards and surprise offers as customers spend more.18

Loyalty Programssales promotion technique in which frequent customers are rewarded for making repeat purchases

To grab customers’ attention in stores, companies use point-of-sale (POS) displays at the ends of aisles or near checkout counters to ease finding products and to eliminate competitors from consideration. In addition to physical goods, POS pedestals also provide services, namely, information for consumers. Some bank lobbies and physicians’ waiting rooms, for example, have interactive kiosks inviting clients to learn more about bank products and educational information about available treatments on consumer-friendly touch-screen displays. For B2B promotions, industries sponsor trade shows in which companies rent booths to display and demonstrate products to customers who have a special interest or who are ready to buy.

Point-of-Sale (POS) Displaysales-promotion technique in which product displays are located in certain areas to stimulate purchase or to provide information on a product

Trade Showsales-promotion technique in which various members of an industry gather to display, demonstrate, and sell products

Direct (or Interactive) Marketing

Direct (or interactive) marketing is one-on-one nonpersonal selling that tries to get consumers to make purchases away from retail stores and, instead, to purchase from home, at work, or using a mobile device. This fast-growing selling method includes nonstore retailers (catalogs, telemarketing, home video shopping); direct mail; direct response advertising (such as infomercials and direct response magazine and newspaper ads); and, most important, online connections. When used by B2B businesses, direct marketing is primarily lead generation so a salesperson can close the sale where interest has been shown. In B2C businesses, it has primarily a selling goal. The advantage of direct marketing is that you can target the message to the individual and you can measure the results. For example, Amazon knows when you sign in who you are and what you have purchased in the past and makes recommendations based on your purchase history. And when you select a certain book title or other product, it can suggest additional titles that other buyers of your selection have also purchased and in that way potentially increase sales to you.

Direct (or Interactive) Marketingone-on-one nonpersonal selling by nonstore retailers and B2B sellers using direct contact with prospective customers, especially via the Internet

The Internet has clearly enhanced traditional direct marketing methods, especially direct mail. By using permission marketing, a form of e-mail in which consumers give a company permission to contact them, a list of customers’ e-mails is compiled and the customers are regularly contacted with special offers and deals based on their past purchases. The e-mail is coming from a company with which the consumer has experience and has agreed to receive the company’s messages, and it contains a direct link to the company’s website and the sale item. Companies such as Amazon, Dell, Gap, and Kate Spade are among those who have used this direct marketing method and technology successfully.

Publicity and Public Relations

Publicity is information about a company, a product, or an event transmitted by the general mass media to attract public attention. Although publicity is free, marketers have no control over the content media reporters and writers disseminate, and because it is presented in a news format, consumers often regard it as objective and credible. Online security breaches, airplane crashes, automobiles recalls, oil spills, and ethical scandals often tarnish the reputations of the businesses involved. Following two fatal airplane crashes involving the Boeing 737 Max, regulators grounded all planes of that model for 20 months. The 737 Max had been the company’s best-selling plane, and having that model grounded during the FAA’s investigation is estimated to have cost Boeing more than $20 billion.19 During the high-profile investigation, e-mails from Boeing employees went public, revealing that many inside the company, including managers, knew that the 737 Max was flawed and dangerous.20 Following the crashes, 80 percent of air travelers said they would avoid flying on a 737 Max in its first six months back in service; half said they would pay more to fly on a different plane.21 However, a firm that engages in positive behaviors may also attract positive newsworthy attention. During the 2020 COVID-19 pandemic, Houston television stations reported how idled United Airlines employees were working in a nonessential repair facility to package food to distribute to homeless shelters and food banks.

Publicitypromotional tool in which information about a company, a product, or an event is transmitted by the general mass media to attract public attention

In contrast to publicity, public relations is company-influenced information that seeks either to build good relations with the public by publicizing the company’s charitable contributions, for example, or to deal with unfavorable events. In the Boeing case, many experts criticized the public relations response of then CEO Dennis Muilenburg, who called then President Donald Trump and asked him to intervene in the FAA’s decision to ground the 737 Max, even after it was removed from service in nearly every other country. Muilenburg minimized the problem and predicted that the 737 Max would be back in service quickly, which made it impossible for Boeing and its airline clients to plan a reasonable solution. Finally, regulators, lawmakers, the public, and the victims’ families believed that Muilenburg’s apologies were insufficient, and he was fired not long after the second crash. Boeing is primarily a business-to-business company, so its public relations team was not prepared to deal with a long-term crisis that impacted consumers.22

Public Relationscommunication efforts directed at building goodwill and favorable attitudes in the minds of the public toward the organization and its products