11/06/2019

Nguyen Thi Hong An, MBA 1

Discussion
1. List out some products (with its brand name) that you
can buy directly from the manufacturers.

2. List out some products that you can not buy directly
from the manufacturers. If so, which channels can you
buy?

1
 11/06/2019

Lecture outline

• Explain the concept of marketing channels and their

1 value,
• Demonstrate how intermediaries perform the six
2 marketing utilities,
• Identify the types of wholesale intermediaries in the
3 distribution system,

• Compare the distribution strategies retailers use,

4
• Explain the various kinds of non-
non-store retailing,
5
• Explain the various ways to build cooperation in channel
6 systems,
• Describe logistics and outline how intermediaries manage
7 the transportation and storage of goods.

3
Nguyen Thi Hong An

*
• Marketing Intermediaries – Organizations that
assist in moving goods and services from
Businesses to Businesses (B2B) and from
Businesses to Consumers (B2C).

• They are called intermediaries because

they’re in the middle of a series of firms that
distribute goods.

15-4
Nguyen Thi Hong An

2
 11/06/2019

*
• Channel of Distribution – A group of marketing
intermediaries that joining together to
transport and store goods from producers to
consumers.

15-5
Nguyen Thi Hong An

• Agents and Brokers –

*
Intermediaries who bring
buyers and sellers
together and assist in
negotiating an exchange
but do not take title to
the goods they offer.

E.g: real estate agents,

insurance brokers,
securities brokers …

15-6
Nguyen Thi Hong An

3
 11/06/2019

*
• Wholesaler – An intermediary that sells products
to other organizations such as retailers,
manufacturers, and hospitals.

15-7
Nguyen Thi Hong An

*
TYPES of MARKETING INTERMEDIARIES?

• Retailer – An organization that sells products to

*
ultimate customers.

15-8
Nguyen Thi Hong An

4
 11/06/2019

http://www.youtube.com/watch?v=95XVueSdOGQ&feature=related

15-9
Nguyen Thi Hong An

*
• Intermediaries perform marketing tasks
faster and cheaper than most manufacturers
could provide them.

• Marketing
intermediaries
make markets more
efficient by
reducing
transactions and
contacts.
15-10
Nguyen Thi Hong An

5
 11/06/2019

15-11
Nguyen Thi Hong An

*
Suppose that eight bakeries each tried to
sell their products directly to seven
supermarkets. The total number of
exchange relationships
Question that would be
established is:
A) 14
B) 25
C) 56
D) 72 15-12
Nguyen Thi Hong An

6
 11/06/2019

*
• Marketing intermediaries can be eliminated
but their activities can’t.

• Intermediaries perform marketing functions

faster and cheaper than other organizations
can.

• Marketing intermediaries add costs to

products but they’re generally offset by the
values they provide.
15-13
Nguyen Thi Hong An

• Utility – The want-satisfying ability, or value, *

that organizations add to goods and services by
making them more useful or accessible to
consumers.

15-14
Nguyen Thi Hong An

7
 11/06/2019

• Form Utility – Changes raw materials into useful *

products; producers generally provide form
utility.
- Starbucks makes coffee the way the customers want it.
- Dell assembles computers according to customers’
wishes
- Levi-Strauss transforms denim into clothes.

• Time Utility – Makes products available when

customers want them.
- 24h, Shop & Go stores are open 24-hours a day.
- Universities offer day and evening classes.
15-15
Nguyen Thi Hong An

*
• Place Utility – Adds value to products by placing
them where people want them.
- Banks place ATMs at convenient locations.
- Pepsi is available in campus vending machines.

• Possession Utility – Helps transfer ownership

from one party to another, including providing
credit.
- Pay for lunch at KFC with your Visa card.
- Car dealers offer loans to buyers.

15-16
Nguyen Thi Hong An

8
 11/06/2019

• Information Utility – Opens two-way flows of *

information between marketing participants.
- Dell’s website offers advice to PC buyers.
- Local government maps show tourist locations.

• Service Utility – Provides service during and

after a sale and teaches customers how to best
use products.
- Apple offers classes to help computer buyers.
- Universities placement offices help students find jobs.
15-17
Nguyen Thi Hong An

*
• Merchant Wholesalers – Independently owned
firms that take title to the goods they handle.
There are two types:

1. Full-service wholesalers perform all distribution

functions.
2. Limited-function wholesalers perform only selected
distribution functions.

• About 80% of wholesalers are merchant

wholesalers.
15-18
Nguyen Thi Hong An

9
 11/06/2019

• Rack Jobbers:
*
Furnish racks or shelves of merchandise such as music,
magazines, and hosiery for retailers for display and sell them
on consignment, meaning they keep title to the goods until they
are sold and then share the profits with the retailer.

15-19
Nguyen Thi Hong An

*
TYPES of LIMITED-
LIMITED-FUNCTION
WHOLESALERS
*
• Cash-
Cash-and-
and-Carry Wholesalers:
Wholesalers: Serve mostly
smaller retailers with a limited assortment of
products.

15-20
Nguyen Thi Hong An

10
 11/06/2019

*
ROLES of AGENTS
and BROKERS *
• Agents generally maintain long-term
relationships with the clients they represent.
- Manufacturer ’ s agents
represent several
manufacturers in a specific
territory.
- Sales agents represent a single
client in a larger territory.
• Brokers usually represent clients on a temporary
basis.

15-21
Nguyen Thi Hong An

15-22
Nguyen Thi Hong An

11
 11/06/2019

15-23
Nguyen Thi Hong An

*
o Channel systems can vary from country to
country, company to company
o Must be able to adapt channel strategies to the
existing structures within each country

o For example: distribution channels in Vietnam are very

different from those of US and UK!

versus

15-24
Nguyen Thi Hong An

12
 11/06/2019

*
• Describe the activities of rack jobbers and
drop shippers?

• What kinds of products would call for each

of these different distribution strategies:
intensive, selective, and exclusive?

15-25
Nguyen Thi Hong An

*
• Electronic Retailing – Selling goods and
services to ultimate consumers over the Internet.

• Telemarketing – The sale of goods and services

via the telephone.

• Vending machines, kiosks, and

carts dispense convenience
goods when consumers deposit
sufficient funds.

15-26
Nguyen Thi Hong An

13
 11/06/2019

*
• Direct Selling - Selling goods and services to
customers in their homes or workplaces.

• Multilevel marketing uses salespeople who

work as independent contractors.

• Direct Marketing -- Any activity that directly

links manufacturers or intermediaries with
ultimate customers.

15-27
Nguyen Thi Hong An

*
1. Corporate Distribution Systems

2. Contractual Distribution Systems

3. Administered Distribution Systems

4. Supply Chains

15-28
Nguyen Thi Hong An

14
 11/06/2019

• Corporate Distribution Systems -- Exist *

when one firm owns all the organizations in
the channel of distribution.

• Examples:
-Safeway owns and operates milk plants,
bakery plants, ice-cream plants, soft drink
bottling plants, and fruit and vege
processing plants.

-TH Truemart is another example. TH

Truemart own retail stores and coordinates
everything: display, pricing, promotion,
inventory control, and so on.
15-29
Nguyen Thi Hong An

*
• Contractual Distribution Systems -- Exist when
members are bound to cooperate through contractual
agreements.

• Examples:
Manufacturer-sponsored retailer franchise system.
For example: Ford and its network of independent
franchised dealers
Manufacturer-sponsored wholesaler franchise system.
For example: Coca-cola licenses bottlers who buy its
syrup concentrate then bottle and sell finished
product.
Service-firm-sponsored retailer franchise system.
For example: McDonald’s, Burger King, KFC
15-30
Nguyen Thi Hong An

15
 11/06/2019

*
• Administered Distribution
Systems -- Exist when producers
manage all the marketing functions
at the retail level.

Examples:

Manufacturers of top brand such as Procter & Gamble, Kraft,
Unilever can command unusual cooperation from resellers
regarding displays, shelf space, promotions and pricing.

Large retailers like Wal-Mart or in case of Vietnam Saigon

Coopmart or Big C can have strong influence on the
manufacturers.
15-31
Nguyen Thi Hong An

*
• Supply Chain -- All the linked activities various
organizations must perform to move goods and
services from the source of raw materials to ultimate
consumers.

• Supply Chain Management -- The process of

managing the movement of raw materials, parts,
work in progress, finished goods, and related
information through all the organizations in the supply
chain.

15-32
Nguyen Thi Hong An

16
 11/06/2019

15-33
Nguyen Thi Hong An

• Logistics -- The planning, implementing and

controlling of the physical flow of material, final goods
and related information from points of origin to points
of consumption.
• Firms may outsource to
companies specializing in
trade compliance to
determine what is needed
to market products to global
customers.

15-34
Nguyen Thi Hong An

17
 11/06/2019

• Inbound Logistics -- Brings raw materials,

packaging, other goods and services and information
from suppliers to producers.

• Materials Handling --
Movement of goods
within a warehouse,
from warehouse to the
factory floor and from
the factory floor to
workstations.
15-35
Nguyen Thi Hong An

• Outbound Logistics -- Manages the flow of

finished products and information to business buyers
and consumers.

• Reverse Logistics -- Brings goods back to the

manufacturer because of defects or for recycling.

15-36
Nguyen Thi Hong An

18
 11/06/2019

Mode Cost Speed Dependability Flexibility Frequency Reach

Rail Med. Slow Medium High Low High

Trucks High Fast High Medium High Highest

Pipeline Low Medium Highest Lowest Highest Lowest

Ships Lowest Slowest Lowest Highest Lowest Low

Air Highest Fastest Low Low Medium Medium

15-37
Nguyen Thi Hong An

• Freight Forwarder -- Puts many small shipments

together to create a single large shipment that can be
transported cost-effectively by truck or train.

• Intermodal Shipping --
Uses multiple modes of
transportation to complete
a single long-distance
movement of freight.

15-38
Nguyen Thi Hong An

19
 11/06/2019

*
• Piggybacking: Truck trailers placed on trains

• Fishybacking: Truck trailers placed on ships

• Birdybacking: Truck trailers placed on planes

15-39
Nguyen Thi Hong An

*
• What four systems have evolved to tie together
members of the channel of distribution?

• How does logistics differ from distribution?

• What are inbound logistics, outbound logistics, and

reverse logistics?

15-40
Nguyen Thi Hong An

20