MKTG 3110

Fall 2015
Mrs. Tamara L. Cohen

Marketing Concepts

Class #12
Place
 Guest Speaker 5% + 5%

December 1 Scott Gakenheimer

•MANDATORY ATTENDANCE = 5%
•MANDATORY ASSIGNMENT = 5%
o Arrive on time
o Leave on time
o No wandering in and out
o Sign in
o NO SCREENS
 KEY TERMS
• Marketing channel • Warehouse
• Vertical marketing • Distribution center
systems • Materials handling
• Horizontal marketing • Back order
systems • Retailing
• Logistics – Category killer
• Supply chain mgmt – Scrambled merchandise
• Lead time • Hypermarket
• Freight forwarder • Vending
• Electronic Data Interchange (EDI)
 KEY CONCEPTS
Value delivery network • Just-in-time (JIT)
Middlemen: • Vendor-managed
• agent / broker inventory
• wholesaler • Reverse logistics
• distributor
• retailer
• Online retailing
Multichannel marketing • Anchor store
Slotting allowances • Outlet stores
Third party logistics • Strip mall
providers
 What is PLACE?
= where the product or service is sold
= distribution
Key elements:
• marketing channel
• channel of distribution
• supply chain
• value delivery network
PLACE is critical
Caterpillar has dominated the world’s
markets for heavy construction
equipment for > 70 years.
• sells >300 products in nearly 200 countries
Caterpillar credits its “unparalleled
distribution & customer support
system” for its success.
• huge company; individual support
• slogan “Buy the Iron, get the Company”
• excellent distribution system is major
competitive advantage
 PLACE is critical
more

Apple recognized that distribution would

be critical in its successful rollout of the
iPhone 5.
Sept.21, 2012: simultaneous launch in
multiple countries
Aug.-Sept. average cost of delivery from
China to West increased by 7%
Apple was recognized by peers
as having the world’s top supply
chain in 2008.
 Vertical Marketing Systems
= members of a distribution channel work together as
a group to meet consumers’ needs
• cooperation removes efforts that conflict in channel
• one member of the distribution channel owns or
buys the others OR one member coordinates the
others without an ownership stake
e.g. An auto parts supplier might buy a steel plant to have
control over needed raw materials, or it may buy a retail
outlet to sell its products.
Apple has used this strategy for 35 years; production is
controlled from start to finish. Focus on core business +
sourcing materials + manufacturing + selling in own stores.
 Horizontal Marketing Systems
= distribution channel arrangement where 2 or more
organizations join for marketing purposes to
develop a new opportunity
SYNERGY / strategic alliance
e.g. Starbucks & Apple iTunes
bank/ATM in grocery store
airlines in the same loyalty programs
 M I DDL E M E N
Middleman = intermediary between manufacturer & end-user
markets

Agent / Broker = middleman with legal authority to act on behalf of

manufacturer

Wholesaler = middleman who sells to other middlemen, usually

retailers

Retailer = middleman who sells to consumers

Distributor = middlemen who provide a variety of distribution
functions, including selling, maintaining inventories,
extending credit, etc.

Dealer = similar to distributor, wholesaler, retailer, etc.

Agent Broker

Wholesaler Distributor
Dealer
Retailer
 Functions of MIDDLEMEN
1. Transactional - buying, selling, risk-taking, because
intermediary stocks merchandise in anticipation of sales
2. Logistical - gathering, storing & dispersing of products
3. Facilitating - assist producers in making goods more
attractive to buyers by providing financing, grading quality,
providing market/competitive information to customers &
suppliers

Consumers benefit from having the goods & services

where they want them,
when they want them, and
in the form they want them.
 Intermediaries minimize the number of
transactions and the cost of distribution
for producers and customers
Common marketing channels for consumer offerings by
the kind and number of intermediaries
 Common marketing channels for business
offerings by the kind and number of intermediaries
 More Routes to Market
1. Electronic Marketing Channels
- some goods & services are easier to
market electronically than others; e.g. travel
services versus plumbing
2. Direct Marketing Channels - includes
mail order, televised home shopping, catalog
sales; e.g. LL Bean, Cutco
3. Multichannel Marketing - blending of
different channels; e.g. Tupperware (disaster);
Walmart selling text books
Consumer electronic marketing channels
are similar to those for
consumer and business offerings
 Even More Routes to Market
4. Dual Distribution
- company uses two (or more)
different channels at once to reach
different customers with same basic
product
5. Strategic Channel Alliances
- one company’s marketing channel
is used to sell another company’s
products (or services); e.g. Kraft
distributes Starbucks coffee products
 Channel Choice & Management
Factors affecting channel choice:
1. Environment - lifestyle changes,
technology, regulatory change
2. Consumers - appropriate channels
3. Product - very sophisticated, very new, very
expensive, very individualized products or services sold
directly
4. Company - company's personnel, financial or
technological capabilities
5. Profitability - cost includes distribution, advertising,
selling
 Issues in Channel Management
Legal issues
o some channel practices are monitored and/or controlled by
Federal Trade Commission (FTC) & Justice Department
o prevent unfair trade practices:
1. Dual distribution
2. Vertical integration
3. Exclusive dealing
4. Tying arrangements
5. Full-line forcing
6. Refusal to deal
Ethical issues
o slotting allowances ?
A Kellogg’s Nutri-Grain cereal bar’s ingredients
come from
global suppliers and supply chains
 Well-known, successful Supply Chains

Dell: A Responsive Walmart: An Efficient

Supply Chain Supply Chain
- mass customization - mass consumption
- customers willing to - customers expect
1. wait 1. reliability
2. pay 2. low prices
- chose responsiveness - chose efficiency
(rather than efficiency)
(rather than
responsiveness)
 Supply chain managers balance
total logistics cost factors against
customer service factors
 Examples of
Customer Service Standards
Type of company Customer service standard

Wholesaler ≥ 98% orders filled accurately

Manufacturer ≤ 5 days order cycle time

Retailer Returns accepted within 30 days

Airline ≥ 90% flight arrivals on time

Trucker ≤ 5% loss & damage per year
Restaurant lunch served within 5 minutes of order
 Key Logistics Functions

Third party logistics

providers = companies
that perform all or most of the
logistical functions that
manufacturers, suppliers and
distributors would otherwise
perform themselves
e.g. FedEx, DHL, UPS, Ryder
Key Logistics Functions
1. Transportation
Evaluate transportation on
basic service criteria:
1. Cost
2. Time
3. Capability
4. Dependability
5. Accessibility
6. Frequency (scheduling)
Advantages & Disadvantages
of 5 Transportation Modes
 Key Logistics Functions
2. Warehousing
 Storage Warehouses

 Distribution Centers

 Materials Handling
 Key Logistics Functions
3. Order processing
 Transmit order
 Enter order into data base
 Check inventory
 Possible order from vendor
 Possible back order
 Key Logistics Functions
4. Inventory management
• Reasons for inventory
1. Buffer against variations in supply and demand
2. Better customer service
3. Promote production efficiencies
4. Hedge against material price increases
5. Promote purchasing & transportation discounts
6. Protect company from strikes and material shortages
7. Product needs time to mature
• In general, inventory should be moved,
not held
 Key Logistics Functions
4. Inventory management (cont.)
• Inventory costs:
– Capital cost
– Inventory service cost
– Storage cost
– Risk
 Key Logistics Functions
5. Inventory strategies
• Just-in-time = inventory supply
system that operates with very low
inventories and requires fast, on-time
delivery

• Vendor-managed inventory
= inventory management system whereby the
supplier determines the product amount and
assortment a customer (e.g. retailer) needs,
and automatically delivers the appropriate
items
 Reverse Logistics
= process of reclaiming recyclables and reusable
materials, returns, and reworks from the point of
consumption, or use for repair, remanufacturing,
redistribution, or disposal
 What is RETAILING?
Retailing includes all activities involved in
selling, renting, and providing
products and services
to ultimate consumers
for personal, family, or household use.
Global impact of RETAILING

Significant retailers in the

world:
Relative size of different types of retailers

Sales in 2009 ($ billions)

 TOP RETAILERS in 2014
1. Walmart ($508.5 billion worldwide sales)
2. Kroger ($103 billion USA sales)
3. Costco ($111.5 billion worldwide sales)
4. Home Depot ($83.2 billion worldwide sales)
5. Walgreen ($75.1 billion worldwide sales)
6. Target ($74.5 billion worldwide sales)
7. CVS ($69.1 billion worldwide sales)
8. Lowe’s ($56.2 billion worldwide sales)
9. Amazon ($83.4 billion worldwide sales)
10. Safeway ($36.3 billion worldwide sales)
 Kinds of RETAILING
Ownership
• Independent Retailer
• Corporate Chain
• Contractual Systems
- Wholesaler-Sponsored Voluntary Chains
- Retailer-Sponsored Cooperatives
- Franchises
Top 5 Franchises in the USA
 Kinds of RETAILING
Level of Service
1. Self-service RFID

– no non-essential customer service

– e.g. self-check-in kiosks at airports & hotels
– dependent on technology
2. Limited service
– e.g. Walmart
3. Full service
– specialty stores, department stores
– ‘personal shopper’ facility
– justifies higher prices
 Kinds of RETAILING
Type of Merchandise Line
1. DEPTH of product line
• specialty stores - limited & single line stores
• specialty discount outlets = “category killer”

2. BREADTH of product line

• general merchandise - broad product line,
limited depth
• several unrelated product lines in store
= “scrambled merchandise”
- one-stop shopping
e.g. hypermarket,
supercenter
4 Positioning Strategies for Retailers
Hypermarkets are popular in Europe, while Supercenters
are popular in the U.S.
Many types of retailers do not have stores
 Online Retailing
Online retailing allows consumers to search for,
evaluate, and order products using the Internet.
Advantages & disadvantages
Intermediaries, e.g. Groupon
Amazon
Amazon versus Walmart?
“Omnichannel is the path to success”
Retail transformation focuses on selling & marketing:
Selling: channel-agnostic / channel-agile
Marketing: personalization & shopper engagement
 Vending
A vending machine dispenses items such as snacks,
beverages, alcohol, cigarettes, lottery tickets, consumer
products and even gold and gems to customers
automatically, after the customer inserts cash or credit
into the machine.
 GREEN retailing
Sustainability & environmental consciousness is
catching on in America, i.e. “green” has become
important in company image & reputation. Being green
is an important element of corporate social responsibility.
Beware of greenwashing (exaggerated claims)
Location Location
Location
Location Store Location Location
Location

1. Central business district - downtown

2. Regional shopping centers - include anchor
stores
3. Community shopping centers - primary store +
20-40 shops; catchment area within 10-20 minute drive
4. Strip mall - neighborhood store cluster; often including
gas station, hardware, laundry, grocery, pharmacy;
catchment area within 5-10 minute drive; convenience
5. Power center - huge shopping strip with multiple
anchor tenants
How stages of the product life cycle relate to a firm’s
marketing objectives &marketing mix actions
Classification of a consumer product affects which products
consumers buy & the marketing strategies used
Next class: Promotion &
Marketing Strategy

Preparation: assigned reading pages

Homework #10: Sales Promotion