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  1. 1. Small Business Distribution and Location
  2. 2. Learning Objectives <ul><li>LO1 Recognize the different types of direct marketing and their pros and cons </li></ul><ul><li>LO2 Learn how to do non-direct distribution </li></ul><ul><li>LO3 Differentiate the types of international strategies </li></ul><ul><li>LO4 Identify the factors to consider in selecting your business location </li></ul>11-
  3. 3. Learning Objectives <ul><li>LO5 Recognize the key issues in leasing. </li></ul><ul><li>LO6 Know what to look for in a potential site layout </li></ul><ul><li>LO7 Understand the pros and cons of buying, building, or leasing </li></ul>11-
  4. 4. Distribution <ul><li>Distribution </li></ul><ul><ul><li>process of getting your product to your customers </li></ul></ul><ul><li>“ Where are my customers?” </li></ul><ul><li>“ Where should I be?” </li></ul>11-
  5. 5. Typical Distribution Channels 11- Figure 11.1
  6. 6. Direct Marketing <ul><li>Word-of-mouth </li></ul><ul><ul><li>A means of spreading information about your business through the comments friends and customers make to other potential customers. </li></ul></ul>11-
  7. 7. Direct Marketing <ul><li>Direct sales </li></ul><ul><ul><li>Methods of going directly to your customer in order to sell your product. </li></ul></ul><ul><ul><li>Vending machines, door-to-door salespeople, leasing space at a craft fair, farmers’ markets, party sales, and most industrial sales </li></ul></ul>11-
  8. 8. Direct Marketing <ul><li>Direct mail </li></ul><ul><ul><li>A method of selling in which catalogs, brochures, letters, videos, and other pieces of marketing materials are mailed directly to customers from which they can mail, call, or e-mail an order. </li></ul></ul><ul><ul><li>Direct faxing and direct e-mailing are more modern forms of direct mail. </li></ul></ul>11-
  9. 9. Direct Marketing <ul><li>Mail order </li></ul><ul><ul><li>Sales made from ads in newspapers or magazines, with purchases made online or by phone as well as by mail. </li></ul></ul>11-
  10. 10. Direct Mail and Its Variants <ul><li>Microinventory </li></ul><ul><ul><li>A set of goods or service that consists of only one or a few items. </li></ul></ul>11-
  11. 11. Direct Mail and Its Variants <ul><li>Just-in-time inventory </li></ul><ul><ul><li>Having just enough product on your shelves to meet the immediate purchases. </li></ul></ul><ul><ul><li>Usually requires frequent shipment from your supplier. </li></ul></ul>11-
  12. 12. Question <ul><li>Which marketing style is a telephone call from a salesperson? </li></ul><ul><li>telemarketing </li></ul><ul><li>direct marketing </li></ul><ul><li>guerilla marketing </li></ul><ul><li>direct response advertising </li></ul>11-
  13. 13. Direct Marketing <ul><li>Telemarketing </li></ul><ul><ul><li>Contact via telephone for the express purpose of selling a product or service. </li></ul></ul><ul><ul><li>can either be inbound (customer calls company) or outbound (company calls customer). </li></ul></ul>11-
  14. 14. Direct Marketing <ul><li>Direct response advertising </li></ul><ul><ul><li>Placing an advertisement in a magazine or newspaper, on television or radio, or in any other media. </li></ul></ul><ul><ul><li>ad contains an order blank with a phone number and e-mail or regular mail address with the intent of having the customer place an immediate order. </li></ul></ul>11-
  15. 15. Cost per 1,000 for Various Forms of Direct Response Advertising 11-
  16. 16. Direct Marketing <ul><li>Guerilla marketing </li></ul><ul><ul><li>The use of creative and relatively inexpensive ways to reach your customer. </li></ul></ul><ul><ul><li>Examples include door-knob hangers, flyers under windshield wipers, T-shirts, balloons, and messages written on sidewalks. </li></ul></ul>11-
  17. 17. Direct Marketing <ul><li>Multichannel marketing </li></ul><ul><ul><li>The use of several different channels to reach your customers, for example, a Web site, direct mail, and traditional retailing. </li></ul></ul>11-
  18. 18. Distribution Issues for Direct Marketing <ul><li>Fulfillment center </li></ul><ul><ul><li>A company that will warehouse your products and fill your customers’ orders for you. </li></ul></ul><ul><li>Retailer </li></ul><ul><ul><li>A middleman business which sells to consumers or end-users of a product (typically in single or small quantities). </li></ul></ul>11-
  19. 19. Nondirect Distribution <ul><li>Wholesaler </li></ul><ul><ul><li>A middleman business which buys (typically in large quantities) and sells (typically in smaller quantities) to businesses rather than consumers. </li></ul></ul>11-
  20. 20. Nondirect Distribution <ul><li>Agent </li></ul><ul><ul><li>A middleman business which represents a manufacturer’s product or service to other business-to-business middleman firms. </li></ul></ul>11-
  21. 21. Nondirect Distribution <ul><li>e-tailer </li></ul><ul><ul><li>An electronic retailer; a store that exists only on the Internet. </li></ul></ul><ul><li>Born international </li></ul><ul><ul><li>A new firm that opens a Web site immediately, thus being exposed to customers from around the world. </li></ul></ul>11-
  22. 22. Question <ul><li>Exporting using no middlemen is __________. </li></ul><ul><li>Indirect exporting </li></ul><ul><li>Freight forwarding </li></ul><ul><li>Express exporting </li></ul><ul><li>Direct exporting </li></ul>11-
  23. 23. Exporting <ul><li>Direct exporting </li></ul><ul><ul><li>Exporting using no intermediaries </li></ul></ul><ul><li>Indirect exporting </li></ul><ul><ul><li>Exporting using intermediaries such as agents, export management companies, or export trading companies. </li></ul></ul>11-
  24. 24. Exporting <ul><li>Freight forwarders </li></ul><ul><ul><li>Firms specializing in arranging international shipments— packaging, transportation, and paperwork. </li></ul></ul>11-
  25. 25. Government Sources of Export Assistance 11- Table 11.2
  26. 26. Exporting <ul><li>Letter of credit </li></ul><ul><ul><li>A document issued by a bank that guarantees a buyer’s payment for a specified period of time upon compliance with specified terms. </li></ul></ul><ul><li>Documentary draft </li></ul><ul><ul><li>A draft which can be exercised only when presented with specified shipping documents. </li></ul></ul>11-
  27. 27. Importing <ul><li>Importing </li></ul><ul><ul><li>similar to exporting, but buyers and sellers are reversed </li></ul></ul><ul><li>Travel abroad - look for products that are selling well in the country you’re visiting </li></ul><ul><li>Trade mission and domestic and international trade shows are also good sources </li></ul>11-
  28. 28. Location <ul><li>First choice for many entrepreneurs is their hometown </li></ul><ul><ul><li>Local banker knows you, more likely to loan money </li></ul></ul><ul><ul><li>You understand market’s needs and wants </li></ul></ul><ul><ul><li>Friends and family are usually first customers </li></ul></ul>11-
  29. 29. Service Firms <ul><li>Three types of locations </li></ul><ul><li>At the client’s location </li></ul><ul><li>At a mutually accessible location </li></ul><ul><li>At your firm’s location </li></ul>11-
  30. 30. Service Firms <ul><li>At the client’s location </li></ul><ul><ul><li>Services include such things as house or office cleaning, pest control, remodeling, lawn and gardening services, carpet cleaning, and similar services which must be performed at the client’s house </li></ul></ul><ul><ul><li>As the firm grows, it may outgrow its home-based headquarters </li></ul></ul>11-
  31. 31. Service Firms <ul><li>Mutually accessible location: </li></ul><ul><ul><li>Too much specialized equipment to be readily transported </li></ul></ul><ul><ul><li>A need for at least some client involvement </li></ul></ul><ul><ul><li>Barbershops, dentist offices, video rental stores restaurants </li></ul></ul>11-
  32. 32. Manufacturers <ul><li>Contract manufacturing </li></ul><ul><ul><li>An existing firm with the correct manufacturing capabilities makes your product for you. </li></ul></ul><ul><li>Sheltered workshop </li></ul><ul><ul><li>A nonprofit organization or institution that provides business services by using handicapped or rehabilitated workers </li></ul></ul>11-
  33. 33. Site Selection <ul><li>High customer contact business </li></ul><ul><ul><li>Three critical site selection considerations: </li></ul></ul><ul><ul><ul><li>Traffic </li></ul></ul></ul><ul><ul><ul><li>Customer ease </li></ul></ul></ul><ul><ul><ul><li>Competition </li></ul></ul></ul><ul><ul><li>Presence of traffic generators in the area </li></ul></ul><ul><ul><li>Parking is also an issue </li></ul></ul>11-
  34. 34. Site Selection <ul><li>Low customer contact business </li></ul><ul><ul><li>Manufacturing business </li></ul></ul><ul><ul><li>Commercial space might be appropriate </li></ul></ul><ul><ul><li>Support businesses will be in or near the area </li></ul></ul><ul><ul><li>Business incubator : </li></ul></ul>11-
  35. 35. Leasing: Location Issues 11-
  36. 36. Leasing : Operational Issues 11-
  37. 37. Typical Manufacturing Layout 11- Figure 11.2
  38. 38. Typical Retail Layouts 11- Figure 11.3
  39. 39. Build, Buy, or Lease <ul><li>Building has the advantage of having the perfect layout in the perfect location and the street appeal of a new building, but it is costly and slow </li></ul><ul><li>Buying something already in existence shortens the time and may be somewhat cheaper </li></ul>11-
  40. 40. Build, Buy, or Lease <ul><li>Leasing is an option with a considerably lower initial cash outlay </li></ul><ul><ul><li>Often the only feasible choice </li></ul></ul><ul><ul><li>Lease expenses are deductible business expenses </li></ul></ul>11-