The document discusses marketing intermediaries and channels of distribution. It defines marketing intermediaries as organizations that assist in moving goods from businesses to other businesses and consumers. Common types of intermediaries include agents/brokers, wholesalers, and retailers. Intermediaries make markets more efficient by reducing transactions and contacts between producers and end users.

1. * * Chapter Fifteen Distributing Products Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

2. WHAT are MARKETING INTERMEDIARIES? * * The Emergence of Marketing Intermediaries 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. LG1 15-

3. WHAT are MARKETING INTERMEDIARIES? * * The Emergence of Marketing Intermediaries Channel of Distribution -- A group of marketing intermediaries that joining together to transport and store goods from producers to consumers. LG1 15-

4. TYPES of MARKETING INTERMEDIARIES? * * The Emergence of Marketing Intermediaries 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. Wholesaler -- An intermediary that sells products to other organizations such as retailers, manufacturers, and hospitals. Retailer -- An organization that sells products to ultimate customers. LG1 15-

5. WHY MARKETING NEEDS INTERMEDIARIES * * Why Marketing Needs Intermediaries Intermediaries perform marketing tasks faster and cheaper than most manufacturers could provide them. LG1 Marketing intermediaries make markets more efficient by reducing transactions and contacts. 15-

6. HOW INTERMEDIARIES CREATE EXCHANGE EFFICIENCY * * LG1 Why Marketing Needs Intermediaries 15-

7. THREE KEY FACTS ABOUT MARKETING INTERMEDIARIES * * The Value vs the Cost of Intermediaries 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. LG1 15-

8. INTERMEDIARIES CREATE UTILITY * * The Utilities Created by Intermediaries Utility -- The want-satisfying ability, or value, that organizations add to goods and services by making them more useful or accessible to consumers. Six types of utilities: Form Time Place Possession Information Service LG2 15-

9. HOW MARKETERS USE UTILITY * * The Utilities Created by Intermediaries Form Utility -- Changes raw materials into useful products; producers generally provide form utility. Starbucks makes coffee the way the customers want it. Levi-Strauss transforms denim into clothes. Time Utility -- Makes products available when customers want them. Many Walgreens stores are open 24-hours a day. Colleges offer day and evening classes. LG2 15-

10. HOW MARKETERS USE UTILITY * * The Utilities Created by Intermediaries 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 McDonalds with your Visa card. Car dealers offer loans to buyers. LG2 15-

11. HOW MARKETERS USE UTILITY * * The Utilities Created by Intermediaries 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. College placement offices help students find jobs. LG2 15-

12. WHOLESALE INTERMEDIARIES * * Wholesale Intermediaries Wholesalers normally make B2B sales, however, stores like Staples and Costco also have retail functions. Retail sales are sales of goods and services to customers for their own use. Wholesale sales are sales of goods and services to other businesses for use in the business or resale. Consumers are more familiar with retailers than wholesalers. LG3 15-

13. TYPES of WHOLESALE INTERMEDIARIES * * Wholesale Intermediaries Merchant Wholesalers -- Independently owned firms that take title to the goods they handle. There are two types: Full-service wholesalers perform all distribution functions. Limited-function wholesalers perform only selected distribution functions. About 80% of wholesalers are merchant wholesalers. LG3 15-

14. TYPES of LIMITED-FUNCTION WHOLESALERS * * Wholesale Intermediaries Rack Jobbers -- Furnish racks or shelves of merchandise such as music, magazines, and hosiery for retailers for display and sell them on consignment. Cash-and-Carry Wholesalers -- Serve mostly smaller retailers with a limited assortment of products. Drop Shippers -- Take orders from retailers and other wholesalers and have the merchandise shipped from producer to buyer. LG3 15-

15. ROLES of AGENTS and BROKERS * * Agents and Brokers Agents generally maintain long-term relationships with the clients they represent. LG3 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-

16. RETAILING in the U.S. * * Retail Intermediaries There are approximately 2.3 million retailers in the U.S., not including websites. LG4 Retailers in the U.S. employ over 11 million people and operate under many different structures. 15-

17. TOP ONLINE RETAILERS * * eBay Amazon Wal-Mart Target Netfilx LG4 Source: Nielsen Online, www.nielsenonline.com . Retail Intermediaries 15-

18. FASTEST GROWING RETAIL CATEGORIES * * Video games Sports and fitness Home, garden, and furniture Event tickets Consumer electronics LG4 Retail Intermediaries 15-

19. RETAIL DISTRIBUTION STRATEGIES * * Retail Distribution Strategy Intensive Distribution -- Puts products into as many retail outlets as possible including vending machines. Selective Distribution -- Uses only a preferred group of the available retailers in an area. Exclusive Distribution -- The use of only one retail outlet in a given geographic area. LG4 15-

20. PICK a STRATEGY… What’s the Correct Retail Strategy for These Products? * * Ralph Lauren Polo Shirts Diet Pepsi Rolls Royce Automobiles Calloway Golf Clubs Snickers Candy Bars Steinway Pianos LG4 Retail Distribution Strategy 15-

21. FORMS of NON-STORE RETAILING * * Electronic Retailing -- Selling goods and services to ultimate consumers over the Internet. Telemarketing -- The sale of goods and services via the telephone. LG5 Non-Store Retailing Vending machines, kiosks, and carts dispense convenience goods when consumers deposit sufficient funds. 15-

22. FORMS of NON-STORE RETAILING * * 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. LG5 Non-Store Retailing 15-

23. WHAT ONLINE SITES NEED Important Features on E-Commerce Web Sites * * Convenient return policies Established brands User reviews Professional site design Alternative payment options LG5 Electronic Retailing Source: GSI Commerce; Harris Interactive. 15-

24. COME BACK AGAIN! Retail Web Sites with the Highest Customer Satisfaction * * Amazon Netflix QVC Apple L.L. Bean LG5 Electronic Retailing Source: ForeSee Results, www.forseeresults.com . 15-

25. RETAIL WEB SITES with the LOWEST CUSTOMER RATING * * Circuit City - Now Bankrupt! Gap Home Shopping Network Overstock Home Depot LG5 Electronic Retailing Source: ForeSee Results, www.forseeresults.com . 15-

26. The FOUR SYSTEMS of CHANNEL RELATIONSHIPS * * Building Cooperation in Channel Systems Corporate Distribution Systems Contractual Distribution Systems Administered Distribution Systems Supply Chains LG6 15-

27. CORPORATE DISTRIBUTION SYSTEMS * * Building Cooperation in Channel Systems Corporate Distribution Systems -- Exist when one firm owns all the organizations in a channel of distribution. Examples: Goodyear Sherwin Williams LG6 15-

28. CONTRACTUAL DISTRIBUTION SYSTEMS * * Building Cooperation in Channel Systems Contractual Distribution Systems -- Exist when members are bound to cooperate through contractual agreements. Examples: Franchise System: McDonald’s , Subway , Sonic Wholesale-Sponsored Chain: IGA, Ace Hardware Retail Cooperative: Associated Grocers , True Value LG6 15-

29. ADIMINISTERED DISTRIBUTION SYSTEMS * * Building Cooperation in Channel Systems Administered Distribution Systems -- Exist when producers manage all the marketing functions at the retail level. Examples: Kraft Ralph Lauren LG6 15-

30. SUPPLY CHAINS * * Building Cooperation in Channel Systems 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. LG6 15-

31. The SUPPLY CHAIN * * LG6 Building Cooperation in Channel Systems 15-

32. USING LOGISTICS * * Logistics: Getting Goods to Consumers Efficiently 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. LG7 Firms may outsource to companies specializing in trade compliance to determine what is needed to market products to global customers. 15-

33. LOGISTICS APPLICATIONS * * Logistics: Getting Goods to Consumers Efficiently Inbound Logistics -- Brings raw materials, packaging, other goods and services and information from suppliers to producers. LG7 Materials Handling -- Movement of goods within a warehouse, from warehouse to the factory floor and from the factory floor to workstations . 15-

34. LOGISTICS APPLICATIONS * * Logistics: Getting Goods to Consumers Efficiently 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. LG7 15-

35. COMPARING TRANSPORTATION MODES * * Logistics: Getting Goods to Consumers Efficiently LG7 15- 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

36. LOGISTICS SPECIALISTS * * Logistics: Getting Goods to Consumers Efficiently Freight Forwarder -- Puts many small shipments together to create a single large shipment that can be transported cost-effectively by truck or train. LG7 Intermodal Shipping -- Uses multiple modes of transportation to complete a single long-distance movement of freight. 15-

37. TYPES of INTERMODAL SHIPPING * * Logistics: Getting Goods to Consumers Efficiently Piggybacking: Truck trailers placed on trains Fishybacking: Truck trailers placed on ships Birdybacking: Truck trailers placed on planes LG7 15-

38. GET YOUR PRODUCT THERE Most Popular Modes of Freight Transport * * LG7 Source: U.S. Freight Transportation Forecast 2008. Logistics: Getting Goods to Consumers Efficiently 15- Method % of Distributors Trucks 69% Trains 15% Pipelines 10% Ships 6% Air Under 1%

39. STORAGE WAREHOUSES * * The Storage Function Storage warehouses hold products for a relatively long period of time. Distribution warehouses are used to gather and redistribute products such as: Beer and soft drinks Package deliveries LG7 15-