Marketing Portfolio (CH9, CH12, CH13, CH14, CH15, CH16, CH17, CH18, CH19) ***PowerPoint Content Provided***
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CJ14_MarketingChannels_RetailingCONTENTforWORDDOCUMENT.pptxMarketing Channels and Retailing
Chapter 14
Learning Goals
Discuss marketing channels and channel intermediaries and describe their functions and activities.
Describe common channel structures, strategies, and factors that influence their choice.
Identify channel relationship types roles and their unique advantages and disadvantages.
Understand the importance of the retailer within the channel and within the national economy.
List and identify the different classifications and types of retailers and their different operational models.
Recognize the major tasks involved in developing a retail marketing strategy
Apply CRM and customer data in retailer decision making.
Discuss trends in retail and channel management.
GOAL #1
Discuss marketing channels and channel intermediaries and describe their functions and activities.
Marketing Channels
A marketing channel is:
A set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer
A business structure that helps channel members perform necessary actions to move products to the final consumer.
Viewed as a large pipeline through which products, their ownership, communication, financing and payment, and accompanying risk flow to the consumer.
Discuss marketing channels …and describe their functions and activities.
Channel Intermediaries
As products move to the final consumers, intermediaries facilitate the distribution process by providing specialization and division of labor, overcoming discrepancies, and providing contact efficiency.
Retailers are those firms in the channel that sell directly to consumers as their primary function
Discuss … channel intermediaries and describe their functions and activities
Channel Intermediaries
Channel Intermediaries
Channel Members
Negotiate with one another, buy and sell products, and facilitate the change of ownership between buyer and seller in the course of moving the product from the manufacturer into the hands of the final consumer.
Purpose of Marketing Channels
Marketing channels facilitate the physical flow of goods through the supply chain, representing “place” or distribution in the marketing mix
As products move through the supply chain, channel members facilitate the distribution process by providing specialization and division of labor, overcoming discrepancies, and providing contact efficiency.
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Purpose (Functions) of Marketing Channel
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
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Purposes of Marketing Channels
Specialization and Division of Labor
Contact Efficiency
Creates greater efficiency
Provides lower production costs
Create time, place, form, and exchange utility
Retailers simplify distribution by cutting the number of transactions required by consumers, making an assortment of goods available in one location.
Retailer -- Businesses in the channel that sell directly to customers
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Channel Intermediaries
Merchant
Wholesaler
An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them.
Agents and
Brokers
Wholesaling intermediaries who facilitate the sale of a product by representing channel members.
Intermediaries in a channel negotiate with one another, facilitate the change of ownership between buyers and sellers, and physically move products from the manufacturer to the final consumer.
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Notes:
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Differences in Channel Intermediaries
Merchant
Wholesalers
Agents
and
Brokers
Take Title to Goods
Do NOT Take Title to Goods
1
The most prominent difference separating intermediaries is whether or not they take title to the product. “Taking title” means they own the merchandise and control the terms of the sale.
Retailers and merchant wholesalers take title to goods, while agents and brokers do not.
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Factors Suggesting Type of Wholesaling Intermediary to Use
Product characteristics
Buyer considerations
Market characteristics
1
Product characteristics, buyer considerations, and market conditions determine the type of intermediary the manufacturer should use. Each of these will determine which type of intermediary is appropriate for a product.
Product characteristics include such aspects of a product as standardization and customization, complexity, and gross margin.
Buyer considerations include purchase frequency and how long the buyer is willing to wait for a product.
Market characteristics include number of buyers and buyer concentration levels.
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Notes:
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Channel Functions Performed by Intermediaries
Contacting/Promotion
Negotiating
Risk Taking
Researching
Financing
Physically distributing
Storing
Sorting
Facilitating Functions
Transactional Functions
Logistical
Functions
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Chapter 13 Marketing Channels
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Notes:
Goal #2
Describe common channel structures, strategies, and factors that influence their choice.
Channel Structures
When possible, producers use a direct channel to sell directly to consumers.
Other times an agent/broker channel may be the best solution.
Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel.
Exhibit 14.2 Marketing Channels for Consumer Products
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Chapter 13 Marketing Channels
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Alternative Channel Arrangements
Dual or multiple distribution
Strategic channel alliances
Nontraditional channels
Usually a producer uses several different (or alternative) channels, including:
Dual channels: Two or more channels selected is called dual or multiple distribution. Dual distribution systems differ from single channel systems, and managers should recognize those differences.
Nontraditional channels: Include the Internet and mail-order channels, and help differentiate a business’ product from the competition.
Strategic channel alliances: Producers use another manufacturer’s already-established channel.
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Factors Affecting Channel Choice
Managers must consider the three options for intensity of distribution: intensive distribution, selective distribution, and exclusive distribution.
3. Producer Factors
2. Product Factors
1. Market Factors
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1. Market Factors
Market Factors That Affect
Channel Choices
Customer profiles
Consumer or Industrial
Customer
Size of market
Geographic location
Market factors include the target customer profiles: Who are the potential customers? What/where/when/how do they buy?
Distinction between consumer or industrial customers. Consumers buy in small quantities and do not require much service, whereas industrial customers purchase in larger quantities and require more customer service.
If the target market is concentrated in specific areas, direct selling is appropriate. If widely dispersed, intermediaries would be less expensive.
In general, a large geographic market requires more intermediaries.
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Notes:
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2. Product Factors
Product Factors That Affect
Channel Choices
Product Complexity
Product Standardization
Product Life Cycle
Product Delicacy
Product Price
Products that are more complex, customized, and expensive benefit from shorter and more direct marketing channels and through a direct sales force. Standardized products can be sold through longer distribution channels with greater numbers of intermediaries.
The choice of channel may change over the life of the product. As products become more common, producers turn from a direct channel to more alternative channels.
Perishable items and fragile products require fairly short marketing channels and a minimum amount of handling.
Chapter 13 Marketing Channels
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3. Producer Factors
Producer Factors That Affect
Channel Choices
Producer Resources
Number of Product Lines
Desire for Channel
Control
2
Producers with larger financial, managerial, and marketing resources are able to use more direct channels. These producers can maintain their own sales force, warehouse their own goods, and extend credit to customers.
Producers with several products in a related area choose channels that are more direct, and sales expenses can be spread over more products.
A producer’s desire to control pricing, positioning, brand image, and customer support may avoid channels in which discount retailers are present. Furthermore, manufacturers of upscale products may sell only in expensive stores to maintain an image of exclusivity.
Chapter 13 Marketing Channels
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Notes:
Goal #3
Identify channel relationship types roles and their unique advantages and disadvantages.
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| Benefits | Hazards | |
| Arm’s Length Relationship | Fulfills a one time or unique need; low involvement/risk | Parties unable to develop relationship; low trust level |
| Cooperative Relationship | Formal contract without capital investment/long-term commitment; “happy medium” | Some parties may need more relationship definition |
| Integrated Relationship | Closely bonded relationship; explicitly defined relationships | High capital investment; any failure could affect every channel member |
Types of Channel Relationships
Identify channel relationship types roles and their unique advantages and disadvantages.
Chapter 13 Marketing Channels
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Notes:
A marketing channel is more than a set of institutions linked by economic ties. Social relationships play an important role in building unity among channel members.
Companies may work with several different suppliers and customers, and so viewing the channel as a chain (with one company connected between two others) paints an incomplete picture. Instead, a distribution channel is more like a network than a chain.
Channel Relationships
Arm’s-length relationships can satisfy a sudden or unique need but carry a potential for opportunism.
Cooperative relationships offer balance and stability, but cannot be sustained long term; and
Integrated relationships are closely bonded and explicit but do not offer flexibility.
Identify channel relationship types roles and their unique advantages and disadvantages.
Social Influences in Channels
Managers must also be aware of the social dimensions that are constantly affecting their relationships.
Channel Power -- A channel member’s capacity to control or influence the behavior of other channel members.
Channel Control -- A situation that occurs when one marketing channel member intentionally affects another member’s behavior.
Channel Leadership -- A member of a marketing channel that exercises authority and power over the activities of other members
Partnering
Conflict
Leadership
Control
Power
Identify channel relationship types roles and their unique advantages and disadvantages.
Channel Issues
Channel Conflict
Channel Partnering
Caused by inequitable channel relationships, that is a clash of goals and methods among the members of a distribution channel
In a broad context, conflict may not be bad. If traditional members refuse to keep pace with the times, removing an outdated intermediary may reduce costs for the entire channel.
Conflict within a channel can be either horizontal or vertical. Horizontal conflict occurs among channel members at the same level, such two or more different retailers that handle the same manufacturer’s brands. Vertical conflict occurs between different levels in a marketing channel
The joint effort of all channel members to create a channel that serves customers and creates a competitive advantage
By cooperating channel members can speed up inventory re-supply, improve customer service, and reduce the total costs of the marketing channel.
Goal #4
Understand the importance of the retailer within the channel and within the national economy.
Importance of the Retailer
In early 2012, indicators estimated that approximately two-thirds of the U.S. gross domestic product comes from retail activity.
The retailing industry is one of the largest employers in the United States.
Though most retailers are quite small, a few giant organizations such as Wal-Mart dominate the retail industry.
Retailing -- All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use.
Retailing enhances the quality of our daily lives, with the millions of goods and services provided mirroring the needs and styles of U.S. society.
Retailing affects all of us directly or indirectly. The retailing industry is one of the largest employers, as shown on the next slide.
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Importance of Retailing
U.S. retailers employ nearly 15 million people
Retailers account for 10.8 percent of U.S. employment
Retailing accounts for 10 percent of all U.S. businesses
Retailing accounts for two-thirds (66%) of the U.S. GDP
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Chapter 15 Retailing
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GOAL # 5
List and identify the different classifications and types of retailers and their different operational models.
Classification of Retail Operations
Retail establishments can be classified according to
ownership,
level of service,
products assortment, and
Price (gross margin).
Retailers use the last three variables to position themselves in the competitive marketplace.
These variables can be combined in several ways to create distinctly different retail operations.
Classifying Retail Stores
Product assortment
Price – Gross Margin
Classification based on breadth and depth of product lines.
Specialty stores may carry dozens of brands, each in a large variety of shapes and sizes. On the other end of the spectrum, full-line discounters typically carry broad assortments of merchandise with limited depth.
The amount of money the retailer makes as a percentage of sales after the cost of goods sold is subtracted.
Traditional department stores and specialty stores usually charge the full “suggested retail price.” In contrast, discounters, factory outlets, and off-price retailers use low prices as a lure for shoppers.
Margins are covered in more detail in Chapter 19.
Categories of Retailers
Retail stores fall into these basic categories:
Department stores,
Specialty stores,
Supermarkets,
Drugstores,
Convenience stores,
Discount stores,
Off-price retailers,
Used goods retailers, and
In some ways, restaurants.
Because consumers demand convenience, non-store retailing is currently growing faster than in-store retailing.
List and identify the different classifications and types of retailers and their different operational models.
Exhibit 14.4: Types of Stores and Their Characteristics
Assort-
ment
Price
Gross Margin
Broad
Narrow
Broad
Med-Narrow
Medium
Med-Broad
Med-Broad
Broad
Med-Narrow
Narrow
Mod-High
Mod-High
Moderate
Mod High
Moderate
Mod Low
Mod Lo-low
Low-very low
Low
Low-High
Mod High
High
Low
Mod High
Low
Mod Low
Mod Low
Low
Low
Low-High
Type of Retailer
Specialty Store
Supermarket
Convenience Store
Drugstore
Full-line Discounter
Specialty Discounter
Warehouse Clubs
Off-price Retailer
Restaurant
Service
Level
Mod Hi-High
High
Low
Low
Low-Mod
Mod-Low
Mod-Low
Low
Low
Low-High
Department Store
Broad
Broad
Medium
Mod-High
Moderate
Moderate
Mod High
Low
Supermarket
Drugstore
Mod Hi-High
Low
Low-Mod
Department Store
How would you classify your most frequented retail outlets?
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Independent
Retailers
Chain Stores
Franchises
Owned by a single person or partnership and not part of a larger retail institution.
Owned and operated as a group by a single organization.
The right to operate a business or to sell a product.
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Classifications of Retail Ownership
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Basic Forms of Franchises
Product and Trade Name Franchising
Dealer agrees to sell in products provided by a manufacturer or wholesaler.
Business
Format
Franchising
An ongoing business relationship
between a franchiser and a
franchisee.
A franchise is a continuing relationship in which a franchiser grants to a franchisee the business rights to operate or sell a product.
The franchisor originates the trade name, product, operation methods, etc.
The franchisee pays the franchiser for the right to use its name, product, or methods.
Goal #6
Recognize the major tasks involved in developing a retail marketing strategy.
Key Tasks in Retail Marketing Strategy
Identify and select a target market
Develop the retailing mix to successfully meet the needs of the chosen target market.
Define a Target Market
Choose a Retailing Mix
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Defining a Target Market
Step 1:
Segment the Market
Demographics
Geographics
Psychographics
6
Defining a target market in retailing begins with market segmentation.
The retailing mix consists of six Ps: the four Ps of the marketing mix plus presentation and personnel.
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Notes:
Retailers develop marketing strategies based on overall goals and strategic plans.
Defining the target market begins with market segmentation.
Successful retailing is based on knowing the customer.
Target markets are defined by demographics, geographics, and psychographics.
© 2015 by Cengage Learning Inc. All rights reserved
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Choosing the Retailing Mix
STEP 2:
Choose the Retailing Mix
Product
Promotion
Personnel
Place
Price
Presentation
6
Chapter 15 Retailing
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Exhibit 14.6 The Retailing Mix
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Presentation of the Retail Store
The presentation of a retail store helps determine the store’s image and positioning in consumers’ minds. For example, positioning as an upscale store would use a lavish or sophisticated presentation.
The main element of presentation is atmosphere (the overall impression conveyed by a store’s physical layout, décor, and surroundings), with the most influential factors Employee type and density: An employee’s general characteristics such as friendly and knowledgeable, and the number of employees in the selling space.
Other influential factors include:
Merchandise type and density: The type of merchandise carried (best brands) and how it is displayed (neat uncluttered, crowded).
Fixture type and density: Elegant, trendy, uncluttered. Fixtures should be consistent with the general atmosphere.
Sound: Sound can be pleasant or unpleasant for a customer.
Odors: Smell can either stimulate or detract from sales.
Visual factors: Colors can create a mood or focus attention.
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Notes:
The presentation of a retail store helps determine the store’s image and positioning in consumers’ minds. For example, positioning as an upscale store would use a lavish or sophisticated presentation.
The main element of presentation is atmosphere (the overall impression conveyed by a store’s physical layout, décor, and surroundings), with the most influential factors shown on this slide.
Employee type and density: An employee’s general characteristics such as friendly and knowledgeable, and the number of employees in the selling space.
Merchandise type and density: The type of merchandise carried (best brands) and how it is displayed (neat uncluttered, crowded).
Fixture type and density: Elegant, trendy, uncluttered. Fixtures should be consistent with the general atmosphere.
Sound: Sound can be pleasant or unpleasant for a customer.
Odors: Smell can either stimulate or detract from sales.
Visual factors: Colors can create a mood or focus attention.
Employee type and density
Fixture type and density
Sound
Odors
Visual factors
Merchandise type and density
Presentation of the Retail Store
GOAL #7
Apply CRM and customer data in retailer decision making.
Retailing and CRM
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Data
Retailers gain insight to who purchases product
Build stronger relationships with customers
CRM Database
Notes:
Chapter 13 Marketing Channels
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Retailing and CRM
Retailers gather data through data mining, the process of discovering patterns in large data sets for the purposes of extracting knowledge and understanding human behavior, and populate databases with it.
These databases are the foundation of a CRM system that allows retailers to gain insights to people who purchase their products.
By using that information to interact with the customers on social media or Web sites, retailers can build lasting relationships with their customers.
GOAL #8
Discuss trends in retail and channel management
New Developments in Retailing
M-commerce
Purchasing goods through mobile devices.
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Online retailers offer greater variety of options for delivery, including one-use package delivery boxes.
Retailers are adopting new strategies to better serve customers.
M-Commerce enables consumers using wireless mobile devices to connect to the Internet and shop.
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Notes:
Retailers are adopting new strategies to better serve customers.
M-Commerce enables consumers using wireless mobile devices to connect to the Internet and shop.
Along with developments in m-commerce and smartphone technology, companies are starting to look into new ways to connect with their customers.
Social shopping allows multiple retailers to sell products to customers through social media sites.
Facial recognition technology allows market researchers to record consumers’ non-verbal reactions to products and advertisements. Some retailers are also using facial recognition technology to display specific advertisements and recommendations to specific customers.
Review
A _____ is a set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer.
facilitating agency or place member
marketing mix intermediary
selective distribution channel
marketing channel or channel of distribution
transportation channel or channel of movement
The major characteristic that is used to differentiate among types of intermediaries is whether they:
install exchange barriers such as location, time, and quantity
take title to the products they sell
create specialization of labor
create economies of scale
raise profit margins for independent middlemen
Review
_____ are intermediaries who facilitate the sales of a product from producer to end user by representing retailers, wholesalers, or manufacturers and providing little input as to the terms of the sale.
Agents and brokers
Marketing facilitators
Channel cooperatives
Merchant wholesalers
Channel functionaries
The three basic functions channel intermediaries perform are:
transactional, logistical, and facilitating
contacting, negotiating, and ownership
promoting, distributing, and bulk-breaking
assorting, accumulating, and allocating
financing, mediating, and storing
Review
A _____ channel is commonly used for low-cost consumer items that are frequently purchased, such as candy, toys, and magazines.
retailer
agent/broker
industrial distributor
producer
wholesaler
Nontraditional channel arrangements:
tend to make a firm’s product seem the same as the competition.
usually broaden a brand’s coverage.
can give a producer serving a niche market a way to gain market access without having to establish channel intermediaries.
are not usually useful for larger firms.
All of the above are true.
Review
Chewing gum and soft drinks are sold in grocery stores, service stations, convenience stores, drugstores, discount stores, and motel vending machines. This is a an example of a(n) _____ distribution strategy.
exclusive
reciprocal
selective
horizontal
intensive
_____ distribution is achieved by screening dealers to eliminate all but a few in any single geographic area. Shopping goods and some specialty products that consumers are willing to search for are sold this way.
Intensive
Selective
Exclusive
Dual
Controlled
Review
Which level of distribution intensity is the most restrictive and entails establishing only one or a few dealers within a specific geographic area?
Selective
Intensive
Exclusive
Dual
Premium
This summer, college student Brandon is planning on selling kites at Panama City Beach. He has found some suppliers and has preordered all of the kites he thinks he can sell this summer. What type of a distribution channel relationship does Brandon have with his suppliers?
Arm’s length
Functional
Cooperative
Hierarchical
Integrated
Review
The capacity of a particular marketing channel member to control or influence the behavior of other channel members is known as:
channel power.
channel conflict.
channel leader.
channel dominance.
channel inversion.
You are responsible for physical distribution of your company’s service and should focus on:
ensuring the intangibility of the service so that physical distribution becomes a less important factor.
minimizing wait times, managing service capacity, improving service delivery, and establishing channel-wide network coherence.
making sure production and consumption are simultaneous.
setting quality standards, choosing faster transportation modes, and using safety stock.
customer-oriented order processing and inventory control.
Review
_____ is defined as all activities directly related to the sale of goods and services to the ultimate consumer for personal, nonbusiness use or consumption.
Wholesaling
Business
Franchising
Distribution
Retailing
Which type of retail ownership is owned and operated by an individual but is licensed by a larger supporting organization?
Independent retailer
Chain store
Franchise
Cooperative
Secondary retailer
Review
Housing several departments under one roof, a _____ carries a wide variety of shopping and specialty goods, including apparel, sporting goods, cosmetics, housewares, electronics, and sometimes furniture.
supermarket
specialty store
convenience store
super club
department store
_____ are retailer channels that compete on the basis of low prices, high turnover, and high volume.
Convenience outlets
Discount stores
General stores
Department stores
Specialty stores
Review
The first task of developing a retail strategy is to:
create a buying organization.
decide what to buy.
define the target market.
create a promotional strategy.
define the pricing policies.
All of the following are factors in creating a store’s atmosphere EXCEPT:
employee type and density.
fixture type and density.
sound.
price.
odors.
Review
One of the new developments in retailing is m-commerce. The “m” in m-commerce stands for:
motivated
multimedia
marketing
managed
mobile
The _____ of retail stores is a key factor in their success; the goal is to use all space in the store effectively, including aisles, displays, and even non-selling areas.
merchandise density
layout
target strategy
merchandise mix
promotional strategy
Essay Review
Intermediaries must perform three basic functions. Name these functions and describe the activities involved in each function. (See Section 14-1)
Retailing opportunities can take place without customers shopping at a store. Name and briefly discuss four forms of non-store retailing. (See section 14-5)
A specialty store is not only a type of store but also is a method of retail operations. Describe the specialty store strategy. Then name two examples of specialty stores. (See section 14-5)
