marketing principles

BUS106 Marketing

Principles Marketing Mix: Place

Lecture 8

Copyright Notice

This Topic’s Big Idea

“A marketing channel…. is a group of

organisations that agree to distribute a

product.”

Learning Objectives

1. Explain marketing channels and the need for intermediaries.

2. Identify issues that influence channel strategy.

3. Discuss logistics and supply chain management and their evolution into distribution practice.

4. Discuss new technology and emerging trends in supply chain management.

Marketing Channels

Marketing channel

(channel of distribution)

A set of interdependent

organisations that facilitate

the transfer of ownership as

products move from

producer to business user

or consumer

Channel members

All parties in the marketing

channel who 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

How marketing channels reduce

the number of required transactions

Channel Intermediaries

Retailer

A channel intermediary

that sells mainly to

consumers

Merchant

wholesaler

Buys goods from

manufacturers and

resells them to

businesses, government

agencies and other

wholesalers or retailers;

and that receives and

takes title to goods,

stores them in its own

warehouse and later

ships them

Agents and

brokers

Wholesaling

intermediaries who

facilitate the sale of a

product to end user by

representing retailers,

wholesalers or

manufacturers

Channel Intermediaries

Channel functions performed

by intermediaries

Contacting/promotion

Negotiating

Risk-taking

Transactional

functions

Channel functions performed

by intermediaries

Logistical

functions

Physically distributing

Storing

Sorting

Channel functions performed

by intermediaries

Facilitating

function

Researching

Financing

Marketing Channels for

Consumer Products

Direct Marketing

Tupperware has long

used direct marketing

as its primary method of

driving sales.

Watch Me: https://www.youtube.com/watch?v

=p8a7iavx3OY

Channels for

Business and Industrial Products

Retail Channels

The Internet has had a drastic impact on

retail channels in many industries, including

the car industry.

Would you buy a car via the Internet?

Alternative

Channel Arrangements

Alternative

Channel Arrangements

Walt Disney Company utilises dual

distribution when it releases first-run

animated films to movie theatres and then

releases a sequel directly to the home-video

market.

Factors Affecting

Channel Choice

• Market factors

– Who are the potential customers?

– What/where/when/how do they buy?

• Product factors

– Standardised vs. customised issues

– product’s life cycle

– delicacy (perishable, fragile)

• Producer factors

– Direct distribution and control

Levels of

Distribution Intensity

Selective Distribution

Hugo Boss clothing is sold only in select

retail outlets. Because only a few retailers

are chosen, the consumer must seek out the

product.

Channel Partnering

• Speed up stock replenishment

• Improve customer service

• Reduction of channel’s total costs

The joint effort of all channel members to

create a supply chain that serves customers

and creates a competitive advantage

Types of channel relationships

Channel Power, Control and

Leadership

Channel power

The capacity of a

particular marketing

channel member to

control or influence

the behaviour of

other channel

members

Channel control

A situation that

occurs when one

marketing channel

member intentionally

affects another

member’s behaviour

Channel leader

(captain)

One member of a

marketing channel

who exercises

authority and power

over the activities of

other members

Channel Conflict

A clash of goals and methods between distribution channel members

Horizontal conflict: occurs among channel members on the same level

Vertical conflict: occurs among channel members at different levels

Supply chains and

logistics management

Logistics - The process of strategically managing the efficient flow and storage of raw materials, in- process stock and finished goods from point of origin to point of consumption

Supply chain - The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function

Supply chain management - A management system that coordinates all of the activities performed by supply chain members from source, to the point of consumption, which results in enhanced customer and economic value

Logistics Service

Interrelated activities performed by a

member of the supply chain to ensure that

the right product is in the right place at the

right time

• Customers want…

– Availability, timeliness, quality, undamaged

goods, minimal order effort, consistent

delivery…balanced with costs

Integrated functions

of the Supply Chain

Sourcing & Procurement

Role of purchasing departments:

• Plan purchasing strategies

• Develop specifications

• Select suppliers

• Negotiate price

• Negotiate service levels

Production Scheduling

Mass customisation (build-to-order) - Production method whereby products are not made until an order is placed by the customer; products are made according to customer specifications

Just-in-time production - A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line

Benefits: Reduces raw material inventories, shortens lead times; creates better supplier relationships; reduces production and storeroom costs; reduces paperwork

Order Processing

Order processing system – a system whereby orders are entered into the supply chain and filled

Electronic data interchange - information technology that replaces paper documents, which accompany business transactions

• Includes: purchase orders and invoices, with electronic transmission of the needed information to reduce stock levels, improve cash flow, streamline operations, and increase the speed and accuracy of information transmission

Inventory Control

Inventory control system - A method of developing and maintaining an adequate assortment of materials or products, to meet customer demand

Materials requirement planning (MRP) - Stock control system that manages the replenishment of raw materials, supplies and components from the supplier to the manufacturer

Distribution resource planning (DRP) - Stock control system that manages the replenishment of goods from the manufacturer to the final consumer

Warehouse &

Materials Handling

• Method of moving stock into, within and

out of the warehouse

• Functions of materials handling:

– Receive goods into warehouse

– Identify, sort and label goods

– Dispatch the goods to temporary storage

– Recall, select or pick the goods for shipment

Transportation

Criteria for transportation mode choice:

Relative Cost - the total amount a specific carrier charges to move the product from the point of origin to the destination

Transit time - the total time a carrier has possession of goods, including the time required for pick-up and delivery, handling and movement between the point of origin and the destination

Reliability - the consistency with which the carrier delivers goods on time and in acceptable condition

Capability - the ability of the carrier to provide the appropriate equipment and conditions for moving specific kinds of goods, such as those that must be transported in a controlled environment (for example, under refrigeration).

Accessibility - the carrier’s ability to move goods over a specific route or network.

Traceability - the relative ease with which a shipment can be located and transferred

Trends in Logistics

Advances in computer technology

Outsourcing of logistics functions

– Use of an independent third party

Electronic distribution

• Over traditional forms such as fibre-optic cable or through satellite transmission of electronic signals

Green supply chain management

• Involves the integration of environmentally conscious thinking into all phases of key supply chain management processes

Marketing Channels and Logistics

Converse Automated Distribution Center

Watch Me: https://www.youtube.com/watch?v=q1-mzwOjkaU

Logo adopted from: Converse Logo, 2016, viewed 25th of October 2016 http://logos-download.com/650-converse-logo-

download.html

Next Week

Marketing Mix: Promotion and Integrated

Marketing Communication.