Marketing 5

BBA 3201, Principles of Marketing 1

Course Learning Outcomes for Unit V Upon completion of this unit, students should be able to:

4. Explain how the marketing mix is used to reach the target market. 4.1 Analyze whether a company maintains a competitive advantage in

reaching its target market with respect to its distribution (place) strategies.

8. Examine distribution channels and the significance of supply chain

management from the standpoint of marketing. 8.1 Explain the distribution channels of a company. 8.2 Describe the benefits of a company using specified physical facilities.

9. Discuss the significance of supply chain and logistics management in

marketing. 9.1 Explain why a company uses certain intermediaries within its

distribution channels.

Unit Lesson Place refers to the distribution of products and services to the consumer in the right quantity at the right location, with the right place being determined by the target market. One of the first decisions made by marketers in respect to place is whether they will be utilizing a direct or indirect channel of distribution. The indirect system assumes the company will utilize a collection of intermediaries, including wholesalers, distributors, retailers, and others that provide a function in the distribution of the product/service. These functions might include information that brings the buyers and sellers together. Another function might be to decrease the discrepancies of quantity or assortment between what the company needs to produce in order to make money and what the target market is actually demanding. The direct system suggests that the company distributes the product/service directly to the consumer maintaining a higher level of control with respect to the distribution process. Additionally, there tends to be lower costs. The marketer needs to think through whether the added control and lower costs are advantageous, or whether the services provided by the intermediaries are necessary to maintain customer satisfaction. With the increased use of the internet for both information as well as online buying, the popularity of utilizing the direct system has increased significantly. Many times companies utilize multiple channels of distribution offering consumers the ability to buy directly as well as indirectly through various intermediaries. This obviously increases the options for the consumer, but sometimes creates channel conflict amongst the participants, which can result in the erosion of the brand. The management of the channel of distribution can be achieved by creating an atmosphere of teammanship amongst intermediaries which provides matching objectives for all involved. Financial incentives tied to performance results can also be used to encourage a culture of working together. Companies utilize various strategies

Reading Assignment Chapter 10: Place and Development of Channel Systems Chapter 11: Distribution Customer Service and Logistics Chapter 12: Retailers, Wholesalers, and Their Strategy Planning

Suggested Reading See information below.

UNIT V STUDY GUIDE

Place & Distribution Channel

BBA 3201, Principles of Marketing 2

when analyzing the type of market exposure that is preferred by their target market. The ideal exposure will have the product available widely enough to satisfy the target customer, but not too much, which would ultimately increase marketing costs through inefficiencies. Another way to look at intensive distribution is to “sell it where they will buy it.” Intensive distribution suggests that a company is distributing the product everywhere, providing for local distribution to the entire population. Basically, these are things like convenience products that the consumer is not willing to travel for. Selective distribution suggests that a company is only selling through intermediaries that will give the product/service special attention. An example of this might be selling snowmobiles in the northern states of the United States instead of the warmer climates of the south. Finally, exclusive distribution provides for selling only in certain areas of the country. This would suggest that the target market is willing to travel significant distances to make these purchases. A good example of this might be the sale of vintage, specialty vehicles. Logistics is another element of the distribution segment of marketing. This involves the transporting, storing, and handling of goods that will align with the customer needs. Just-in-time is a production system that suggests that the product is only produced as needed. Additionally, all the raw materials, work in progress, and inventory is kept to a minimum thus reducing production costs. The overall concept is that the company orders each of the raw materials only as needed as the product travels through the production process. The final product is ready just as the product is needed by the consumer (“just-in-time”). As the advantages of lower costs associated with not carrying additional materials and inventory are seen, one needs to also realize that there is little room for error or faulty products. Each intermediary is very reliant on the next, which tends towards a reduction in channel conflict. Retailing is a continuously changing environment in today’s world. History takes us to the traditional small business owner, suburban malls, mega malls, and to the entertainment shopping districts that are currently popular. The wheel of retailing is a theoretical concept explaining how retailers develop and change over time. It begins with the new retailers entering the market as low status, low margin, low price operators. As these operators mature, they develop into the more conventional retailer that offers additional services resulting in higher operating costs and higher prices. As this happens, new retailers with the low prices enter providing significant challenges to the more developed retailers. This process continues on and is called the wheel of retailing. Retailers need to develop a strategy utilizing the marketing mix (four Ps). With respect to product, the retailer decides the product selection, after sale service, and any other special services that they will offer. Thinking about place, they decide whether to build physical stores, the number and locations, store size, layout, and atmosphere. Atmospherics and themes are used quite extensively to attract customers to the store, entertain them, and ensure that they will remain in the store for a longer period of time. Techniques include the use of store themes, music, decorations, layout of store, outside of store, and even scents. For instance, the famous Hollister targets teenagers with its beach themed ambience, music, and distinctive scent throughout. Think through how other stores use similar themes to make their target market feel more comfortable with their surroundings. With respect to price, the marketer must decide the overall pricing strategy, the discounts offered, and if charge cards will be used. Finally, with respect to promotion, the retailer decides on the use of advertising, publicity, salespeople, and other types of (Perreault, Cannon, & McCarthy, 2015). Overall, place develops the right distribution strategies for the target market. This involves not only the channel of distribution but also the use of wholesalers, distributors, retailers, and a host of other intermediaries. From a broad sense, maintaining a competitive advantage with respect to place suggests that the company is able to deliver the product more efficiently than their competitors.

BBA 3201, Principles of Marketing 3

Reference Perreault, W., Jr., Cannon, J., & McCarthy, J. (2015). Essentials of marketing: A

marketing strategy planning approach (14th ed.). New York, NY: McGraw-Hill.

Suggested Reading Click here to access a PowerPoint presentation of the Chapter 10 material. Click here to access a PDF version of this presentation. Click here to access a PowerPoint presentation of the Chapter 11 material. Click here to access a PDF version of this presentation. Click here to access a PowerPoint presentation of the Chapter 12 material. Click here to access a PDF version of this presentation.