Chapter 13 Distributing and Promoting Products PDF

Chapter 13 Distributing and...

Chapter 13 Distributing and Promoting Products © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  LEARNING OBJECTIVES (slide 1 of 2) 13-1 Identify the various distribution channels and explain the concept of market coverage. 13-2 Understand how supply-chain management facilitates partnering among channel members. 13-3 Discuss the need for wholesalers, describe the services they provide, and identify the major types of wholesalers. 13-4 Distinguish among the major types of retailers and shopping centres. 13-5 Explain the five most important physical distribution activities. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  LEARNING OBJECTIVES (slide 2 of 2) 13-6 Explain how integrated marketing communications works to have the maximum impact on the customer. 13-7 Understand the basic elements of the promotion mix. 13-8 Explain the three types of advertising and describe the major steps of developing an advertising campaign. 13-9 Recognise the kinds of salespersons, the steps in the personal-selling process, and the major sales management tasks. 13-10 Describe sales promotion objectives and methods. 13-11 Understand the types and uses of public relations. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Distribution Channels and Market Coverage  Distribution channel (or marketing channel) – a sequence of marketing organisations that directs a product from the producer to the ultimate user  Middleman (or marketing intermediary) – a marketing organisation that links a producer and user within a marketing channel Merchant intermediary – a middleman that actually takes title to products by buying them Functional intermediary – a middleman that helps in the transfer of ownership of products but does not take title to the products © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13-1 Distribution Channels © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Commonly Used Distribution Channels (slide 1 of 3) Producer to Consumer  Includes no marketing intermediaries Example: buying a laptop directly from Apple’s website Producer to Retailer to Consumer  Retailer – a intermediary that buys from producers or other middlemen and sells to consumers  This channel is used most often for products that are bulky and for which additional handling would increase selling costs. Examples: cars, furniture © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Commonly Used Distribution Channels (slide 2 of 3) Producer to Wholesaler to Retailer to Consumer  Wholesaler – a intermediary that sells products to other businesses  A producer uses wholesalers when its products are carried by so many retailers that the producer cannot manage and distribute all of them. Example: chewing gum and soft drink manufacturers Producer to Agent to Wholesaler to Retailer to Consumer  Agents – functional middlemen that do not take title to products and that are compensated by commissions paid by producers  This channel is used for seasonal products (such as Christmas decorations) and by producers that do not have in-house sales forces. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Commonly Used Distribution Channels (slide 3 of 3) Producer to Organisational Buyer  The manufacturer’s own sales force sells directly to organisational buyers, or business users.  Heavy machinery and airplanes usually are distributed in this way. Producer to Agent Intermediary to Organisational Buyer  Manufacturers use this channel to distribute such items as operating supplies, accessory equipment, small tools and standardised parts. Using Multiple Channels  Often, a manufacturer uses different distribution channels to reach different market segments.  Many retailers now employ multiple distribution channels that complement their brick-and-mortar stores with websites and apps where consumers can research products, read other buyers’ reviews and make actual purchases. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Level of Market Coverage  Intensive distribution – the use of all available outlets for a product Many convenience goods, including sweets, gum, and soft drinks, are distributed intensively.  Selective distribution – the use of only a portion of the available outlets for a product in each geographic area Manufacturers of goods such as furniture, home appliances and clothing typically prefer selective distribution. o Example: Falke brand socks are distributed through retailers such as Cape Union Mart.  Exclusive distribution – the use of only a single retail outlet for a product in a large geographic area Exclusive distribution usually is limited to prestigious products. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Partnering Through Supply-Chain Management  Supply-chain management – long-term partnership among channel members working together to create a distribution system that reduces inefficiencies, costs and redundancies while creating a competitive advantage and satisfying customers  Supply-chain management requires cooperation throughout the entire marketing channel, including manufacturing, research, sales, advertising and shipping.  Supply chains focus not only on producers, wholesalers, retailers and customers, but also on component-parts suppliers, shipping companies, communication companies, and other organisations that participate in product distribution.  Category management – a practice in which the retailer asks a supplier in a particular category how to stock the shelves  Technology has enhanced the implementation of supply-chain management significantly. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Wholesalers Provide Services to Retailers and Manufacturers  Wholesalers help retailers by: Buying in large quantities and selling to retailers in smaller quantities, and delivering goods to retailers Stocking in one place the variety of goods that retailers otherwise would have to buy from many producers Providing assistance in other vital areas, including promotion, market information and financial aid  Wholesalers help manufacturers by: Performing functions similar to those provided to retailers Providing a sales force, reducing inventory costs, assuming credit risks and furnishing market information © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Wholesalers (slide 1 of 3) Merchant Wholesalers  Merchant wholesaler – an intermediary that purchases goods in large quantities and sells them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial users  Merchant wholesalers have the following characteristics: They usually operate one or more warehouses at which they receive, take title to, and store goods. Most merchant wholesalers are businesses composed of salespeople, order takers, receiving and shipping clerks, inventory managers and office personnel. The successful merchant wholesaler must analyse available products and market needs, as well as be able to adapt the type, variety and quality of its products to changing market conditions. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Wholesalers (slide 2 of 3) Merchant Wholesalers (cont.)  Merchant wholesalers may be classified as full- service or limited-service wholesalers depending on the number of services they provide. Full-service wholesaler – an intermediary that performs the entire range of wholesaler functions o Three types of full-service wholesalers: 1. General-merchandise wholesaler – a middleman that deals in a wide variety of products 2. Limited-line wholesaler – a middleman that stocks only a few product lines but carries numerous product items within each line 3. Specialty-line wholesaler – a middleman that carries a select group of products within a single line © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Wholesalers (slide 3 of 3) Agents and Brokers  Agent – a middleman that expedites exchanges, represents a buyer or a seller, and often is hired permanently on a commission basis  Broker – an intermediary that specialises in a particular commodity, represents either a buyer or a seller, and is likely to be hired on a temporary basis © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TABLE 13-1 The Five Largest South African Retailers © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Retail Stores (slide 1 of 3)  One way to classify retailers is by the number of stores owned and operated by the business. Independent retailer – a business that operates only one retail outlet Chain retailer – a company that operates more than one retail outlet  Another way to classify retail stores is by store size and the kind and number of products carried. Department store – a retail store that (1) employs 25 or more persons and (2) sells at least home furnishings, appliances, family apparel, and household linens and dry goods, each in a different part of the store o Examples: Woolworths Discount store – a self-service general-merchandise outlet that sells products at lower-than-usual prices o Examples: The Crazy Store © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Retail Stores (slide 2 of 3) Warehouse showroom – a retail facility in a large, low-cost building with a large on-premises inventory and minimal service o Example: IKEA Convenience store – a small food store that sells a limited variety of products but remains open well beyond normal business hours o Examples: 7-Eleven, BP Express Supermarket – a large self-service store that sells primarily food and household products o Examples: Pick n Pay, Checkers Superstore – a large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product lines o Examples: Pick n Pay Hypermarket, Checkers Hyper © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Retail Stores (slide 3 of 3) Warehouse club – a large-scale members-only establishment that combines features of cash-and-carry wholesaling with discount retailing o Examples: Makro, AllSale Club Traditional specialty store – a store that carries a narrow product mix with deep product lines o Examples: Gap, The Body Shop Off-price retailer – a store that buys manufacturers’ seconds, overruns, returns and off-season merchandise for resale to consumers at deep discounts o Example: Discount My Fashion Factory shops – retail stores that are owned by manufacturers and sell directly to the public Category killer – a very large specialty store that concentrates on a single product line and competes on the basis of low prices and product availability o Examples: Best Buy, Toys “R” Us © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Non-store Selling (slide 1 of 2)  Non-store retailing – a type of retailing whereby consumers purchase products without visiting a store  Nonstore retailers use direct selling, direct marketing and vending machines. Direct Selling  Direct selling – the marketing of products to customers through face-to- face sales presentations at home or in the workplace  Direct selling sometimes involves the ‘party plan’, which requires effective salespeople who identify potential hosts and provide encouragement and incentives for them to organise a gathering in their home or workplace Direct Marketing  Direct marketing – the use of the telephone, internet and non-personal media to introduce products to customers, who then can purchase them via mail, telephone, or the internet © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Non-store Selling (slide 2 of 2) Direct Marketing (cont.)  Forms of direct marketing: Catalogue marketing – a type of marketing in which an organisation provides a catalog from which customers make selections and place orders by mail, telephone, or the internet Direct-response marketing – a type of marketing in which a retailer advertises a product and makes it available through mail, telephone, or online orders Telemarketing – the performance of marketing-related activities by telephone Television home shopping – a form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card Online retailing– retailing that makes products available to buyers through computer connections o Automatic vending – the use of machines to dispense products © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Shopping Centres  Planned shopping centre – a self-contained retail facility constructed by independent owners and consisting of various stores Types of planned shopping centres: o Lifestyle shopping centre – an open-air-environment shopping centre with upscale chain specialty stores o Neighborhood shopping centre – a planned shopping centre consisting of several small convenience and specialty stores o Community shopping centre – a planned shopping centre that includes one or two department stores and some specialty stores, along with convenience stores o Regional shopping centre – a planned shopping centre containing large department stores, numerous specialty stores, restaurants, movie theatres, and sometimes even hotels © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Physical Distribution  Physical distribution – all those activities concerned with the efficient movement of products from the producer to the ultimate user  It combines several interrelated business functions, the most important of which are: Inventory management Order processing Warehousing Materials handling Transportation © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Inventory Management  Inventory management – the process of managing inventories in such a way as to minimise inventory costs, including both holding costs and potential stockout costs Holding costs – the expenses of storing products until they are purchased or shipped to customers o Include: - The money invested in inventory - The cost of storage space - Insurance costs - Inventory taxes Stockout costs – sales lost when items are not in inventory © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Order Processing  Order processing – activities involved in receiving and filling customers’ purchase orders © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Warehousing  Warehousing – the set of activities involved in receiving and storing goods and preparing them for reshipment  Warehousing includes the following activities: Receiving goods Identifying goods Sorting goods Dispatching goods to storage Holding goods Recalling, picking and assembling goods Dispatching shipments © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Materials Handling  Materials handling – the physical handling of goods, in warehouses as well as during transportation  Unit loading – a method of materials handling in which several smaller cartons, barrels, or boxes are combined into a single standard-size load that can be moved efficiently by forklift, conveyer, or truck © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Transportation  Transportation – the shipment of products to customers  Carrier – a business that offers transportation services Types of carriers: o Common carrier – a transportation business whose services are available to all shippers - Examples: railroads, airlines o Contract carrier – do not serve the general public and the number of businesses they can handle at a time is limited by law o Private carrier – owned and operated by the shipper © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TABLE 13-2 Characteristics of Transportation Modes © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  What Is Integrated Marketing Communications?  Integrated marketing communications – coordination of promotion efforts to ensure maximum informational and persuasive impact on customers © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  The Promotion Mix: An Overview  Promotion – communication about an organisation and its products that is intended to inform, persuade, or remind target-market members  Promotion mix – the particular combination of promotion methods a business uses to reach a target market Four elements of the promotion mix: 1. Advertising – a paid non-personal message communicated to a select audience through a mass medium 2. Personal selling – personal communication aimed at informing customers and persuading them to buy a business’s products 3. Sales promotion – the use of activities or materials as direct inducements to customers or salespersons 4. Public relations – communication activities used to create and maintain favourable relationships between an organisation and various public groups, both internal and external © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13-2 Possible Elements of a Promotion Mix © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Advertising by Purpose  Primary-demand advertising – advertising whose purpose is to increase the demand for all brands of a product within a specific industry Example: the South African Sugar Association  Selective-demand (or brand) advertising – advertising that is used to sell a particular brand of product It is by far the most common type of advertising, and it accounts for the majority of advertising expenditures.  Institutional advertising – advertising designed to enhance a business’s image or reputation Example: Telkom sponsored the South African Olympic team in 2016 and ran advertisements. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Major Steps in Developing an Advertising Campaign 1. Identify and analyse the target audience 2. Define the advertising objectives 3. Create the advertising platform An advertising platform includes the important selling points, or features, that an advertiser will incorporate into the advertising campaign. 4. Determine the advertising appropriation The advertising appropriation is the total amount of money designated for advertising in a given time period. 5. Develop the media plan A media plan outlines a timetable for advertisements and which media will be used. 6. Create the advertising message 7. Execute the campaign 8. Evaluate advertising effectiveness © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TABLE 13-3 Advantages and Disadvantages of Major Media Classes (slide 1 of 3) © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TABLE 13-3 Advantages and Disadvantages of Major Media Classes (slide 2 of 3) © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TABLE 13-3 Advantages and Disadvantages of Major Media Classes (slide 3 of 3) © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TABLE 13-4 Most Effective Advertisers © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Advertising Agencies  Advertising agency – an independent business that plans, produces, and places advertising for its clients © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Social and Legal Considerations in Advertising  Critics of advertising have two main complaints – that it is wasteful and that it can be deceptive. Although advertising (like any other activity) can be performed inefficiently, evidence shows that it is not wasteful.  Advertising is the most effective and least expensive means of communicating product information to a large number of individuals and organisations.  Advertising encourages competition. It thus leads to the development of new and improved products, wider product choices and lower prices.  Advertising revenues support mass-communication media – newspapers, magazines, radio and television, effectively paying for news coverage and entertainment programming.  Advertising provides job opportunities in fields ranging from sales to film production. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Personal Selling  Personal selling is the most adaptable of all promotional methods because the person presenting the message can modify it to suit the individual buyer.  However, it is also the most expensive method because it involves salespeople communicating with customers one at a time or in small groups. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Kinds of Salespersons (slide 1 of 2)  Order getter – a salesperson who is responsible for selling a business’s products to new customers and increasing sales to present customers (known as creative selling)  Order taker – a salesperson who handles repeat sales in ways that maintain positive relationships with customers © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Kinds of Salespersons (slide 2 of 2)  Sales support personnel – employees who aid in selling but are more involved in locating prospects, educating customers, building goodwill for the business and providing follow-up service Three kinds of sales support personnel: 1. Missionary salesperson – a salesperson, generally employed by a manufacturer, who visits retailers to persuade them to buy the manufacturer’s products 2. Trade salesperson – a salesperson, generally employed by a food producer or processor, who assists customers in promoting products, especially in retail stores 3. Technical salesperson – a salesperson who assists a company’s current customers in technical matters © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13-3 The Six Steps of the Personal-Selling Process © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Major Sales Management Tasks  Sales managers must: Set sales objectives in concrete, quantifiable terms and specify a specific period of time and geographic area Adjust the size of the sales force to meet changes in the business’s marketing plan and the marketing environment Attract and hire effective salespersons Develop a training programme and decide where, when, how, and for whom to conduct the training Formulate a fair and adequate compensation plan to retain qualified employees Motivate salespersons to keep their productivity high Define sales territories and determine scheduling and routing of the sales force Evaluate the operation holistically, through sales reports, communications with customers and invoices © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Sales Promotion Objectives  Marketers use sales promotion activities and materials for a number of purposes, including: 1. To attract new customers 2. To encourage trial of a new product 3. To invigorate the sales of a mature brand 4. To boost sales to current customers 5. To reinforce advertising 6. To increase traffic in retail stores 7. To smooth out customer demand 8. To build up reseller inventories 9. To neutralise the competition’s promotional efforts 10. To increase the attractiveness of shelf placement and displays. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Sales Promotion Methods  Most sales promotion methods can be classified as promotional techniques for either consumer sales or trade sales. Consumer sales promotion method – a sales promotion method designed to attract consumers to particular retail stores and to motivate them to purchase certain new or established products Trade sales promotion method – a sales promotion method designed to encourage wholesalers and retailers to stock and actively promote a manufacturer’s product © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of Sales Promotion Methods (slide 1 of 2)  Several factors affect a marketer’s choice of sales promotion method, including: The objectives of the promotional effort Product characteristics o Size, weight, cost, durability, uses, features and hazards Target-market profiles o Age, gender, income, location, density, usage rate and buying patterns Distribution channels and availability of appropriate resellers The competitive and regulatory forces in the environment © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Selection of Sales Promotion Methods (slide 2 of 2)  Rebate – a return of part of the purchase price of a product  Coupon – reduces the retail price of a particular item by a stated amount at the time of purchase  Sample – a free product given to customers to encourage trial and purchase  Premium – a gift that a producer offers a customer in return for buying its product  Frequent-user incentive – a programme developed to reward customers who engage in repeat (frequent) purchases  Point-of-purchase display – promotional material placed within a retail store  Trade show – an industry-wide exhibit at which many sellers display their products  Buying allowance – a temporary price reduction to resellers for purchasing specific quantities of a product  Cooperative advertising – an arrangement whereby a manufacturer agrees to pay a certain amount of a retailer’s media cost for advertising the manufacturer’s product © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Types of Public-Relations Tools  Written materials Brochures, newsletters, company magazines, annual reports  Corporate-identity materials  Speeches  Event sponsorship  Publicity – communication in news-story form about an organisation, its products, or both News release – a typed page of about 300 words provided by an organisation to the media as a form of publicity Feature article – a piece (of up to 3 000 words) prepared by an organisation for inclusion in a particular publication Captioned photograph – a picture accompanied by a brief explanation Press conference – a meeting at which invited media personnel hear important news announcements and receive supplementary textual materials and photographs © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Uses of Public Relations  Public relations focuses on enhancing the reputation of the total organisation by increasing public awareness of a company’s products, brands, or activities and by fostering desirable company images, such as that of innovativeness, dependability, or social responsibility.  By getting the media to report on a business’s accomplishments, public relations helps a company to maintain public visibility.  Effective management of public-relations efforts also can reduce the amount of unfavourable coverage surrounding negative events. © 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.