Distribution Strategies PDF

Distribution Strategies Channel members/partners are the firms a company partners with to actively promote and sell a product to users as it travels through its marketing channel. -​ Many other products and services pass through multiple organizations before they get to you. These organiza...

Distribution Strategies Channel members/partners are the firms a company partners with to actively promote and sell a product to users as it travels through its marketing channel. -​ Many other products and services pass through multiple organizations before they get to you. These organizations are called intermediaries (middlemen or resellers). Supply Chain - All organizations that figure into any part of the process of producing, promoting, and delivering an offering to its user. -​ The supply chain includes producers of the raw materials. -​ A product supply chain also includes transportation companies such as railroads that help physically move the product. -​ Companies that build websites for the other companies. Supply Chain Management - Firrmsare constantly monitoring their supply chains and tinkering with them so they're as efficient as possible. Types of Channel Partners -​ Wholesalers -​ Retailers -​ Agents/Brokers Wholesalers Wholesalers obtain large amounts of products from producers, store them, and break them down into cases and smaller units that are more convenient for retailers to buy. This process is called “Breaking bulk.” Types: Merchant wholesalers, brokers and manufacturing agents. Merchant Wholesalers (distributors, dealers, jobbers) They are wholesalers that take title to the goods. Full-service wholesalers perform a broad range of services for their customers, such as stocking inventories, operating warehouses, supplying credit to buyers, employing salespeople, and delivering goods to customers. Limited-service Wholesalers They offer fewer services to their customers but lower prices. Drop Shippers A type of limited service wholesaler. They earn a commission by finding sellers. And passing their orders along to procedures, who then ship them to the sellers. Mail-order Wholesalers They sell their products using catalogues instead of sales forces and then ship the ​ Products to buyers. Truck Jobbers (Truck Wholesalers) Actually store products, which are often highly perishable on their trucks (fish etc) Rack Jobbers They sell specialty products, such as books, hosiery, and magazines that they display on their own racks in stores. Retailers They buy products from wholesalers, agents, or distributors and then sell them to consumers. Retailers vary by the types of products they sell, their sizes, the prices they charge, the level of service they provide consumers, and the convenience or speed they offer. Supermarkets (Grocery Stores) They are self-service retailers that provide a full range of food products to consumers, as well as some household products. Convenience Store They are miniature supermarkets Drugstores They specialize in selling over-the-counter medications, prescriptions, and health and beauty products. Category Killer Sells a high volume of a particular type of product and, in doing so, dominates the competition, or category. PetSmart and Best Buy are examples. Specialty Stores They sell a certain type of product, but they usually carry a deep line of it. Department Stores By contrast, carry a wide array of household and personal types of merchandise such as clothing and jewelry. Superstores They are oversized department stores that carry a broad array of general merchandise as well as groceries. Warehouse Clubs They are supercenters that sell products at a discount. Online Retailing They are selling to consumers via television, catalogues, and vending machines; and telemarketing and examples of nonstore retailing. Outlet Stores They were a new phenomenon at the end of the last century. They sell products that couldn't be sold through normal retailing channels due to mistakes in manufacturing. Used Retailers They sell used products Brokers -​ Brokers or agents don't purchase or take title to the products they sell. -​ Their role is limited to negotiating sales contracts for producers. -​ Clothing, furniture, food, and commodities such as lumber and steel are often sold by brokers. -​ Generally paid a commission for what they sell and are assigned to different geographical territories by the producers with whom they work. -​ Because they have excellent inductee contacts, brokers and agents are “go-to” resources for both consumers and companies trying to buy and sell products. -​ They are most commonly found in real estate. Direct Channel and Indirect Channel -​ Direct Channel: The shortest marketing channel which consists of just two parties, a producer and a consumer. -​ Indirect Channel: A channel that includes one or more intermediaries. For example, a wholesaler, distributor, broker or agent, is an indirect channel. B2C (Business to consumer) B2B (Business to Business) Cutting out the Middleman Large retailers, including Target and Walmart, sometimes bypass the middleman. They buy their products directly from manufacturers and then store and distribute them to their retail outlets. Disintermediation The process of cutting out the middleman/intermediaries, often so products can be sold for cheaper. International Marketing Channels -​ Consumer and business markets in North America are well-developed and growing slowly. -​ The growth opportunities abound in other countries. -​ Some third-world countries lack good intermediary systems. In these countries, firms are on their own in terms of selling and distributing products downstream to users. -​ Other countries have elaborate marketing channels that must be navigated. -​ Corruption and unstable;e governments also make it difficult to do business in some countries. Disseminate Marketing Communications and Promote Brands -​ Wholesalers, distributors, retailers, and consumers need to be informed, via marketing communications, that an offering exists and that there is a good reason to buy it. -​ Sometimes, a push strategy is used to help marketing channels accomplish this. Push/Pull Strategy -​ A push strategy is one in which a manufacturer convinces wholesalers, distributors, or retailers to sell its products. -​ A pull strategy focuses on creating demand for a product among consumers so that businesses agree to sell the product. Sorting and Regrouping Products -​ Many businesses do not want to receive huge quantities of a product. -​ One of the functions of wholesalers and distributors is to break down large quantities of products into smaller units to provide an assortment of different products to businesses. Storing and Managing Inventory -​ If a channel member has run out of a product when a customer wants to buy it, the result is often a lost sale. -​ That is why most channel members stock, or “carry” reserve inventory. -​ Storing products is not free. Distributing Products -​ Physical goods that travel within a channel need to be moved from one member to another and sometimes back again. -​ Some large wholesalers, distributors, and retailers own their fleets of trucks for this purpose. -​ In other cases, they hire third-party transportation providers, trucking companies, railroads, and so forth, to move their products. Assume Ownership Risk and Extend Credit A free-on-board (FOB) provision designates who is responsible for what shipping costs and who owns the title to the goods and when. A nondisclosure agreement (NDA) is a contract that specifies what information is proprietary, or owned by the partner, and how, if at all, the partner can use that information. Marketing Channel Strategies Types of Distribution -​ Intensive Distribution -​ Selective Distribution -​ Exclusive Distribution Intensive Distribution Intensive distribution is a strategy in which companies try to sell their products in as many outlets as possible. Intensive distribution strategies are often used for convenience offerings, products customers purchase on the spot without much shopping around. Soft drinks and newspapers are an example. Selective Distribution Selective distribution involves selling products at select outlets in specific locations. For example, Sony TVs can be purchased at a number of outlets such as Best Buy or Walmart, but the same models are generally not sold at all the outlets. Exclusive Distribution Exclusive Distribution involves selling products through one or very few outlets. Most students often think exclusive means high priced, but that's not always the case. Exclusive simply means limiting distribution to only one outlet in any area, and can be a strategic decision based on applying the scarcity principle to creating demand. Type of Customer -​ How your customers want to buy products will have an impact on the channel you select. -​ It should be your prime consideration. Type of Product -​ The type of product you're selling will also affect your marketing channel choices. -​ Perishable products often have to be sold through shorter marketing channels than products with longer shelf lives. -​ Canned tuna can be shipped by “slow boat” and handled by more intermediaries. -​ Valuable and fragile products also tend to have shorter marketing channels. Channel Partner Capabilities -​ Your ability versus the ability of other types of organizations that operate in marketing channels can affect your channel choices. -​ If you produce downloadable products like digital books or recordings, you can sell your products straight to customers on the Internet. Channel Dynamics -​ Channel Power -​ Channel Conflict -​ Channel Cooperation -​ Channel Integration Channel Power -​ Strong channel partners often wield what is called channel power and are referred to as channel leaders, or channel captains. -​ More often today, big retailers like Walmart and Target are commanding more channel power. -​ They have millions of customers and are bombarded with products wholesalers and manufacturers want them to sell, which makes these retailers able to call all the shots. -​ Category killers are in a similar position. Channel Conflict -​ A dispute among channel members is called a channel conflict. -​ Channel conflicts are common. -​ Part of the reason for this is that each channel member has its own goals, which are like those of any other channel member. -​ All channel members want to have low inventory levels but immediate access to more products. Channel Cooperation -​ Oftentimes companies produce informational materials and case studies showing their partners how they can help boost their sales volumes and profits. -​ Channel partners also want to feel assured that the products coming through the pipeline are genuine and not knockoffs and that there will be a steady supply of them. -​ Your goal is to show your channel partners that you understand issues such as these and help them generate business. -​ Producing marketing and promotional materials their channel partners can use for sales purposes can also facilitate cooperation among companies.  -​ In-store displays, brochures, banners, photos for websites, and advertisements the partners can customize with their own logos and company information are examples. Channel Integration -​ Another way to foster cooperation in a channel is to establish a vertical marketing system. In this type of system, channel members formally agree to closely cooperate. -​ A vertical marketing system can also be created by one channel member taking over the functions of another member, this is referred to as vertical integration. -​ Backward integration occurs when a company moves upstream in the supply chain that is toward the beginning. -​ A horizontal marketing system is one in which two companies at the same channel level say, two manufacturers, two wholesalers, or two retailers agree to cooperate with one another to sell their products or to make the most of their marketing opportunities and is sometimes called horizontal integration. Vertical Versus Horizontal Conflict -​ The conflicts described so far are examples of vertical conflict. -​ A vertical conflict is a conflict that occurs between two different types of members in a channel, say, a manufacturer, an agent, a wholesaler, or a retailer. -​ By contrast, a horizontal conflict is a conflict that occurs between organizations of the same type, say, two manufacturers that each want a powerful wholesaler to carry only its products. -​ Horizontal conflict can be healthy because it competition competition-driven. But it can create problems too. -​ Channel leaders like Walmart usually have a great deal of say when it comes to how channel conflicts are handled. Promotion Strategies Mobile Marketing Customers opting into getting promotions via mobile marketing, like text messages. Out-of-Home Advertising Billboards and movable promotions like taxis and inside subways. IMC (Integrated Marketing Communications) Provides an approach designed to deliver one consistent message to buyers through an organization's promotions that may span all different types of media such as TV and radio. Consumers Sales Promotions Consists of short-term incentives such as coupons, contests, games, rebates and mail-in offers that supplement the advertising and sales efforts. Direct Marketing Involves the delivery of personalized and often interactive promotional materials to individual consumers via channels such as mail, catalogues, internet, email, telephone, and direct response advertising. Professional Selling An interactive, paid approach to marketing that involves a buyer and seller. The interaction between two parties can occur in person, by telephone etc. IMC Elements ​ Advertising ​ Sales Promotions ​ Direct marketing ​ Professional selling ​ Public relations ​ Sponsorships ​ Online media Factors that Influence the Promotion Mix -​ Budget available: For many companies, the budget available to market a product determines what elements of the promotion mix are utilized. -​ Stage in the product life cycle: The stage in the product life cycle also affects the type and amount of promotion used. -​ Type of product and type of purchase decision: Different products also require different types of promotion. Very technical products and very expensive products often need professional selling, so the customer understands how the product operates and its different features. -​ Target market characteristics and consumers' readiness to purchase: To select the best methods to reach different target markets, organizations need to know what types of media different targets use, how often they make purchases and what their readiness to purchase. -​ Consumers' preferences for various media: We've already explained that different types of consumers prefer different types of media. In terms of target markets, college-aged students may prefer online, cell phone, mobile marketing, and social media more than older consumers do. -​ Regulations, competitors, and environmental factors: Regulations can affect the type of promotion used. For example, laws in the United States prohibit tobacco products from being advertised on TV. -​ Availability of media: Organizations must also plan their promotions based on the availability of media. The top-rated television shows and Super Bowl ad slots for example often sell out quickly. AIDA Model -​ Attention -​ Interest -​ Desire -​ Action Message characteristics and advertising appeals Organizations must also determine what type of appeal to use and how to structure their messages. Some common advertising appeals are: -​ Humorous -​ Emotional -​ Frightening -​ Rational -​ Environmentally conscious Unique selling proposition When organizations want to communicate value, they must determine what message strategies work best for them. Smart organizations determine a product's unique selling proposition (USP), or specific benefit consumers will remember. Methods to determine promotion budget -​ Percentage of last year's sales -​ Affordable method -​ Competitive parity -​ Objective and task method Percentage of last year's sales The simplest method for determining the promotion budget is often merely using a percentage of last year's sales or the projected sales for the next year. This method does not consider any changes in the mallet or unexpected circumstances. Affordable method Whatever you think you can afford, is often used by small businesses. Unfortunately, things are going to cost more than expected and you may not have enough money. Competitive parity Other companies may decide to use comparative parity, that is, they try to keep their promotional spending comparable to the competitors' spending level. This method is designed to keep a brand in the minds of consumers. During a recession, some firms feel like they must spend as much. Objective and task methods A more rational and ideal approach is the objective and task method, whereby marketing managers first determine what they want to accomplish with their communications. They research to figure out how much the activities or tasks cost to develop a budget. Consumer sales promotions -​ Free sample: Allows consumers to try a small amount of a product so they will want to purchase. -​ Coupons: Providing an immediate price reduction of an item, the retailer gets a handling fee for accepting coupons. -​ Point of purchase displays: Including coupon machines and other elements, placed next to products in stores to encourage consumers to buy a brand or product immediately.  -​ Premium: Something you get either for free or for a small shipping and handling charge with your proof of purchase. -​ Contests: Sales proportions people enter or participate in to have a chance to win a prize. Loyalty programs Sales promotions designed to impeach business. Loyalty programs include things such as frequent flier programs, hotel programs, and shopping cards for grocery stores, drugstores, and restaurants. Rebates Popular with both consumers and the manufacturers that provide them. When you get a rebate, you are refunded part, or all, of the purchase price of a product back after completing a form and sending it to the manufacturer with your proof of purchase. Trade promotions -​ Trade shows -​ Conventions -​ Event marketing -​ Trade allowances -​ Training -​ Special incentives Trade shows and conventions -​ Trade shows are one of the most common types of sales promotions in B2B markets. A trade show is an event in which firms in a particular industry display and demonstrate their offerings to other organizations they hope will buy them. -​ Conventions, or meetings, with groups of professionals, also provide a way for sellers to show potential customers different products. Sales contests Often held by manufacturers or vendors, provide incentives for salespeople to increase their sales. Often, the contests focus on selling higher profit or slow-moving products. Trade allowances and advertising allowance -​ Trade allowances give channel partners, for example, manufacturers wholesalers, distributors, retailers, and so forth, different incentives to push a product. One type of trade allowance is an advertising allowance to advertise a seller's products in local newspapers  -​ Advertising allowance benefits both the manufacturer and the retailer. typically, the retailer can get a lower rate than manufacturers on advertising in local outlets, saving the manufacturer money. Free merchandise and push money -​ Free merchandise: Such as a tool, television, or other products produced by the manufacturer, can also be used to get retailers to sell products to consumers. -​ Push money: Or a cash incentive, from the manufacturer to push a particular item. The push to sell the item might be because there is a large amount of inventory of it, it is being replaced by a new model or the product is not selling well. Push vs Pull strategy -​ Push strategy involves promoting a product a businesses, such as wholesalers and retailers, who then push the product through the channel promoting it to final consumers. -​ Pull strategy is when a company promotes products and services to final consumers to pull consumers into the stores or get the consumers asking for the product. Promotion Objectives -​ Inform: Creates awareness -​ Remind: Reminds about need -​ Persuade: Tries to convince Price The Pricing Framework -​ Before pricing a product, an organization must determine its priding objectives -​ Companies must also estimate demand for the product or service, determine the costs, and analyze all factors -​ The organization should choose the most appropriate pricing strategy and determine policies and conditions regarding price adjustments. Pricing Objectives -​ Earning a targeted return on investment (ROI) -​ Maximizing profits -​ Maximizing sales -​ Maximizing market share -​ Maintaining status quo Factors that affect pricing decisions -​ Product costs -​ Demand -​ Customers -​ The external environment Customers 3 important factors for customers -​ Product offers value -​ How many buyers are there -​ How sensitive they are to changes to price Price elasticity Or how sensitive people are to your price changes, affects the demand for products. Elasticity refers to the amount of stretch or change. Pricing laws, regulations, and ethics -​ Price discrimination: charging different people different prices based on appearance, race, culture, and wealth. However, young children and seniors are often given discounts. Pricing Strategies -​ Price skimming -​ Penetration pricing -​ Everyday low pricing -​ Status quo pricing Price skimming When a company sets a high initial price for a product, it draws in customers willing to pay the price to buy your product early. Which makes the company make back their investment. Penetration pricing When a company offers a low initial price, it often competes with products already on the market. The goal is to get as much of the market as possible. Everyday pricing The price initially set is the price the seller expects to charge throughout the product's life cycle. Status quo pricing When a company wants to maintain the status quo or simply meet, or equal its competitor's prices to keep its current prices. Pricing approaches -​ Cost plus (markup) -​ Odd-even - pricing like $4.99 or $9.99 -​ Prestige - Increasing price to add value -​ Price lining - Multiple versions of the same thing for different prices -​ Demand backward - When prices start where the customers want to pay -​ Leader - pricing a few items low to get people in the store -​ Sealed bid - offering to buy products at prices designated in sealed bids -​ Going rate - when customers pay the same price regardless of where they got it -​ Price Building - things are sold together at a lower price -​ Captive - they must buy this product, there is no alternative -​ Product mix - includes all the products a company offers -​ Two parts - Where the customer has to pay two different charges -​ Payment - Being able to pay in instalments -​ Promotional - short-term, trying to get the most people in the store Pricing adjustments -​ FOB origin: The title changes at the origin, that is, when the product is purchased, and the buyer pays the shipping charges. -​ FOB destination: The titles change at the destination, that is after the product is transported and the seller pays the shipping charges. -​ Uniform-delivered: Also called postage stamp pricing, means buyers pay the same shipping changes regardless of where they are located. -​ Trade allowance: A type of discount or allowance that manufacturers provide wholesalers or retailers in exchange for helping to promote their product.