MKIB153 Fundamentals of Marketing: Place (Distribution) PDF

MKIB153 Fundamenta ls of Marketing Lecture 8 – Place (Distribution) Dr Lauren Sinton Learning Objectives After this session, you should be able to: Explain the importance of distribution decisions Discuss marketing channel functions, structure and management Discuss different intermediar...

MKIB153 Fundamenta ls of Marketing Lecture 8 – Place (Distribution) Dr Lauren Sinton Learning Objectives After this session, you should be able to: Explain the importance of distribution decisions Discuss marketing channel functions, structure and management Discuss different intermediaries Outline different retailing patterns Recap: Marketing Mix… After marketers have completed their research, understood the environment and their customers, they make plans to satisfy those customers’ needs. At the heart of the plans is the marketing mix (4Ps): Product Promotion Place Price If one of the Ps is out of sync the whole of the product offering is devalued, The mix for Services extends to 7Ps: People, Process and Physical Evidence.  The right product, in the right place, at the right time The Secrets of Place (Distribution)… Distribution and Supply Chain Concepts Marketing Channels An organized system of marketing institutions through which products, resources, information, funds, and/or product ownership flow from the point of production to the final user. Physical Distribution Coordinating the flow of information and products among members of the channel to ensure that products are available in the right places, in the right quantities, at the right times, and in a cost-efficient manner. Supply Chain The connection and integration of all members of the marketing channel What is a “A network of businesses and organisations through which goods pass to get to their final Supply Chain? destination” (Masterson, 2017) Simple Supply Chain Example Supply Chain Sellers / Suppliers Manufacturers Composition… Resellers Wholesalers Retailers Facilitators / Intermediaries Agents and distributors Logistics services Buyers / Customers Customers Consumers Business users  Getting the brand to the target market The can be costly Importan Forming a reliable distribution channel is crucial yet challenging ce of Each market contains a distribution network with many logistical and channel ‘Place’ choices In some markets, the distribution Decision structure is multi-layered and complex s… The marketer that builds the most efficient channel will gain a significant competitive advantage  Suitable storage facilities The right amount of stock Good communications throughout the Key Aspects distribution channel Suitable transport of Logistics Packaging that will protect the product in Management transit and storage (and be easy to lift and move) … Risk e.g. potential crime and/or piracy Where (location/environment) do consumers want to purchaser the product? (department store, e-tailer, warehouse market trader etc.)  Supply Chain of Coffee… Marketing Channel Functions Contact Efficiency (e.g. supermarkets) Channel Functions Sorting Breaking bulk Maintaining inventories Maintaining convenient locations Provide services All channel functions must be performed regardless of who does them  Internal determinants Channe Cost – capital & maintenance Control l External determinants Decisio Customer characteristics Nature of product Demand ns Competition Legal regulations Local practices Customer service needs The Covid- 19 Vaccine Just a little illustration of the complexities of the vaccine supply chain Getting the product to the consumer is complex, costly, and needs collaboration and careful consideration of storage, transportation, protection, packaging, perishability, distribution, segmentation & targeting. The following slide illustrates this complexity Covid19 Vaccine Supply Chain Source: Zoltan Kis Channel Structure: Length… PYO farm 0 consumer 0 level channel Channel Structure: Length (2)… farm wholesaler / market 1 restaurant 2 consumer 2 level channel Channel Structure: Length Options Channel Structure: Width/ Breadth… Exclusive Selective Intensive  Channel Structure: Width Options Multichannel Distribution…  Distribution Effectiveness Meeting the objectives of both the business and its customers Channel Right product, right place, right time Efficiency & Convenience is key for consumers http://www.youtube.com/watch?v=kR-4 Effectivene MHOpAwI&feature=related ss… Channel Efficiency Reduce costs by eliminating waste Logistical efficiency can millions of pounds Ethical Supply Chains Places focus on transparency, sustainability and responsible practices Addresses social, environmental and economic concerns to build trust and value Key considerations: Transparency Labour standards Sourcing Fair trade Supplier auditing NIKE Case Study: Supply Chain… How many Nike products do you own? Accusations of factory sweatshop conditions. Huge PR disaster in 90’s. In 2000s, Nike surprised the business community by releasing database of 750 factories. No laws required the company to disclose. Strategic shift: went from denying responsibility for inhumane conditions to leading on disclosure. Nike has continually improved and promoted CSR in their supply chain through to present day. NIKE Case Study: Exclusive distribution to support marketing / Distribution Channel… brand objectives. NIKE only offer their full range to customers from NIKE Town in London as they want to keep a level of exclusivity to their brand as well as offering parts of the range through other retail outlets such as sports direct or Nike Liverpool or via the Old Trafford Stadium shop. Selling Overseas… Home Country Overseas Indirect export Direct export Facilities Level of involvement and risk Target Country  Direct export is a method of selling goods or services directly to foreign customers without involving intermediaries or middlemen such as agents, distributors, or trading companies. In a direct export model, the producer or exporter engages with overseas buyers, establishes sales Direct or contracts, and takes responsibility for various aspects of the export process, including Indirect logistics, shipping, customs clearance, and after- sales support. Exporting? Indirect export is a method of selling goods or services to foreign markets through intermediaries, such as agents, distributors, trading companies, or export management companies. In an indirect export model, the producer or exporter does not engage directly with foreign customers but rather relies on these intermediaries to facilitate international sales. Marketing Functions along the Supply Chain (1)… Stock Holding Essential for a retailer to have stock available but too much stock is a waste of the retailer's money. This puts pressure on the seller to “hold” stock away from the retailers and provide it as and when they need it. This is known as a Just in Time approach and reduces retailers waste but increases sellers' risk. Transportation is the way of getting the product to the customer. Sometimes customers take products away with them, sometimes a courier is used, sometimes this is their own courier system (e.g., Amazon) and others use intermediaries e.g. ‘Very’ uses Yodel. This process gets much more complicated when we start looking at the transportation of oil or gas for example. Marketing Functions along the Supply Chain (2)… Information Gathering Analysing information to shape the way they approach customers in future interactions. e.g., this could be live information, or it could be analysed using Google Analytics or information from a CRM or EPOS system. Communications Helps to develop efficiency in the supply chain. If information can be shared equally then the costs of operations could be reduced e.g., EPOS systems - electronic point of sale. Promoting All buyers and sellers promote their goods and services to each other. Final consumer does not see all of these, but they are equally important in creating value for the end user. Digital Technology… Electronic Distribution B2B Order management Instant communication Supplier search B2C e-tailing, enabling both bricks and clicks C2C Different form of competition (e.g. eBay) and more focus on recycled and second hand using sites such as FB market place, Shpok and GumTree. Supply Chain Development Changes to the Retail Environment One of the most important developments in consumer markets over the past 25 years has been the increasing power of retailers over manufacturers Increased Retail Power – Why? Consolidation of retailers (more negotiation power) Development of retailers own private label brands Retail investment in data, which in some cases suppliers rely on (e.g. Tesco Clubcard) E-commerce means they can sell directly to customers, bypassing the supply chain Customer demand (convenience, speed, choice) Just-in-Time inventory management Globalised supply chains Power of branding and marketing The Buyer- Seller Relationshi p… Types of Retailer Department stores Variety stores Supermarkets Hypermarkets Town centre speciality stores Out-of-town speciality stores Convenience stores Discount clubs Catalogue stores Direct  Agent Can’t resell at higher price without permission Merchant Other Buy and sell on own account Intermediari Licensee es Contractual agreement whereby one company is given the right to use something owned by another company Franchisee Given the right to do business in a specified manner New Types of Intermediaries affiliate sites price comparison sites Multichannel Marketing Reaching and engaging customers through multiple channels or platforms simultaneously to create a cohesive and integrated customer experience. Meet consumers where they are, whether that's online, offline, or in various digital and physical environments, to provide a consistent message and brand experience. Location… ”You can be the best retailer in the world, but if you set up shop in the wrong place, you’ll never do much business. If you operate from the wrong properties, you start with your hands tied behind your back.” (George Davies, 1991). Location Decisions… Store location decisions are frequently considered to be the single most important elements of retail marketing. Although a good location is unlikely in itself to compensate for poor overall strategy, a bad location can be a issue that is very difficult to overcome. Even very small physical differences between locations can exert a major influence upon the stores accessibility and attractiveness to customers. The location decision represents a long term investment and a very major investment in terms of large purpose built outlets. Location Choices…  Is the right type Transport and of customer Costs? car parking? there? Where? Competitive Complementary A suitable Choosing a outlets? businesses? building? Retail Planning permission? Has there been a similar (For chains) impact of new Location… Other legal business in the outlet on restrictions? area? existing ones? Does the location have the right image? Thank you for listening! Any questions?