School of Business ManagementUniversiti Kebangsaan Malaysia _______________________________________________________________________________________

ACTUAL PRODUCT LEVELMarketing channels are set of interdependent organizations involvedin the process of making a product or service available for use orconsumption.

ACTUAL PRODUCT LEVEL Product variety Service backup Lot size Spatial convenience

The higher the level of the service output, the higher the price would be to the consumers.

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Consumer Marketing Channels

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Distribution coverage: Number of them

needed

Types of marketing intermediaries

Terms & responsibilities of each

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Channels Alternatives for a Cellular Car Phone Maker

School of Business ManagementUniversiti Kebangsaan Malaysia _______________________________________________________________________________________

• Exclusive Distribution

• Intensive Distribution

• Selective Distribution

School of Business ManagementUniversiti Kebangsaan Malaysia _______________________________________________________________________________________

Exclusive Distribution

• Limiting the number of intermediaries.• Used when producer want to maintain control over the service level and output offered by the resellers.

School of Business ManagementUniversiti Kebangsaan Malaysia _______________________________________________________________________________________

Selective Distribution

• The use of more than a few but less than all of the intermediaries.• Used by established companies and new companies seeking distributors.• Gained adequate market coverage with more control and less cost than intensive distribution. .

School of Business ManagementUniversiti Kebangsaan Malaysia _______________________________________________________________________________________

Intensive Distribution

• Manufacturer placing the products in as many outlets as possible.• Used for products which the consumer requires a great deal of location convenience

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TERMS & RESPONSIBILITIES OF CHANNEL MEMBERS

Determine rights & responsibilities of participating channel members

“Trade-Relations Mix”

1. Price policies

2. Conditions of sale

3. Distributors’ territorial rights

4. Mutual services & responsibilities

ACTUAL PRODUCT LEVEL• Comprises an independent producer, wholesaler(s) and retailer(s).• Each is a separate business seeking to maximize its own profits, even if the goal reduces profit for the system as a whole.• No channel member has complete or substantial control over other members.

ACTUAL PRODUCT LEVEL• Comprises the producer, wholesaler(s), and retailer(s) acting as a unified system.• One channel member, the channel captain, owns the others or franchises them, or has so much power that they all cooperate.• The channel captain can be the producer, the wholesaler, or the retailer.

ACTUAL PRODUCT LEVELShould be reviewed when:

•Significant change in consumption pattern

•New and strong competitor enters the market

•The product moves into other stages in its PLC

ACTUAL PRODUCT LEVEL

Includes all the activities involved in selling goods or services directly to final consumers for personal, non-business use.

A retailer or retail store is any business enterprises whose sales volume comes primarily from retailing.

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Major Retailer Types

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store retailers

non-store retailers

retail organizations

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Figure 16.1 Retail Positioning Map

By combining different service levels with different assortment breadths, we can distinguish the 4 broad positioning strategies available to retailers

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Non-store retailing has grown faster than store retailing

Falls into 3 major categories:

1. Direct Selling

2. Direct Marketing

3. Automatic Vending

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Increasing number of retail stores form corporate retailing

Achieve economies of scale Greater purchasing power

Wider brand recognition Better-trained employees

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Major Types of Corporate Retail Organizations

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GIORDANO Junior targets GIORDANO Junior targets couples with childrencouples with children

ACTUAL PRODUCT LEVEL

• Strong retail brand approachStrong retail brand approachPromote themselves as brands rather than brands that they carry.Introduce in-house brands and promote actively.

• The showcase storeThe showcase storeSell other brands and often gets the vendor of

thosebrands to take responsibility for stock, staff, and

eventhe selling space. The vendor then hand over a percentage of the

sales to the store’s owner. This translates into lower gross margins for the department store but also lower

operating costs.

ACTUAL PRODUCT LEVEL

The services mix is a key tool for differentiating one store from another.• Prepurchase services:Prepurchase services:

Include accepting telephone and mail orders, advertising, window and interior display, fitting rooms, shopping hours, fashion show, and trade-ins.• Postpurchase services:Postpurchase services:

Include shipping and delivery, gift wrapping, adjustments and returns, alteration and tailoring, installations, and engraving.• Ancillary services:Ancillary services:

Include general info, check cashing, parking, restaurants, credit, rest-rooms, and children-attendant service.

ACTUAL PRODUCT LEVELPls read on “Wheel-of-Retailing”

ACTUAL PRODUCT LEVEL

Includes all the activities involved in selling goods or services to those who buy for resale or business uses.

Wholesalers pay less attention to promotion, atmosphere, and location because they are dealing with business customers.

Wholesale transactions are usually larger than retail transactions and cover a larger trade area

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Wholesaling , major feature of distribution in Asia

A number of factors explain this: Growth of factories located far from buyers Advanced production orders rather than in

response to specific orders Increase in intermediate producers & users To adapt products to needs of intermediate &

final users

ACTUAL PRODUCT LEVEL

Exercise on PricingExercise on PricingRushdy started a small company that makes and sells home-made kaya. People who tried the kaya really seemed to like it. One of the first problems Rushdy faced was pricing. She had thought of pricing the kaya high enough so her money would earn the interest it would have received if she had left in her investment account. On the other hand, pricing the kaya low would help to acquire loyal customers. After some thought, Rushdy decided to fix the price at RM2.95 a bottle, which was cheaper than other brands of kaya in the market. In its first year of operation, the company sold 144,000 bottles to retailers in various parts of the city. The company fixed costs were RM32,000 and its variable unit costs were RM1.25 per bottle.