chapter 14 marketing channels and retailing 2014
TRANSCRIPT
Lamb, Hair, McDaniel
Chapter 13
Marketing Channels and
Retailing
2013-2014
© 2013 by Cengage Learning Inc. All rights reserved 2
Explain what marketing channels and channel intermediaries are describe their functions and activities
Describe common channel and strategies, and the
factors that influence their choice
Describe channel relationship types and roles, and their unique benefits and drawbacks
Explain the importance of the retailer within in the
channel and within the national economy
1
2
3
4
List and understand the different classifications and types of retailers, as well as their different operational models
Explain the major tasks involved in developing a retail marketing strategy
Discuss the roles of CRM and customer data in retailer decision making
Describe trends in retail and channel management
© 2013 by Cengage Learning Inc. All rights reserved 3
5
6
7
8
Explain what marketing channels and channel
intermediaries are, and describe their functions
and activities
© 2013 by Cengage Learning Inc. All rights reserved
4
Marketing Channels
1
Marketing Channel
a set of interdependent organizations that eases the transfer of ownership as
products move from producer to business user or consumer.
Channel Members negotiate with one another, buy and sell products,
and facilitate the change of ownership between buyer and seller in the course of moving the
product from the manufacturer into the hands of the final consumer
© 2013 by Cengage Learning Inc. All rights reserved 5
1
© 2013 by Cengage Learning Inc. All rights reserved 6
Marketing Channel Functions
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
1
© 2013 by Cengage Learning Inc. All rights reserved 7
Specialization and Division of Labor
Creates greater efficiency
Provides lower production
costs
Create time, place, form, and
exchange utility
1
Contact Efficiency
Retailer
Firms in the channel that sell directly to customers
Retailers simplify distribution by cutting the number of transactions required by consumers, making an
assortment of goods available in one location
© 2013 by Cengage Learning Inc. All rights reserved 8
1
© 2013 by Cengage Learning Inc. All rights reserved
9
Exhibit 14.1 How Marketing Channels Reduce the Number of Required Transactions
© 2013 by Cengage Learning Inc. All rights reserved 10
Channel Intermediaries
Merchant
Wholesaler
An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them.
Agents and
Brokers
Wholesaling intermediaries who facilitate the sale of a product by representing channel members.
1
© 2013 by Cengage Learning Inc. All rights reserved
11
Channel Intermediaries
Merchant Wholesalers
Agents and
Brokers
Ta
ke
Title
to G
oo
ds
Do N
OT
Take T
itle to
Goods
1
© 2013 by Cengage Learning Inc. All rights reserved 12
Factors Suggesting Type of Wholesaling Intermediary to Use
Product characteristics
Buyer considerations
Market characteristics
1
© 2013 by Cengage Learning Inc. All rights reserved 13
Channel Functions Performed by Intermediaries
Contacting/Promotion
Negotiating
Risk Taking
Researching
Financing
Physically distributing
Storing
Sorting
Facilitating Functions
Transactional Functions
Logistical Functions
1
Describe common
channel and strategies,
and the factors that
influence their choice
© 2013 by Cengage Learning Inc. All rights reserved 14
Channel Structures
2
Exhibit 14.2 Marketing Channels for Consumer Products
© 2013 by Cengage Learning Inc. All rights reserved
15
Exhibit 14.3 Channels for Business and Industrial Products
© 2013 by Cengage Learning Inc. All rights reserved
16
© 2013 by Cengage Learning Inc. All rights reserved 17
Alternative Channel Arrangements
Multiple or dual distribution
Strategic channel alliances
Nontraditional channels
2
© 2013 by Cengage Learning Inc. All rights reserved 18
Factors Affecting Channel Choice
Producer Factors
Product Factors
Market Factors
2
© 2013 by Cengage Learning Inc. All rights reserved 19
Market Factors
Market Factors That Affect Channel Choices
Customer profiles
Consumer or Industrial
Customer
Size of market
Geographic location
2
© 2013 by Cengage Learning Inc. All rights reserved 20
Product Factors
Product Factors That Affect Channel Choices
Product Complexity
Product Standardization
Product Life Cycle
Product Delicacy
Product Price
2
© 2013 by Cengage Learning Inc. All rights reserved 21
Producer Factors
Producer Factors That Affect Channel Choices
Producer Resources
Number of Product Lines
Desire for Channel
Control
2
© 2013 by Cengage Learning Inc. All rights reserved 22
Levels of Distribution Intensity
Intensive A form of distribution aimed at
having a product available in
every outlet
Selective A form of distribution achieved
by screening dealers to eliminate
all but a few in any single area
Exclusive
A form of distribution that established one or a few dealers within a given area
2
© 2013 by Cengage Learning Inc. All rights reserved 23
Levels of Distribution Intensity
Intensive Achieve mass market selling. Convenience goods.
Many
Selective
Exclusive
Work with selected intermediaries. Shopping and some specialty goods.
Work with single intermediary. Specialty goods and industrial equipment.
Several
One
Intensity Level
Objective Number of Intermediaries
© 2013 by Cengage Learning Inc. All rights reserved 24
Describe channel relationship types and roles, and their unique
benefits and drawbacks
Types of Channel Relationships
3
© 2013 by Cengage Learning Inc. All rights reserved 25
Benefits Hazards
Arm’s Length
Relationship
Fulfills a one time or
unique need; low
involvement/risk
Parties unable to
develop relationship;
low trust level
Cooperative
Relationship
Formal contract
without capital
investment/long-term
commitment; “happy
medium”
Some parties may
need more relationship
definition
Integrated
Relationship
Closely bonded
relationship; explicitly
defined relationships
High capital
investment; any failure
could affect every
channel member
Types of Channel Relationships
Global Channel Relationships
3
Global Channel Development
Channel policies differ
Gray marketing channels
© 2013 by Cengage Learning Inc. All rights reserved
© 2013 by Cengage Learning Inc. All rights reserved 27
Social Influences in Channels
Partnering
Conflict
Leadership
Control
Power
3
© 2013 by Cengage Learning Inc. All rights reserved 28
Channel Power, Control, and Leadership
Channel
Power
A channel member’s capacity to control
or influence the behavior of other channel
members
Channel
Control
A situation that occurs when one marketing
channel member intentionally affects another
member’s behavior
Channel
Leader
A member of a marketing channel that
exercises authority/power over the activities
of other members
3
© 2013 by Cengage Learning Inc. All rights reserved 29
Channel Conflict
Conflicts may occur if channel members:
Have conflicting goals
Fail to fulfill expectations of other channel members
Have ideological differences
Have different perceptions of reality
3
By COOPERATING, channel members can
speed up inventory replenishment, improve
customer service, and reduce the total
costs of the marketing channel.
Channel Partnering
© 2013 by Cengage Learning Inc. All rights reserved
30
the joint effort of all channel members to create a channel that serves customers and creates a competitive advantage.
3
Explain the importance of the
retailer within in the channel
and within the national
economy
© 2013 by Cengage Learning Inc. All rights reserved
31
The Role of Retailing
4
© 2013 by Cengage Learning Inc. All rights reserved 32
Retailing
All the activities directly
related to the sale of goods
and services to the ultimate
consumer for personal, non-
business use.
4
© 2013 by Cengage Learning Inc. All rights reserved 33
The Role of Retailing
U.S. retailers employ nearly 15 million
people
Retailers account for 10.8 percent of U.S.
employment
Retailing accounts for 10 percent of U.S.
businesses
Retailers account for two-thirds of the
U.S. GDP
Industry is dominated by a few giant
organizations, such as Walmart 4
List and understand the different classifications
and types of retailers, as well as their different operational models
Classification of Retail Operations
© 2013 by Cengage Learning Inc. All rights reserved 34
5
© 2013 by Cengage Learning Inc. All rights reserved 35
Classification of Retail Operations
Ownership
Level of Service
Product Assortment
Price
5
Exhibit 14.4 Types of Stores and Their Characteristics
© 2013 by Cengage Learning Inc. All rights reserved
Assort- ment
Price Gross
Margin
Broad
Narrow
Broad
Med-Narrow
Medium
Med-Broad
Med-Broad
Broad
Med-Narrow
Narrow
Mod-High
Mod-High
Moderate
Mod High
Moderate
Mod Low
Mod Lo-low
Low-very low
Low
Low-High
Mod High
High
Low
Mod High
Low
Mod Low
Mod Low
Low
Low
Low-High
Type of Retailer
Specialty Store
Supermarket
Convenience Store
Drugstore
Full-line Discounter
Specialty Discounter
Warehouse Clubs
Off-price Retailer
Restaurant
Service Level
Mod Hi-High
High
Low
Low
Low-Mod
Mod-Low
Mod-Low
Low
Low
Low-High
Department Store Broad
Broad
Medium
Mod-High
Moderate
Moderate
Mod High
Low Supermarket
Drugstore
Mod Hi-High
Low
Low-Mod
Department Store
Independent Retailers
Chain Stores
Franchises
Owned by a single person or partnership and not part of a larger retail institution
Owned and operated as a group by a single organization
The right to operate a business or to sell a product
© 2013 by Cengage Learning Inc. All rights reserved 37
Classification of Ownership
5
© 2013 by Cengage Learning Inc. All rights reserved 38
Level of Service
Full
Service
Self
Service
5
© 2013 by Cengage Learning Inc. All rights reserved 39
Product Assortment
Classification based on BREADTH and DEPTH of
product lines.
5
© 2013 by Cengage Learning Inc. All rights reserved 40
Price
Gross Margin
The amount of money the retailer makes as
a percentage of sales after the cost of goods
sold is subtracted.
5
© 2013 by Cengage Learning Inc. All rights reserved 41
Major Types of Retail Operations
Department Stores
Specialty Stores
Supermarkets
Drugstores
Convenience Stores
Discount Stores
Restaurants 5
© 2013 by Cengage Learning Inc. All rights reserved 42
Types of Retail Operations
Department
Store
A store housing several
departments under one roof.
Each department is headed by a
buyer, or department head who
selects merchandise.
Specialty
Store
A retail store specializing in a
given type of merchandise.
5
© 2013 by Cengage Learning Inc. All rights reserved 43
Types of Retail Operations
Supermarket
Large, departmentalized, self-
service retailer. Specializes in
food. Some use scrambled
merchandising.
Drugstore
A retail store that stocks
pharmacy-related products
and services as its main draw.
Convenience
Store
A miniature supermarket,
carrying only a limited line of
high-turnover convenience
goods. 5
© 2013 by Cengage Learning Inc. All rights reserved 44
Categories of Discount Stores
Full-Line Discounters
Specialty Discount Stores
Warehouse Clubs
Off-Price Retailers
5
© 2013 by Cengage Learning Inc. All rights reserved 45
Restaurants
• Straddle the line between retail and service establishments
• Sell tangible products (food, drink) but also services (food prep, food service)
• Many could be considered specialty retailers
5
© 2013 by Cengage Learning Inc. All rights reserved 46
Nonstore Retailing
Automatic Vending
Direct Retailing
Direct Marketing
Electronic Retailing
5
Automatic Vending
Is the use of machines to offer
goods for sale.
Vending is the most pervasive retail
business in the United States, with 11.5
MILLION vending machines selling
billions or dollars worth of goods
annually.
© 2013 by Cengage Learning Inc. All rights reserved 47
5
© 2013 by Cengage Learning Inc. All rights reserved 48
Direct Retailing
Door-to-Door
Office-to-Office
Home Sales Parties
5
© 2013 by Cengage Learning Inc. All rights reserved 49
Types of Direct Marketing
Catalogs and Mail Order
Direct Mail
Telemarketing
Electronic Retailing
Shop-at-Home Networks
5
Top E-Tailers by Sales Volume
50
America's Top Ten Retail Businesses
Rank Company Web Sales Volume (in billions)
1 Amazon.com Inc. $48.08
2 Staples Inc. $10.6
3 Apple Inc. $6.66
4 Walmart.com $4.9
5 Dell Inc. $4.6
6 Office Depot Inc. $4.1
7 Liberty Media (owns QVC) $3.76
8 Sears $3.6
9 Netflix Inc. $3.2
10 CDW $3.0
Beyond the Book
© 2013 by Cengage Learning Inc. All rights reserved 51
The Basic Forms of Franchising
Product and
Trade Name
Franchising
Dealer agrees to sell in
products provided by a
manufacturer or
wholesaler.
Business
Format
Franchising
An ongoing business
relationship between a
franchiser and a franchisee.
5
52
Top 10 Franchisors
1. Hampton Hotels
2. Subway
3. 7-Eleven
4. ServPro
5. Days Inn
6. McDonald’s
7. Denny’s
8. H&R Block
9. Pizza Hut
10. Dunkin Donuts
5
List the major tasks involved in developing
a retail marketing strategy
Retail Marketing Strategy
© 2013 by Cengage Learning Inc. All rights reserved 53
6
© 2013 by Cengage Learning Inc. All rights reserved 54
Retail Marketing Strategy
Develop a Retailing Mix
Define & Select a Target Market
6
© 2013 by Cengage Learning Inc. All rights reserved 55
Defining a Target Market
STEP 1: Segment the Market
Demographics
Geographics
Psychographics
6
© 2013 by Cengage Learning Inc. All rights reserved 56
Choosing the Retailing Mix
STEP 2: Choose the Retailing Mix
Product
Promotion
Personnel
Place
Price
Presentation
6
Exhibit 14.6 The Retailing Mix
© 2013 by Cengage Learning Inc. All rights reserved 57
© 2013 by Cengage Learning Inc. All rights reserved 58
Choosing the Retailing Mix
Product Offering
The mix of products offered to the
consumer by the retailer; also
called the product assortment or
merchandise mix.
6
© 2013 by Cengage Learning Inc. All rights reserved 59
Retail Promotion Strategy
Public Relations
Publicity
Sales Promotion
Advertising
6
© 2013 by Cengage Learning Inc. All rights reserved 60
The Proper Location
Economic growth potential
Competition
Geography
Choosing a Community
6
The Proper Location
Land costs
Zoning Regulations
Public Transportation
Mall
© 2013 by Cengage Learning Inc. All rights reserved 61
Socioeconomic characteristics
Traffic flows
Choosing a Specific
Site
Choosing the Type of
Site
Freestanding Store
Shopping Center
6
© 2013 by Cengage Learning Inc. All rights reserved 62
Retail Prices
Quality Image
High Price Low Price
Good Value Single Price Point
6
© 2013 by Cengage Learning Inc. All rights reserved 63
Presentation of the Retail Store
Employee type and density
Fixture type and density
Sound
Odors
Visual factors
Merchandise type and density
6
© 2013 by Cengage Learning Inc. All rights reserved 64
Personnel
Suggestion Selling
Trading Up Two Common
Selling Techniques
6
Channel and Retailing Decisions for Services
Prioritize customer service by focusing on four areas:
• Minimizing wait times
• Managing service capacity
• Improving service delivery
• Establishing channel-wide network coherence
© 2013 by Cengage Learning Inc. All rights reserved 65
6
The Relationship between Retailer Decision Making and Customer Data
© 2013 by Cengage Learning Inc. All Rights Reserved. 66
Discuss the roles of CRM and customer data in retailer
decision making
7
Retailing and CRM
© 2013 by Cengage Learning Inc. All Rights Reserved. 67
Data
Retailers gain insight to who
purchases product
Build stronger relationships with
customers
CRM Database
7
Describe trends in retail and channel
management
New Developments in Retailing
© 2013 by Cengage Learning Inc. All rights reserved 68
8
New Developments in Retailing
M-commerce
Purchasing goods
through mobile
devices.
© 2013 by Cengage Learning Inc. All rights reserved 69
8
Online retailers offer greater variety of options for delivery, including one-use package delivery
boxes.
Chapter 14 Video New Balance Hubway
New Balance Hubway is a bike sharing system in the Boston area that uses automated stations to provide a bike service to people looking to go short distances. In this clip, employees discuss how the retailing model works for Hubway, and how the difference between brick and mortar and e-business models allowed them to succeed in the Boston area.
CLICK TO PLAY VIDEO
© 2013 by Cengage Learning Inc. All rights reserved 70
Part 4 Video
Scripps Networks Interactive
Distribution Decisions
Scripps Networks Interactive owns the content on popular networks such as Food Network, DIY, and the Cooking Channel. Deciding how to best get their content (both digital and solid products) into different locations takes some careful thought, and various decision makers discuss the process in this video clip.
CLICK TO PLAY VIDEO
© 2013 by Cengage Learning Inc. All rights reserved 71