Distributing

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Chapter
15
Distributing Products Quickly and Efficiently
14-1
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Marketing Intermediaries and the Supply Chain
This arrow really represents a series of
suppliers, e.g. the farmer, grain wholesaler and
flour mill owner are each in the chain that
provides flour.
The Wholesalers arrow represents one or more
sequential wholesalers.
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Channels of Distribution
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Are Intermediaries Bad?

• About half the cost of the things we buy are
  marketing costs that go largely to pay for the
  work of intermediaries.
• Why dont we get rid of the intermediaries and
  pass the savings on to the consumer?

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Cutting Out the Middleman
Traditional Book Distribution
Borders/ Barnes and Noble Model
Amazon.com
Publisher
Publisher
Publisher
Wholesalers
Amazon.com
Retail Chain
Independent bookstores
Consumers
Consumers
Consumers
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For every dollar you spend on food, ___ goes to
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Functions Performed by Marketing Intermediaries

• Transportation
• Storage
• Selling, including
• Merchandising
• Personal selling
• Advertising

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Exchange Efficiency in a World Without
Intermediaries
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Exchange Efficiency in a World with Intermediaries
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Three Basic Points About Intermediaries

• Marketing intermediaries can be eliminated, but
  their activities cant.
• Intermediaries have survived in the past because
  they have performed marketing functions more
  effectively and efficiently than others could.
• Intermediaries add costs to products, but these
  costs are usually more than offset by the values
  they create.

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Form Utility
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Time Utility
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Place Utility
The 18 Starbucks Locations Nearest You
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Possession Utility
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Possession Utility (cont.)

• Credit
• Delivery
• Installation
• Anything that facilitates the transfer of
  ownership

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Information Utility
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Service Utility
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Types of Merchant Wholesalers

• Full-service wholesalers
• Perform sales functions, carry inventories (with
  the associated risks), provide delivery, and
  extend credit to customers
• Rack jobbers
• Limited-function wholesalers
• Cash-and-carry wholesalers
• Drop-shippers

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Agents and Brokers

• Neither take title to the goods
• Agents maintain a long-term relationship with the
  people they represent. Examples
• Sports agents
• Manufacturers agent (rep)
• Insurance agent
• Brokers are usually hired on a temporary basis.
  Examples
• Real estate broker
• Farm commodities broker

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Types of Retailers
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Types of Retailers
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Retail Distribution Strategy
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Retail Distribution Strategy
Intensity Level
Objective Product Type
Examples
Selective

• Work with selected
• intermediaries
• Shopping and some
• specialty goods.

DVD players, TVs, personal computers, cameras,
furniture, most clothing
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Retail Distribution Strategy
Intensity Level
Objective Product Type
Examples
Exclusive

• Work with very fewintermediaries
• Specialty goods

Some designer clothing and purses, private
helicopters, private airplanes
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Non-Store Retailing

• Direct selling
• Vending machines, kiosks, and carts

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Multilevel marketing

• E.g. Amway, Mary Kay Cosmetics
• NOT pyramid schemes!
• Pyramid scheme example The Plane Game

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Electronic retailing

• Sometimes called E-tailing or B2C E-commerce
• Amazon.com
• Target.com

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Direct marketing
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Supply Chain Management

• Re-engineering the processes along the entire
  value chain from producers to consumers to
  simultaneously reduce inventories and reduce
  stock-out or line-down situations.

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The Supply Chain for Fiberrific Cereal
ManufacturingFacility
Storage
CompanyHQ
Warehouse
Consumer
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Logistics

• Inbound logistics is concerned with bringing raw
  materials, packaging, and parts from suppliers to
  your company efficiently.
• Materials handling is the movement of raw
  materials, parts, and goods within the company.

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Outbound Logistics

• Outbound logistics is concerned with managing the
  flow of finished products from your company to
  your customers.

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Freight Forwarder

• A freight forwarder is a company that puts many
  small shipments together to create a single large
  shipment that can be transported cost-effectively
  to the final destination.

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Choosing the right transportation mode

• The largest percentage of goods in the U.S. (by
  volume) is shipped by rail (35-40).
• Trucks are the second most popular surface
  transportation mode, handling about 25 of the
  volume.
• Can deliver to almost any business destination

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Choosing the right transportation mode

• Water transportation is the cheapest per pound,
  but is slow and offers limited destinations.
• Pipelines are used primarily for transporting
  water, petroleum, and petroleum products.
• Air transportation is the fastest, but the most
  expensive per pound.

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Intermodal transportation

• Piggyback loading truck trailers on railcars.

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Intermodal transportation

• Fishyback loading truck trailers onto ships

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Intermodal transportation

• Birdyback loading truck trailers onto airplanes