GB101- Chapter 15

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What has become one of the most important managerial functions for many organizations

managing the flow of goods through intermediaries

Marketing Intermediaries (once called middlemen)

organizations that assist in moving goods and services from producers to business and consumer users

channel of distribution

consists of a whole set of marketing intermediaries, such as agents, brokers, wholesalers, and retailers, that join together to transport and store goods in their path (or channel) from producers to consumers

Agents/Brokers

marketing intermediaries who bring buyers and seller together and assist in negotiating an exchange, but don't take title to the goods--that is, at no point do they own the goods--they are examples of marketing intermediaries--they faciliate the exchange process

Wholesaler

a marketing intermediary that sells to other organizations, such as retailers, manufacturers, and hospitals--part of the B2B system

retailer

an organization that sells to ultimate consumers

Why have markeitng intermediaries at all?

intermediaries perform certain marketing tasks--such as transporting, storing, selling, advertising, and relationship building--faster and cheaper than most manufacturers could

3 basic points about intermediaries

1) marketing intermediaries can be eliminated, but their activities can't --that is: you can eliminate some wholesalers adn retailers, but then consumers or someone else would have to perform the intermediaries' tasks, including transporting and storing goods, finding suppliers, and establishing communication with suppliers 2) intermediary organizations ahve survived in the past because they have performed marketing functions faster and cheaper than others could--to maintain their competitive position in the channel, intermediaries must adapot the latest in technology 3) intermediaries add costs to products, but these costs are usually more than offset by the values they create

utility

utility, in economics, is the want-satisfying ability, or value, that organizations add to goods or services when the products are made more useful or accessible to consumers than they were before

Utilities added by intermediaries

form, time, place, possession, information, and service --> although one of these is performed by the producer, most are performed by marketing intermediaries

Form

has been provided mostly by producers rather than by intermediaries--it consists of taking raw materials and changing their form so that they become useful products

Time Utility

intermediaries add time utility to products by making them available when they're needed

Place Utility

intermediaries add place utility to products by having them where people want them

Possession Utility

intermediaries add possession utility by doing whatever is necessary to transfer ownership from one party to anotehr, including providing credit--activites include delivery, installation, guarantees, and follow-up service

Information Utility

intermediaries add information utility by opening two-way flows of information between marketing participants

Service Utility

intermediaries add service utility by providing fast, friendly service during and after the sale and by teaching customers how to best use products over time

retail sale

the sale of goods and services to consumers for their own use

wholesale sale

the sale of goods and services to businesses and institutions for use in the business or to wholesalers or retailers for resale--make B2B sales

Merchant Wholesalers

independently owned firms that take title (own) the goods they handle--2 types: full-service wholesalers and limited-function wholesalers

Full-Service Wholesalers

perform all of the distribution functions

Limited-Function Wholesalers

perform only selected functions, but try to do them especially well--3 common types of limited function wholesalers: 1) rack jobbers 2) cash-and-carry wholesalers 3) drop shippers

Rack Jobbers

furnish racks or shelves full of merchandise to retailers, display products, and sell on consignment--means that they keep title to the goods until they're sold, and then they share the profits with the retailer

Cash-and-carry Wholesalers

serve mostly smaller retailers with a limited assortment of products--traditionally, retailers went to such wholesalers, paid cash, and carried the goods back to their stores--today they can use credit cards

Drop Shippers

solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer--they own the merchandise but don't handle, stock, or deliver it--that's done by the producer\

Agents and Brokers

bring buyers and sellers together and assist in negotiating an exchange--unlike merchant wholesalers, agents and brokers never own the products they distribute-- they earn commissions or fees based on a percentage of the sales revenues--brokers

Difference between agents and brokers

Agents: maintain long-term relationships with the people they represent---Brokers: usually hired on a temporary basis-they have no continuous relationship with the buyer or seller, once they negotiate a contract between a buyer and seller, their relationship ends

Manufacturer's agents (sales agents)

agents who represent producers--sales agents represent a single producer in a typically larger territory

retailer

marketing intermediary that sells to ultimate consumers

3 categories of retail distribution

1) intensive distribution: puts products into as many retail outlets as possible, including vending machines--products include convenience goods 2) selective distribution: the use of only a preferred group of the available retailers in an area--helps to assure producers of quality sales and service--manufacturers of appliances, furniture, and clothing (shopping goods) 3) exclusive distribution: the use of only one retail outlet in a given geographic area--the retailer has exclusive rights to sell the product and is therefore likely to carry a large inventory, give exceptional service, and pay more attention to this brand than others--luxury auto manufacturers and specialy goods

Nonstore Retailing

internet retailing, telemarketing, vending machines, kiosks, carts

Electronic retailing

consists of selling goods and services to ultimate consumers over the Internet

telemarketing

the sale of goods and services by telephone

benefits of vending machines, carts and kiosks

vending machines: carry the benefit of location- carts and kiosks: have lower overhead costs than stores do and can offer lower prices on items

Direct Selling

involves selling to consumers in their homers or where they work ex: cosmetics producers (Avon)

multilevel marketing (MLM)

MLM salespoeple work as independent contractors--they earn commissions on their own sales, and they also create commissions for the "upliners" who recruited them--in turn they receive commissions from any "downliners" they recruit to sell--when you have hundreds of downliners--people who have been recruited by the people you recruit--the commissions can be quite large--also there is a low cost of entry

direct marketing

includes any activity that directly links manufacturers or intermediaries with the ultimate consumer--includes catalog sales, telemarketing and online marketing--has become popular because shopping from home or work is more convenient for consumers than going to stores

Four systems emerged to tie firms together

(manufacturers, wholesalers, and retailers must work closley together to form a unified system) 1) corporate systems 2) contractual systems 3) administered systems 4) supply chains

Corporate distribution system

one in which all of the organizations in the channel of distribution are owned by one firm--if the manufacturer owns the retail firm, clearly it can maintain a great deal of control over its operations

contractual distribution system

if a manufacturer can't buy retail stores, it can try to get retailers to sign a contract to cooperate--a contractual distribution system is one in which members are bound to cooperate through contractual agreements--3 forms of contractual systems 1) franchise systems 2) wholesaler-sponsored chains 3) retail cooperatives

Franchise systems

the franchise agrees to all of the rules, regulations, and procedures established by the franchisor--this results in the conssten quality and level of service you find in most franchised organizations

Wholesaler-sponsored chains

each store signs an agreement to use the same name, participate in chain promotions, and cooperate as a unified system of stores, even though each store is independently owned and managed

Retail Cooperatives

much like a wholesaler-sponsored chain except that it is initiated by the retailers--the same degree of cooperation exists, however, and the stores remain independent--normally in such a system, retailers agree to focus their purchases on one wholesalers, but cooperative retailers could also purchase a wholesale organization to ensure better service

administered distribution system

system in which producers manage all of the marketing functions at the retail level--retailers cooperate with producers in such systems because they get a great deal of free help- all the retailer has to do is ring up the sale

supply chain (value chain)

consists of the sequence of linked activites that must be performed by various organizatiosn to move goods and services from the source of raw mateirals to ultimate consumers--longer than a channel of distribution because it includes links from suppliers to manufacturers, whereas the channel of distribution begins with manufacturers--CHANNELS OF DISTRIBUTION ARE PART OF THE OVERALL SUPPLY CHAIN--included in the supply chain are suppliers of all kinds, manufacturers, wholesalers, and retailers (channel of distribution is just manufacturers, wholesalers, retailers)

Supply chain management

the process of mananging the movement of raw mateirals, parts, work in progress, finished goods, and related information through all the organizations involved in the supply chain; managing the return of such goods if necessary; and recycling materials when appropriate

the complexity of supply-chain management often leads firms to:

outsource the whole process to experts that know how to integrate it

logistics

involves planning, implementing, and controlling the physical flow of materials, final goods, and related info from points of origin to points of consumption to meet customer requirements at a profit--it is as much about the movement of info as it is about the movement of goods--customer wants and needs must flor through the system all the way to suppliers and must do so in real time

Imbound logistics

brings raw materials, packaging, other goods and services, and info from suppliers to producers

Materials handling

the movement of goods within a warehouse, from warehouses to the factory floor, and from the factory floor to various workstations

factory processes

change raw materials and parts and other inputs into outputs, such as finished goods

outbound logistics

manages the flow of finished products and info to business buyers and ultimate consumers

reverse logistics

involves bringing goods back to the manufacturer because of defects or for recycling materials

third party logistics

used to describe the use of outside firms to help move goods from here to there

criteria all transportation modes can be evalueated on

cost, speed, dependability, flexibility, frequency, and reach

Trains

the largest percentage of foods in the US is shipped by rail--best for bulky items items such as coal, wheat, cars, etc

piggyback shipping

truck trailer is detached from the cab; loaded onto a railraod flatcar; and taken to a destination where it will be offloaded, attached to a truck, and driven to the customer's plant

freight forwarder

can put many small shipments together to create a single large shipment that can be transported cost-effectively, by truck or train, to the final destination---(this happens when a company may not ship enough goods to even think of using a railroad)

Trucks

the second largest surface transportation mode is motor vehicles (trucks, vans)--trucks reach more locations than trains and they can deliver almost any commodity door-to-door

trucking specialists

like friehgt forwarders, they have emerged to supply one important marketing function--transporting goods

Water

water transportation is inexpensive, but slow.

fishyback

when truck trailers are placed on ships to travel long distances at lower rates

birdyback

when truck trailers are placed in air planes

pipeline

one transportation mode is movement by pipeline, primarly used for transporting water, petroleum

Air Transportation

airlines carry everything from small packages to luxury cars and elephants--primary benefit: speed--only a small part of shipping today is done by air

Intermodal shipping

uses multiple modes of transportation--highway, air, water, rail--to complete a single long-distance movement of freight---all of the movement is handled by one integrated shipping firm

storage

a good percentage of the total cost of logistics is for storage--2 major kinds of warehouses: storage and distribution

storage warehouse

hold products for a relatively long time

Distribution warehouses

facilities used to gather and redistribute products

Tracking goods

UPC, RFID

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