Chapter 15 Terms

Distribution Strategy
A firm’s overall plan for moving products through intermediaries and on to final customers.
Marketing Intermediaries
Business people and organizations that assist in moving and marketing goods and services between producers and consumers.

Two general types: Wholesalers and Retailers.

Intermediaries that sell products to other intermediaries for resale or to organizations for internal use.

Includes selling to other wholesalers, companies, government agencies, and educational institutions.

Small business owners go to Costco for equipment and supplies – Wholesale

Intermediaries that sell goods and services to individuals for their own personal use.

Consumers go to Costco for personal use – Retail

Contributions of Wholesalers and Retailers
Provide the items customers need in a convenient location. (Place Utility)

Save customers the time of having to contact each manufacturer to purchase a good. (Time Utility)

Provide an efficient process for transferring products from the producer to the customer. (Possession Utility)

Distribution Functions of Intermediaries
*Matching Buyers and Sellers* – Reducing the number of contact points between buyers and sellers.
*Providing Market Information* – Collect valuable data about customer purchases: who buys, how often, and how much. Can share this with producers to optimize product mixes and promotional efforts.
*Providing promotional and sales support* – Many intermediaries assist with advertising, in-store displays, and other promotional efforts for some or all of the products they sell.
*Gathering assortments of goods* – Intermediaries receive bulk shipments from producers and break them into more convenient units (known as Breaking Bulk).
*Transporting and Storing Products* – May also transport goods from producer to retail outlet
*Assuming Risks* – Product damage, theft, product perishability.
*Providing Financing* – Large intermediaries sometimes provide loans to smaller producers.
*Completing Product Solutions* – Value added Resellers or System Integrators to complete or customize solutions for customers.
*Facilitating Transactions and Supporting Customers* – Finding products that fit their needs and then provide customer support and technical assistance after the sale.
Merchant Wholesalers
Independent wholesalers that take legal title to goods they distribute. Independently owned businesses thst buy from producers, take legal title to the goods, and then resell them to retailers or to organizational buyers.

Small to midsized businesses usually

Full-Service Merchant Wholesalers
Provide a wide variety of services, such as storage, sales, order processing, delivery, and promotional support.
Rack Jobbers
Full-Service Merchant Wholesalers that set up displays in retail outlets, stock inventory, and perform other services such as marking prices on merchandise.
Limited-Service Merchant Wholesalers
Provide fewer services.
Drop Shippers
Natural resources such as lumber, grain, and coal are usually marketed through a class of limited0service wholesalers which take ownership but not physical possession of the goods they handle.
Merchant wholesalers that sell products to organizational customers for internal operations or the production of other goods, rather than to retailers for resale.
Agents and Brokers
Independent wholesalers that do not take title to the goods they distribute but may or may not take possession of those goods. Bring buyers and sellers together, they are generally paid a commission
Manufacturers’ Representatives
Sell various noncompeting products to customers in a specific region. By representing several manufacturers’ products, these reps achieve enough volume to justify the cost of a direct sales call.
Outlook for Wholesaling – Integrated Logistics Management
*1. Integrated Logistics Management* – (Outsourcing) Third party logistics firms continue to take over a wide range of tasks in supply chain management. Allows company to focus on core business activities. Transportation and Wholesalers.
Outlook for Wholesaling – Threat of Disintermediation
*2. Threat of Disintermediation* – The replacement of intermediaries by producers, customers, or other intermediaries when those other parties can perform channel functions more effectively or efficiently.

Role would be taken over by manufacturers on the upstream end or by customers (retailers and other organizational buyers) on the downstream end.

Outlook for Wholesaling – Unbundling of Services
*3. Unbundling of Services* – Pay for specific distribution services individually.
Outlook for Wholesaling – Industry Coonsolidation
*4. Industry Consolidation* – Consolidation seems likely as large firms with economies of scale buy up or drive out smaller, less competitive firms. Strategic Sourcing in which they forge closer relationships with a smaller number of strategic distribution partners.
Shopper Marketing (In-Store Marketing)
Refers to communication efforts directed at consumers while they are in the retail setting.
Wheel of Retailing
An evolutionary process by which stores that feature low prices gradually upgrade until they no longer appeal to price-sensitive shoppers and are replaced by a new generation of leaner, low price competitors.
Department Stores
Large stores that carry a variety of products in multiple categories, such as clothing, housewares, gifts, bedding, and furniture.
Specialty Stores
Stores that carry only a particular type of goods often with deep selection in those specific categories.

Home depot = category killers

Discount Stores
Retailers that sell a variety of everyday goods below the market price by keeping their overhead low.
Off-Price Retailers
Stores that sell designer labels and other fashionable products at steep discounts (TJ Maxx)
Online Retailers
Companies that use e-commerce technologies to sell over the internet; includes internet-only retailers and the online arm of store based retailers.
The application of internet technologies to wholesaling and retailing.
Warehouse Club
Giant store that offers both food and general merchandise at discount prices.
Outlook for Retailing
Overcapacity – too many strores
Continued Growth in online Retailing
Growth of multichannel Retailing
Format innovations – hybrid stores
Retail Theater.
Threat of Disintermediation
Multichannel Retailing
Coordinated efforts to reach consumers through more than one retail channel.
Retail Theater
The addition of entertainment or education aspects to the retail experience.
Distribution Mix
A combination of intermediaries and channels a producer uses to reach target customers.
Trading Partners
General term for any group of companies involved in a distribution network.
Slotting Allowances
In some industries, channel capacity is at such a premium that retailers can demand payments from producers in exchange for carrying their products for an agreed-upon length of time.

Help offset financial risk of bringing in new products.

Channel Length
P –> C
Producer to Consumer – Catalogs, telemarketing, infomercials, and the internet are using the shortest, simplest distribution channel.

More control over pricing, promotion, service, and delivery.

Channel Length
P –> R –> C
Producer to Retailer to Consumer – Producers that don’t want to be involved in sales to consumers can sell their products to retailers, who then resell them to customers.
Channel Length
P –> WS –> R –> C
Producer to Wholesaler to Retailer to Consumer – Manufacturers or suppliers of supermarket and pharmaceutical items often rely on two intermediary levels to reach consumers.

Works best for small producers that lack the resources to sell or deliver merchandise to individual retail sites. Also good for retailers that lack the space to store container size shipments of each product they sell.

Channel Length
P –> A/B –> WS –> R –> C
Producer to Agent/Broker to Wholesaler to Retailer to Consumer – Additional channel levels are common in certain industries, such as agriculture, where specialists are required to negotiate transactions or to perform interim functions such as sorting, grading or subdividing the goods.
Intensive Distribution
Market coverage strategy that tries to place a product in as many outlets as possible.
Selective Distribution
MCS that uses a limited number of carefully chosen outlets to distribute products.
Exclusive Distribution
MCS that gives intermediaries exclusive rights to sell a product in a specific geographic area.
Channel Conflict
Disagreement or tension between two or more members in a distribution channel, such as competition between channel partners trying to reach the same group of customers.
Marketing Systems
Arrangements by which channel partners coordinate their activities under the leadership of one of the partners.
Physical Distribution
All the activities required to move finished products from the producer to the consumer.
The planning, movement, and flow of goods and related information throughout the supply chain.
Steps in the Physical Distribution Process
*1. Forecasting* – Trying to predict which quantities of which products need to be where and when.
*2. Inventory Control* – Constant balancing between forecasted and actual demand, making sure enough goods are available to ship without stockpiling so much that costs get out of hand.
*3. Warehousing* – Often technological marvels with robotics, RFID tracking, and advanced software.
*4. Outboard Transportation* – Companies can choose rail, trucks, ships, air, pipelines, and digital networks.
Order Processing
Functions involved in receiving and filling customer orders.
Distribution Centers
Advanced warehouse facilities that specialize in collecting and shipping merchandise.
Intermodel Transportation
The coordinated use of multiple modes of transportation, particularly with containers that can be shipped by trucks, rail, and sea.