1+ intermediary levels

• More levels- less control- greater channel complexity
• Connected by: physical flow of product, flow of ownership, payment flow, info flow, and promo flow- channels with 1 or few levels more complex

• produceràwholesaleràretaileràconsumer, poor performance
  • Each intermediary seeks to max own profits even at the expense of profits for the system as a whole
  • No formal means for resolving conflict

• members at different levels work together in a unified way; producer+wholesaler+retailerà consumer

Horizontal Marketing Systems

• 2+ companies at one level join together to follow a new marketing opportunity
• Combine financial, production, or marketing resources
• Ex: Wal-Mart and McD’s
• Work well globally
• Join w/ comp. or non-comp

Multichannel Distribution System

• A DS in which a single firm sets up 2+ marketing channels to reach one or more customer segments

• Hybrid marketing systems

• Ex: sell directly to segment 1 through internet and indirectly to segment 2 through retailers, indirectly through distributors and dealers to business segment 1, and directly through sales force to business segment 2
• Ex: John Deere- sells with JD retailers, Lowes, online
• Advantages: expands sales, gains opportunities to tailor its products to the specific needs of diverse customer segments

Changing Channel Organization

• Changes in technology + growth of direct and online marketingà disintermediation

1.analyzing consumer needs

2.setting channel objectives

3. identifying major objectives

4.evaluating the major alternatives

• customer shares real time data on sales and current inventory levels w/ the supplier, supplier takes full responsibility for managing inventories and deliveries- need close cooperation

logistics concept that emphasizes teamwork inside the company and among all the marketing channel organizations to maximize the perf of the entire distribution system

·      The right product (assortment utility)

·      At the right place (place utility)

·      At the right time (time utility)

o   More manufacturer control

o   Closer customer contact- interior design- talk to designer directly- could be really valuable

o   Eliminate double margins

·      Benefits of Indirect

o   More rapid penetration and broader coverage

o   Benefit of specialization

o   Variable rather than fixed cost structure

• relatively large, low-cost, low-margin, high-volume, self service operation- serve customer’s total needs for grocery and household products

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  •  
    • combine manufacturer’s outlets with off-price retail stores and department store clearance outlets- Off 5th

• 2+ outlets, commonly owned and controlled
  • Can buy in large quantities at lower prices and gain promotional economies
  • Hire specialists to deal with pricing, promotion, merchandising, inventory control, and sales forecasting

Product Assortment

• Should differentiate the retailer and match target’s expectations
• Offer merchandise that no other competitor carries- ex: LF has European brands that no one else has

Services Mix

• Inviting customers to ask questions
• Ex: Home Depot offers mix of services to do-it-yourselfers, “how to” classes to proprietary credit cards

Store Atmosphere

• Create unique store experience that suits target market and moves customers to buy

Price Decision

• Retailer’s price policy must fit its target market and positioning, product and service assortment, and competition
• Either high markups on lower volume (specialty stores) or low markups on higher volumes (discount stores)

• merging of consumers, products, prices, and retailers
  • Greater competition for retailers
  • More difficult to differentiate offerings

• new retailers begin as low-margin, low-price, low-status to challenge retailers that have become “fat”à have successà upgrade facilities and servicesà costs increaseà need to increase pricesà eventually become like the retailers they replaced
• Explains initial success and later troubles of department stores, supermarkets, and discount stores and recent success of off-price retailers

all activities involved in selling goods and services to those buying for resale or business use

firm engaged primarily in wholesaling activities- buy mostly from producers, sell mostly to retailers, industrial consumers, and other wholesalers

Wholesalers add value by:

• Selling and promoting
• Buying and assortment building
• Bulk breaking
• Warehousing
• Transportation
• Financing

•  
  • primarily selling and delivery function- limited line of semiperishable merchandise- sell for cash as they make rounds

•  
  • merchandise- sell for cash as they make rounds
  • Drop shippers: don’t carry inventory or handle product- receive order, select manufacturer who ships to customer- assumes title and risk from order to delivery

·      personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships, includes presentations, trade shows, incentive programs

o   Most effective tool at the stage of building up buyer’s preferences, convictions, and action, buyer feels a great need to listen and respond, US firms spend 3 times more on personal selling than advertising·      personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships, includes presentations, trade shows, incentive programs

o   Most effective tool at the stage of building up buyer’s preferences, convictions, and action, buyer feels a great need to listen and respond, US firms spend 3 times more on personal selling than advertising

·      direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships, includes catalogs, telephone marketing, kiosks, internet, mobile

o   Less public, immediate and customized, interactive, well suited for highly targeted markets and to build one on one customer relationships 

carefully integrating and coordinating the company’s many communications channels to deliver a clear, consistent, and compelling message about the organization and its products, more companies are adopting this concept

·      Carefully coordinate advertising, personal selling, public relations, direct marketing, sales promotion to ensure clear brand messages

Steps of Effective Communication

1.     Identify the target audience

2.     Set communication objectives

3.     Design a media

4.     Choose media

5.     Select the message source: how the audience views the communicator

6.     Collect feedback: change the promotion program and the product itself

1.     Identify the target audience

                                 i.     Current users and potential buyers, what, how, when, where, who

                                 i.     Target audience can be any of the buyer-readiness stages: the stages consumers normally pass through on their way to purchase, including awarenessà knowledgeà likingà preferenceà convictionà purchase

                                 i.     get Attention, hold Interest, arouse Desire, obtain Action, (the AIDA model),

                               ii.     Three types of appeals: rational, emotional, moral

                             iii.     Have strong format for the message

4. Choose media

                                 i.     Personal communication channels: two or more people communicate directly with each other, face to face, phone, mail or internet chat

                               ii.     Word-of-mouth influence: personal communication about a product between target buyers and neighbors, friends, family members, and associates

                             iii.     Buzz  marketing: have opinion leaders for brands: getting them involved to spread information about a product or service to others in their communities

                              iv.     Non-personal communication channels: media that carry messages without personal contact or feedback, major media, atmospheres, and events, affects buyers directly

·      FirmàTradeàConsumers: using the sales force and trade promotion to push the product through channels, the producer promotes the product, to channel members, who in turn promote to final consumers, business to business and put more funds into personal selling, sales promotion, advertising, and PR

o   Influence wholesalers/retailers to stock and promote your brand in store

o   Emphasize trade promotions and personal selling in resource allocation

·      FirmßTradeßConsumers: spending a lot on advertising and consumer promotion to induce final consumers to buy the product, creating a demand vacuum that “pulls” the product through the channel, business to consumer put more of their funds in advertising, followed by sales promotion, personal selling, and then PR

o   Influence consumer to go to the retail store and demand your brand

o   Emphasize advertising and consumer promotions in resource allocation

Industrial

Personal Selling > Sales Promotion > Advertising

Advertising > Personal Selling > Sales Promotion

Product Life Cycle

Advertising: Introduction (Awareness) / Maturity (Differentiation)

Promotion: Growth (Trial) / Maturity (Defend Share)

§  people or cartoon characters singing about the product

a.    specific media within each general media type

building good relations with the company’s various publics by obtaining favorable publicity, building up a good corp image, and handling or heading off unfav rumors

Major Steps: (managing sales force)

1.Designing sales force strategy and structureà

2. Recruiting and selecting salespeopleà

3. Training salespeopleà

4. Compensating salespeopleà

5. Supervising salespeopleà

6. Evaluating salespeople

·      learns as much as possible about a prospective customer before making a sales call, good research, should set call objectives 

·      tell the “value story” to the buyer, showing how the company’s offer solves the customer’s problems

o   Customer-solution approach: buyers want answers and results, sales people must develop solutions to present

o   Qualities that customers dislike: pushy, late, deceitful, unprepared, disorganized

o   Like: good listening, empathy, honesty, dependable, thoroughness, and follow-through

o   Plan presentation methods: clear message 

·      when salesperson asks customer for the order

·      to ensure satisfaction and repeat business, schedule follow-up call

·      persuade resellers to carry a brand, give it shelf space, promote it in advertising, push it to consumers

Developing the sales promotion program

·   1 . Decide on size of incentive

·      2. Set conditions for participation

·      3. Length of promotion