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Marketing Mix (PLACE)

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Title: Marketing Mix (PLACE)


1
Marketing Mix (PLACE)
  • Learning objectives
  • After reading this chapter, you should be able
    to
  • Explain why companies use marketing channels and
    discuss the functions these channels perform
  • Discuss how channel members interact and how they
    organise to perform the work of the channel
  • Identify the major channel alternatives open to a
    company and how companies select, motivate and
    evaluate channel members
  • Discuss the nature and importance of retailers,
    wholesalers and physical distribution.
  • Explain integrated logistics, including how it
    may be achieved and its benefits to the company.

2
Marketing Mix (PLACE)
  • Specifically, in this chapter, we will examine
    the following questions concerning
  • marketing channels
  • What is the nature of marketing channels?
  • How do channel firms organise to do the work of
    the channel?
  • What problems do companies face in designing and
    managing their channels?
  • What role does physical distribution play in
    attracting and satisfying customers?
  • How are marketing channels changing and what are
    their implications for marketers?
  • Most firms cannot bring value to customers by
    themselves. Instead, they must
  • work closely with other firms in a larger value
    delivery network. Let us take a
  • look at what is meant by a value delivery network.

3
Supply chain and the value delivery network
  • Producing a product and making it available to
    buyers requires building relationships not just
    with customers, but also with key suppliers and
    resellers in the companys supply chain.
  • The supply chain consists of upstream and
    downstream partners, including suppliers,
    intermediaries and even intermediaries
    customers.
  • Upstream from the manufacturer or service
    provider is the set of firms that supply the raw
    materials, components, parts, information,
    finances and expertise needed to create a product
    or service.
  • Marketers, however, have traditionally focused on
    the downstream side of the supply chain--- on
    the marketing channels or distribution channels
    that look forward towards the customer.
  • Marketing channel partners such as wholesalers
    and retailers form a vital connection between the
    firm and its target consumers.
  • Both upstream and downstream partners may also be
    part of the firms supply chains. But it is the
    unique design of each companys supply chain that
    enables it to deliver superior value to
    customers.
  • An individuals firms success depends not only on
    how it performs but also on how well its entire
    supply chain and marketing channel competes with
    competitors channels.

4
The supply chain of industries
Example of a shoe manufacturer
Outbound
Hides and skin producer
Leather producer
distributor
Shoe manufacturer
Wholesaler
Retailer
Consumers
Agent
Example of cloths manufacturer
Outbound
Cotton producer
Distributors
Textile Industry/manufac turer
Inbound
Agents
Wholesalers
Retailers
Consumers
Example of biscuit manufacturer
Sugar/flour Banana p
Distributor
Producer
Agent
Wholesaler
Retailer
Consumers
Example of bread manufacturer
Flour producer
Distributor
Retailer
Producer
Agent
Wholesaler
Consumer
Example of car manufacturer
Iron and steel Tyre producers
Distributor
Consumers
Inbound
Car producer
Wholesaler
Retailer
Example of aircraft manufacturer
Accessories producer
Aircraft producer e.g. Boeing/Airbus
Wholesaler
Consumer
5
Value delivery network
  • A network made up of the company, suppliers,
    distributors and customers who partner with
    each other to improve the performance of the
    entire system.
  • Marketing channel (distribution channel)
  • It is a set of interdependent organisations
    involved in the
  • process of making a product or service available
    for use or
  • consumption by the consumer or industrial user.

6
The nature and importance of marketing channels
  • Marketing channels helps to make goods and
    services reach the final consumers
  • They help to break bulk
  • They help to communicate with customers about
    products
  • They help to promote, distribute, products
  • HOW CHANNEL MEMBERS HELP TO ADD VALUE

7
MARKETING MIX ( PLACE)DISTRIBUTION CHANNEL
DISTRIBUTION CHANNEL IN CONSUMER MAREKT
Producer
Consumer
Channel 1
Producer
Retailer
Consumer
Channel 2
Retailer
Wholesaler
Consumer
Producer
Channel 3
Producer
Wholesaler
Retailer
Consumer
Agent
Channel 4
Producer
Business Customer
Channel 1
Producer
Business distributor
Business Customer
Channel 2
Producer
Sales branch
Business customer
Channel 3
Sales branch
Business distributor
Producer
Business customer
Channel 4
DISTRIBUTION CHANNEL IN ORGANISATIONAL MARKET
8
PLACE / DISTRIBUTION
  • Place refers to the location of products.
  • Place also refers to the process of making the
    products available to customers at the right
    price, place, quantity, and quality.
  • Products produced must be made available to
    customers. The aim of business is to satisfy
    customers therefore in order to satisfy
    customers, the products produced must be made
    available to them at the right time, right place,
    price, right quantity and right quality.
  • A market oriented organisation makes sure it
    delivers the product so that customers can easily
    have access to the products at the right quantity
    and quality.
  • If products are produced and there are not
    distributed, then the marketing process will be
    incomplete. Marketing involves exchange and
    therefore if customers cannot get the products
    produced, therefore exchange cannot be possible.

9
PLACE / DISTRIBUTION
  • Distribution' is one of the four aspects of
    marketing. A distributor is the middleman between
    the manufacturer and retailer. After a product is
    manufactured by a supplier/factory, it is
    typically stored in the distributor's warehouse.
    The product is then sold to retailers or
    customers. The other three parts of the marketing
    mix are product management, pricing, and
    promotion.

10
Supply Chain
  • A supply chain, logistics network, or supply
    network is a coordinated system of organizations,
    people, activities, information and resources
    involved in moving a product or service in
    physical or virtual manner from supplier to
    customer. The entities of a supply chain
    typically consist of manufacturers, service
    providers, distributors, sales channels (e.g.
    retail, ecommerce) and consumers (end customers).
    Supply chain activities (aka value chains or life
    cycle processes) transform raw materials and
    components into a finished product that is
    delivered to the end customer. Supply chain links
    value chains.

11
Intermediaries
  • WHOLESAILING - WHOLESALERS
  • A wholesaler is a person who buys large
    quantities of goods and resells to other
    distributors rather than to ultimate consumers. A
    wholesaler is also a middleman.
  • Wholesaling consists of the sale of
    goods/merchandise to retailers, to industrial,
    commercial, institutional, or other professional
    business users or to other wholesalers and
    related subordinated services.
  • According to the United Nations Statistics
    Division Wholesale is the resale (sale without
    transformation) of new and used goods to
    retailers, to industrial, commercial,
    institutional or professional users, or to other
    wholesalers, or involves acting as an agent or
    broker in buying merchandise for, or selling
    merchandise, to such persons or companies.
    Wholesalers frequently physically assemble, sort
    and grade goods in large lots, break bulk, repack
    and redistribute in smaller lots, for example
    pharmaceuticals store, refrigerate, deliver and
    install goods, engage in sales promotion for
    their customers and label design."

12
WHOLESALER
  • Business that buys goods from manufacturers and
    that sells goods, usually in large quantities to
    retailers, who in turn sell them to the end user.
    Virtually everything sold on a retail basis can
    be purchased from a wholesaler, who acts as
    middleman between the manufacturer (or owner, and
    the retailer. Wholesalers help manufacturers by
    absorbing some of the costs of sales and
    distribution, and allow manufacturers to
    concentrate their resources on manufacturing.
  • Wholesaling is the selling of merchandise to
    anyoneeither a person or an organizationother
    than the end consumer of that merchandise.
  • Wholesalers, who are sometimes referred to as
    middle agents, represent one of the links in the
    chain along which most goods pass on their way to
    the marketplace. As intermediaries between
    producers and consumers of goods, wholesalers
    facilitate the transport, preparation of
    quantity, storage, and sale of articles
    ultimately destined for customers. Wholesalers
    are extremely important in a variety of
    industries, including such diverse product areas
    as automobiles, grocery products, plumbing
    supplies, electrical supplies, and raw farm
    produce. They are particularly vital to the
    operations of small retailers. Whereas large
    retail companies buy directly from the
    manufacturer and often have their own
    intermediate warehousing operations, the limited
    resources of independent retail outlets makes
    alliances with wholesalers a practical necessity.

13
WHOLESALER
  • Strictly speaking, although a wholesaler may own
    or control retail operations, wholesalers do not
    sell to end-customers. Indeed, many wholesale
    operations are themselves owned by retailers or
    manufacturers. Even in these instances, however,
    the enterprise's wholesaling branch exists to
    facilitate the movement of goods from one area to
    a market demand in another area. Wholesaling
    provides manufacturers with an expanded consumer
    market potential in terms of geographical
    locations and consumer purchasing power while at
    the same time providing a cash flow for the
    manufacturer
  • Wholesalers are successful only if they are able
    to serve the needs of their customers, who may be
    retailers or other wholesalers. Some of the
    marketing functions provided by wholesalers to
    their buyers include

14
WHOLESALER
FUNCTIONS PROVIDED BY WHOLESALERS TO THEIR
BUYERS
  • Provide producer's goods in an appropriate
    quantity for resale by buyers.
  • Provide wider geographical access and diversity
    in obtaining goods.
  • Ensure and maintain a quality dimension with the
    goods that are being obtained and resold.
  • Provide cost-effectiveness by reducing the number
    of producer contacts needed.
  • Provide ready access to a supply of goods.
  • Assemble and arrange goods of a compatible nature
    from a number of producers for resale.
  • Minimize buyer transportation costs by buying
    goods in larger quantities and distributing them
    in smaller amounts for resale.
  • Work with producers to understand and appreciate
    consumerism in their production process.

15
TYPES OF WHOLESALERS
  • Although there are a number of ways to classify
    wholesalers, the categories used by the
  • Census of Wholesale Trade are employed most
    often. The three types of wholesalers
  • are 1) merchant wholesalers 2) agents, brokers,
    and commission merchants and 3)
  • manufacturers' sales branches and offices.
  • MERCHANT WHOLESALERS Merchant wholesalers are
    firms engaged primarily in buying, taking title
    to, storing, and physically handling products in
    relatively large quantities and reselling the
    products in smaller quantities to retailers
    industrial, commercial, or institutional
    concerns and other wholesalers. These types of
    wholesaling agents are known by several different
    names, including wholesaler, jobber, distributor,
    industrial distributor, supply house, assembler,
    importer, and exporter, depending on their
    services.

16
TYPES OF WHOLESALERS
  • According to E. Jerome McCarthy and William D.
    Perreault Jr., authors of Basic Marketing,
    merchant wholesalers account for the large
    majority of whole-saling establishments and
    wholesale sales. "As you might guess based on the
    large number of merchant wholesalers, they often
    specialize by certain types of products or
    customers," added McCarthy and Perreault. "They
    also tend to service relatively small geographic
    areas. Merchant wholesalers also differin how
    many of the wholesaling functions they provide.
    There are two basic kinds of merchant
    wholesalers 1) service (sometimes called
    full-service wholesalers) and 2) limited-function
    or limited-service wholesalers." The latter
    category of wholesalers, which itself is divided
    up into little niches, offer varying levels of
    service in such areas as product delivery, credit
    bestowal, inventory storage, provision of market
    or advisory information, and sales.

17
TYPES OF WHOLESALERS
  • Agents, brokers, and commission merchants are
    also independent middlemen who do not (for the
    most part) take title to the goods in which they
    deal, but instead are actively involved in
    negotiating and other functions of buying and
    selling while acting on behalf of their clients
    (commission merchants typically are limited to
    agricultural goods). They are usually compensated
    in the form of commissions on sales or purchases.
    Agents, brokers, and commission merchants usually
    represent the non-competing products of a number
    of manufacturers to several retailers. This
    category of wholesaler is particularly popular
    with producers with limited capital who can not
    afford to maintain their own sales forces.
  • MANUFACTURERS' SALES BRANCHES AND OF FICES
    Manufacturers' sales branches and offices are
    owned and operated by manufacturers but are
    physically separated from manufacturing plants.
    They are used primarily for the purpose of
    distributing the manufacturers' own products at
    the wholesale level. Some have warehousing
    facilities where inventories are maintained,
    while others are merely sales offices. Some of
    them also wholesale allied and supplementary
    products purchased from other manufacturers.

18
THE CHANGING LANDSCAPE OF WHOLESALING
  • The future of wholesaling appears somewhat
    ambiguous. One major force affecting wholesaler
    activity is growth in the power of retail chain
    stores. The continued mergers and acquisitions
    taking place between similar regional chains
    since 1970 means that independent retailers will
    have a lesser need for wholesalers. The emergence
    of the Internet as a sales tool has also impacted
    wholesalers, many of whom are struggling to adopt
    profitable methodologies that make use of this
    new medium. Another negative factor has been an
    increased emphasis, on the part of both
    manufacturers and end users, on cutting
    distribution costs. However, there is a
    countervailing force at work in that retailing is
    becoming increasingly fragmented as more and more
    specialized retailers cater to specialized market
    niches. As this specialization continues, using
    wholesalers becomes the most cost-efficient way
    for manufacturers to cover fragmented retailer
    market segments.
  • The wholesaler is able to bundle several
    manufacturers' items into combinations that can
    all be sold through the specialist outlet. In
    most cases, wholesalers will capitalize on market
    opportunities among specialized, independent
    retailers while they lose ground to chains buying
    directly from manufacturers. Many wholesalers
    have adapted nicely by becoming efficient
    importers, upgrading their operations with
    computers, improving inventory handling, and
    automating their warehouses.

19
KEYS TO SUCCESSFUL WHOLESALING
  • Industry observers contend that for many
    wholesalers, the ultimate key to success will be
    an ability to establish closer alliances with
    retail specialists that offer solid, long-term
    growth prospects or concentrate on merchandise
    categories where chains still must use
    wholesalers because of needed buying
    efficiencies. "Most wholesalers are busy changing
    quickly to offer much more to their retailers
    than the assembly and conveyance of products,"
    wrote David Merrefield in Supermarket News. "Most
    are mobilizing groups of independent retailers
    into virtual chains of stores that use a common
    banner and hew to uniform standards. Wholesalers
    must actively collect sales data from affiliated
    retailers to aggregate and make it known to
    manufacturers. Wholesalers must also make known
    to their retailer affiliates that the retailers
    are partners with their wholesaler, their
    vendors, and even their fellow retailers, all of
    whom must join the quest for overall low-cost
    operation.
  • In addition to establishing good working
    relationships with independent retailers,
    wholesalers can also take several other steps to
    give them the best chance of survivingand even
    thrivingin today's competitive marketplace.
    These include smart, customer-oriented marketing
    programs, superior customer service, efficient
    operations management processes, and innovative
    business strategies for expanding into new
    product lines, industries, or geographic
    territories. "Error-free management of a
    wholesale operation is impossible," admitted the
    editors of How to Run a Small Business, "due to
    the wide variety of items that most wholesalers
    handle, and the many imponderables (such as
    delays in shipments from vendors, unforeseeable
    spurts in consumer demands, and even the vagaries
    of weather) that wholesalers are subject to. But
    all wholesalers have the same problems. What
    distinguishes successful wholesalers is how well
    they manage the variables under their control."

20
Retailing - RETAILERS
  • Retailing consists of the sale of
    goods/merchandise for personal or household
    consumption either from a fixed location such as
    a department store or kiosk, or away from a fixed
    location and related subordinated services.1 In
    commerce, a retailer buys goods or products in
    large quantities from manufacturers or importers,
    either directly or through a wholesaler, and then
    sells individual items or small quantities to the
    general public or end user customers, usually in
    a shop, also called store. Retailers are at the
    end of the supply chain. Marketers see retailing
    as part of their overall distribution strategy.

21
RETAILING
  • Shops may be on residential streets, or in
    shopping streets with little or no houses, or in
    a shopping center. Shopping streets may or may
    not be for pedestrians only. Sometimes a shopping
    street has a partial or full roof to protect
    customers from precipitation.
  • Shopping is buying things, sometimes as a
    recreational activity. Cheap versions of the
    latter are window shopping (just looking, not
    buying) and browsing.

22
Department store
  • A department store is a retail establishment
    which specializes in selling a wide range of
    products without a single predominant merchandise
    line. Department stores usually sell products
    including apparel, furniture, appliances, and
    additionally select other lines of products such
    as paint, hardware, toiletries, cosmetics,
    photographic equipment, jewelry, toys, and
    sporting goods. Certain department stores are
    further classified as discount department stores.
    Discount department stores commonly have central
    customer checkout areas, generally in the front
    area of the store. Department stores are usually
    part of a retail chain of many stores situated
    around a country or several countries.

23
Shops and stores
  • There are three major types of retailing, two of
    which have buildings that the customer can visit
    to do business with. The first is
    counter-service, once the only type of shop, but
    now rare except for selected items (see below).
    The second, and now more widely used method of
    retail, is self-service. Quickly increasing in
    importance are online shops, the third type,
    where products and services can be ordered for
    physical delivery, downloading or virtual
    delivery.
  • Even though most retailing is done through
    self-service, many shops offer counter-service
    items, e.g. controlled items like medicine and
    liquor, and small expensive items.
  • Shops used to deal with just one type of article.
    In the nineteenth century, in France, arcades
    were invented, which were a street of several
    different shops, roofed over. From this there
    soon developed, still in France, the notion of a
    large store of one ownership with many counters,
    each dealing with a different kind of article was
    invented it was called a department store. In
    cities, these were multi-story buildings which
    pioneered the escalator. In the mid-twentieth
    century in the United States there developed the
    mall, midway between the arcade and the
    department store. A mall consists of several
    two-storey department stores linked by arcades
    (many of whose shops are owned by the same firm
    under different names). All the stores rent their
    space from the mall owner.
  • A recent development is a very large shop called
    a superstore. (Superstore (also megastore or
    supercenter) is a name used for various kinds of
    largest retail stores).

24
  • Retailing and Wholesaling

25
ROAD MAP Previewing the Concepts
  • Explain the roles of retailers and wholesalers in
    the distribution channel.
  • Describe the major types of retailers and give
    examples of each.
  • Identify the major types of wholesalers and give
    examples of each.
  • Explain the marketing decisions facing retailers
    and wholesalers.

26
What is Retailing?
  • Retailing includes all the activities involved in
    selling products or services directly to final
    consumers for their personal, non-business use.

27
Types of Retailers
Retailers are classified based on
Amount of Service They Offer
Breadth Depth of Product Lines
Relative Prices Charged
How They Are Organized
28
Amount of Service
  • Self-Service Retailers
  • Serve customers who are willing to perform their
    own locate-compare-select process to save
    money.
  • Limited-Service Retailers
  • Provide more sales assistance because they carry
    more shopping goods about which customers need
    information.
  • Full-Service Retailers
  • Usually carry more specialty goods for which
    customers like to be waited on.

29
Product Line Classification
Specialty Stores Carry narrow product lines with
deep assortments within those lines.
Department Stores Carry a wide variety of
product linestypically clothing, home
furnishings, and household goods. Each line is
operated as a separate department managed by
specialist buyers or merchandisers.
30
Product Line Classification
Supermarket Large, low-cost, low-margin,
high-volume, self-service store that carries a
wide variety of food, laundry, and household
products.
Convenience Stores Small stores located near
residential areas that are open long hours 7
days a week and carry a limited line of
high-turnover convenience goods.
31
Web-Based Supermarket
In the battle for share of stomachs, Safeway
and many large supermarkets have added Web-based
sales.
32
Product Line Classification
Superstores Much larger than regular
supermarkets and offer a large assortment of
routinely purchased food products, nonfood items,
and services.
Category Killers Giant specialty stores that
carry a very deep assortment of a particular line
and is staffed by knowledgeable employees.
HYPER MARKET Huge stores that combine
supermarket, discount and warehouse retailing
in addition To food, they carry furniture,
appliances, clothing and many other products.
33
Discussion Question
  • What type of impact did the emergence of category
    killers have on department stores?

34
Relative Prices Classification
Discount Store A retail institution that sells
standard merchandise at lower prices by accepting
lower margins and selling at higher volume.
Off-Price Retailer Retailer that buys at
less-than-regular wholesale prices and sells at
less than retail. Examples are factory outlets,
independents, and warehouse clubs.
35
Relative Prices Classification
Factory Outlet Off-price retailing operation
that is owned and operated by a manufacturer and
that normally carries the manufacturers surplus,
discontinued, or irregular goods.
Independent Off-Price Retailer Off-price
retailer that is either owned and run
by entrepreneurs or is a division of a larger
retail operation.
36
Factory Outlets
Factory outlet malls and value-retail centers
have blossomed in recent years, making them one
of retailings hottest growth areas.
37
Relative Prices Classification
Warehouse Club Off-price retailer that sells a
limited selection of brand-name grocery items,
appliances, clothing, and a hodgepodge of other
goods at deep discounts to members who pay
annual membership fees.
Click Here to Visit Sam's Club
38
Organizational Classification
Chain Stores Two or more outlets that are owned
and controlled, have central buying and
merchandising, and sell similar lines of
merchandise.
Voluntary Chain A wholesaler-sponsored group of
independent retailers that engages in bulk buying
and common merchandising.
39
Organizational Classification
Retailer Cooperative A group of independent
retailers that bands together to set up a
jointly owned, central wholesale operation and
conducts joint merchandising and promotion
efforts.
Franchise A contractual association between a
manufacturer, wholesaler, or service
organization (a franchiser) and independent
businesspeople (franchisees) who buy the right to
own and operate one or more units in the
franchise system.
40
Franchising
Franchisees now command 35 of all retail sales
in the U.S. Subway is one of the fastest growing
franchises, with nearly 20,000 shops in 74
countries.
41
Organizational Classification
Merchandising Conglomerates A free-form
corporation that combines several diversified
retailing lines and forms under
central ownership, along with some integration of
their distribution and management functions.
42
Retailer Marketing Decisions
43
Assortment and Services Decisions
Product Assortment Brand of merchandise Merchandi
sing events
Services Mix Different numbers and types of
services are key to non-price store differentiati
on
Store Atmosphere Physical layout and feel of
the store
44
Price, Promotion, Place Decisions
Price policy must fit its target market and
positioning, product and service assortment, and
competition
Can use any or all of the promotion
toolsadvertising, personal selling, sales
promotion, public relations, and direct
marketingto reach consumers
Retailers can locate in CBDs, various types
of shopping centers, strip malls, or power centers
Location, Location, Location!
45
Mall of America
  • The Mall of America megamall contains
  • Over 520 specialty stores
  • 49 restaurants
  • 7-acre indoor theme park
  • Underwater World featuring hundreds of marine
    specimens
  • A two-story miniature golf course.
  • Click Here to Visit the Mall of America

46
The Future of Retailing
  1. Growing Importance of Retail Technology
  2. Global Expansion of Major Retailers
  3. Retail Stores as Communities or Hangouts
  1. New Retail Forms and Shortening Retail Life
    Cycles
  2. Growth of Nonstore Retailing
  3. Retail Convergence
  4. Rise of the Megaretailers

47
Wholesaling
  • Wholesaling includes all activities involved in
    selling goods and services to those buying for
    resale or business use.

48
Functions Provided by Wholesalers
Selling Promoting
Management Services Advice
Buying Assortment Building
Market Information
Bulk-Breaking
Risk Bearing
Warehousing
Financing
Transportation
49
Types of Wholesalers
  • Merchant Wholesalers
  • Largest group of wholesalers
  • Account for 50 of wholesaling
  • Two broad categories
  • Full-service wholesalers Wholesale merchants
    industrial distributors. The wholesale merchants
    sells to retailers while the industrial
    distributors sells to industries.
  • Limited-service wholesalers cash-and-carry
    wholesalers, truck wholesalers or truck jobbers,
    drop shippers, Rack jobbers, Producers
    cooperatives mail-order wholesalers.

50
Types of Wholesalers
  • Brokers and Agents
  • Do not take title to goods
  • Perform fewer functions
  • Brokers bring buyers and sellers together
  • Agents represent buyers on more permanent basis
  • Manufacturers agents are most common type of
    agent wholesaler

51
Types of Wholesalers
  • Examples of agents Manufacturers agents,
    selling agents, purchasing agents, commission
    merchants, manufacturers and retailers branches
    and offices.

52
Wholesaling In Action
Grainger is by far the worlds leading wholesaler
of maintenance, repair, and operating
supplies. Click Here to Explore Grainger's
Website
53
Wholesaler Marketing Decisions
54
Trends in Wholesaling
Must Constantly Improve Services and Reduce Costs
Distinction Between Large Retailers Wholesalers
is Blurry
Will Continue to Increase the Services Provided
to Retailers
Wholesalers Are Now Going Global
55
Trends in Retailing
  • New retail forms and shortening lifecycles.
  • Growth of non-store retailing
  • Retail convergence
  • The rise of mega-retailers
  • The growing importance of retail technology
  • Global expansion of retailers

56
Rest Stop Reviewing the Concepts
  1. Explain the roles of retailers and wholesalers in
    the distribution channel.
  2. Describe the major types of retailers and give
    examples of each.
  3. Identify the major types of wholesalers and give
    examples of each.
  4. Explain the marketing decisions facing retailers
    and wholesalers.

57
MAJOR LOGISTICS FUNCTIONS
  • Warehousing
  • Inventory management
  • Transportation road, rail, water, pipeline, air,
    internet etc.
  • Logistics information management

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Goals of the logistics system
  • The goal of the marketing logistics system should
    be to provide a targeted level of customer
    service at the least cost.
  • The objective is to maximise profit and reduce
    cost
  • Providing maximum customer service at the least
    cost Maximum customer service implies rapid
    delivery, large inventories, flexible
    assortments, liberal returns policies and a host
    of other services--- all of which raise the
    distribution cost. In contrast, minimum
    distribution cost implies slower delivery, small
    inventories and larger shipping lots which
    represent a lower level of overall customer
    service.

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Integrated logistics management
  • Cross-functional teamwork inside the company
  • Building logistics partnership

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MARKETING LOGISTICS AND SUPPLY CHAIN MANAGEMENT
  • The nature and importance of marketing
    logistics.-
  • (Physical distribution or marketing logistics is
    the task involved in planning ,
  • implementing and controlling the physical flow of
    materials and final goods from
  • points of origin to points of use to meet the
    needs of customers at a profit).
  • To some managers, physical distribution means
    only trucks and
  • warehouses. But modern logistics is more than
    this. Physical distribution or
  • marketing logistics involves planning,
    implementing and controlling the physical
  • flow of materials, final goods and related
    information from points of origin to
  • points of consumption to meet customer
    requirements at a profit. In short, it
  • involves getting the right product to the right
    customer in the right place at the
  • right time.
  • Marketing logistics addresses not only outbound
    distribution (moving products from
  • the factory to customers), but also inbound
    distribution (moving products and materials
  • from suppliers to the factory) and reverse
    distribution (moving broken, unwanted or
  • excess products returned by consumers and
    resellers). In short, it involves entire supply
  • chain managementmanaging upstream and downstream
    value-added flows of materials, final goods and
    related information among suppliers, the company,
    resellers and final consumers.
  • Thus the logistics managers task is to
    coordinate the whole channel physical
    distribution system- the activities of suppliers,
    purchasing agents, marketers, channel members and
    customers. These activities include forecasting,
    purchasing, production planning, order
    processing, inventory management, warehousing and
    transportation planning.

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Companies today are placing greater emphasis on
logistics for several reasons
  1. Customer service and satisfaction have become the
    cornerstones of marketing strategy in many
    businesses, and distribution is an important
    customer service element.
  2. Improved logistics can yield tremendous cost
    savings to both the company and its customers.
  3. The explosion in product variety has created a
    need for improved logistics management.
  4. Finally, improvements in information technology
    have created opportunities for improving
    distribution efficiency.
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