Chapter 15 Distributing Products The Emergence of Marketing Intermediaries Marketing intermediaries organizations that assist in moving goods and services from producers to businesses B2B and from businesses to consumers B2C Channel of distribution a whole set of marketing intermediaries such as agents brokers wholesalers retailers that join together to transport and store goods in their path or channel form producers to consumers Agents brokers marketing intermediaries who bring buyers and sellers together and assist in negotiating an exchange but don t take title to the goods Wholesaler a marketing intermediary that sells to other organizations part of B2B system Retailer an organization that sells to ultimate consumers Channels of distribution help ensure communication flows and the flow of money and title to goods also help ensure that the right quantity and assortment of good will be available when and where needed Intermediaries can transport store sell advertise faster and more cheaply than most manufacturers could Having a wholesaler cuts the number of contacts Marketers say intermediaries add value and that value greatly exceeds the costs Economists say that intermediaries add costs and should be eliminated Marketing intermediaries can be eliminated but their activities cant you can eliminate some wholesalers and retailers but then consumers or someone else would have to perform the intermediaries tasks including transporting and storing goods The Utilities Created by Intermediaries Utility in economics the want satisfying ability or value that organizations add to goods or services by making them more useful or accessible to consumers than they were before o Form changing raw materials into useful products usually done by producers ex farmer separates the wheat from the chaff o Time utility adding value to products by making them available o Place utility adding value to products by having them where people when they re needed want them o Possession utility doing whatever is necessary to transfer ownership from one party to another including providing credit delivery installation guarantees and follow up service o Information utility adding value to products by opening 2 way flows of information between marketing participants o Service utility adding value by providing fast friendly service during and after the sale and by teaching customers how to best use products over time Wholesale Intermediaries A retail sale is the sale of goods and services to consumers for their own use A wholesale sale is the sale of goods and services to businesses and institutions like schools or hospitals for use in the business or to wholesalers or retailers for resale Merchant wholesalers independently owned firms that take title to the gods they handle 80 of wholesalers fall in this category o Full service wholesalers perform all the distribution functions o Limited function wholesalers perform only selected functions but try to do them especially well Rack jobbers wholesalers that furnish racks or shelves full of merchandise to retailers display products and sell on consignment meaning they keep title to the goods until they re sold and then share the profits with the retailer Cash and carry wholesalers wholesalers that serve mostly smaller retailers with a limited assortment of products Drop shippers wholesalers that solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer own the merchandise but don t handle stock or deliver it tend to handle bulky products like coal lumber and chemicals Agents brokers never own the products they distribute like wholesalers do o Agents brokers usually do not carry inventory provide credit or o Agents brokers earn commissions while wholesalers earn profit o Agents maintain long term relationship brokers are usually hired on assume risks temporary basis o Manufacturer s agents sales agents represent producers Retail Intermediaries Inverse distribution distribution that puts products into as many retail outlets as possible convenience goods like candy cigarettes gum Selective distribution distribution that sends products to only a preferred groups of retailers in an area appliances furniture clothing Exclusive distribution distribution that sends products to only one retail outlet in a given geographic area luxury auto manufactures skydiving equipment Non store Retailing the internet Electronic retailing selling goods and services to ultimate customers over Telemarketing the sale of goods and services by telephone Vending machines good location Carts and kiosks cheap Direct selling selling to consumers in their homes or where they work cosmetics vacuum cleaners Multi level marketing Direct marketing any activity that directly links manufacturers or intermediaries with the ultimate customer o Includes direct mail catalog sales telemarketing online marketing Building Cooperation in Channel Systems Corporate distribution system a distribution system in which all of the organizations in the channel of distribution are owned by one firm Contractual distribution system a distribution system in which members are bound to cooperate through contractual agreements o Franchise systems franchisee agrees to all of the rules regulations and procedures established by the franchisor o 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 is independently owned and managed o Retail cooperatives like a wholesaler sponsored chain but initiated by the retailers Administered distribution system a distribution system in which producers manage all of the marketing functions at the retail level Supply chains value chain the sequence of linked activities that must be performed by various organizations to move goods from the sources of raw materials to ultimate consumers o Longer than a channel of distribution bc it includes links from suppliers to manufacturers whereas the channel of distribution begins with manufacturers Supply chain management the process of managing the movement of raw materials 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 Logistics Getting Goods to Consumers Efficiently Logistics the marketing activity that involves
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