Marco Romero CHAPTER 15 DISTRIBUTING PRODUCTS Marketing intermediaries middlemen organizations that assist in moving goods and services from producers to businesses B2B and from businesses to consumers B2C o Marketers say intermediaries add value and that value greatly exceeds the cost Channel of distribution 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 o Helps ensure communication flows and the flow of money and title to goods o Helps ensure the right quantity and assortment of goods will be available when and where needed Agents brokers marketing intermediaries who bring buyers and sellers together and assist in negotiating and exchange but don t take title to the goods Wholesaler a marketing intermediary that sells to other organizations o Part of the B2B system Retailer an organization that sells to ultimate consumers eg students Utility in economics the want satisfying ability or value that organizations add to The utilities created by intermediaries Form utility the value producers add to materials in the creation of finished goods and Time utility adding value to products by making them available when they re needed Place utility adding value to products by having them where people want them 7 goods or services services 24 hour stores Eleven on highways Possession utility doing whatever is necessary to transfer ownership from on part to another including providing credit delivery installation guarantees and follow up service Information utility adding value to products by opening two way flows of information between marketing participants newspapers salespeople libraries web sites and gov publications 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 Retail sale is the sale of goods and service to consumers for their own use 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 goods they handle THREE COMMON TYPES OF LIMITED FUNCTION WHOLESALERS Rack jobbers wholesalers that furnish racks or shelves full of merchandise to retailers display products and sell on consignment 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 A FULL SERVICE WHOLESALER WILL Marco Romero 1 Provide sales force to sell the goods to retailers and other buyers 2 Communicate manufacturers advertising deals and plans 3 Maintain inventory thus reducing the level of the inventory suppliers have to 4 Arrange or undertake transportation 5 Provide capital by paying cash or quick payments for goods 6 Provide suppliers with market information they can t afford or can t obtain carry themselves 7 Undertake credit risk by granting credit customers and absorbing any bad debts thus relieving the supplier of this burden 8 Assume the risk for the product by taking title THE WHOLESALER MAY PERFORM THE FOLLOWING SERVICES TO CUSTOMERS 1 Buy goods the end market will desire and make them available to customers 2 Maintain inventory thus reducing customers costs 3 Transport goods to customers quickly 4 Provide market information and business consulting services 5 Provide financing through granting credit which is especially critical to small retailers 6 Order goods in the types and quantities customers desire Agents who represent producers are either manufacturer s agents or sales agents o As long as they do not carry competing products manufacturer s agents many represent several manufacturers in a specific category o Sales agents represent a single producer in a typically larger territory Brokers have no continuous relationship with the buyer or seller o Once they negotiate a contract between the parties their relationship ends There are three categories of retail distribution intensive selective and exclusive Intensive distribution distribution that puts products into as many retail outlets as possible convenience goods such as candy cigarettes gum and magazines Selective distribution distribution that sends products to only a preferred group of retailers in an area manufacturers of appliances furniture and clothing This helps ensure producers of quality sales and service Exclusive distribution distribution that sends products to only one retail outlet in a given geographic area Luxury auto manufacturers often use exclusive distribution as do producers of specialty goods such as skydiving equipment and fly fishing products Other types of nonstore retailing includes telemarketing vending machines kiosks and carts direct selling multilevel marketing and direct marketing Electronic retailing selling goods and services to ultimate customers over the internet Telemarketing the sale of goods and services by telephone Direct selling selling to customers in their homes or where they work Direct marketing any activity that directly links manufacturers or intermediaries with the ultimate consumer Four systems have emerged to tie firms together corporate systems contractual systems administered systems and supply chains Corporate distribution system a distribution system in which all of the organizations in the channel of distribution are owned by one firm Marco Romero Contractual distribution system a distribution system in which members are bound to cooperate through contractual agreements There are three forms of contractual systems 1 Franchise systems such as McDonalds KFC and Baskin Robbins The franchisee agrees to all the rules regulations and procedures established by the franchisor Results in consistent quality and level of service you find in most franchised organizations 2 Wholesaler sponsored chains such as Ace Hardware and IGA food stores Each store signs an agreement to use the same name participate in chain promotions and cooperate as unified system of stores even though each is independently owned and managed 3 Retail cooperatives such as Associated Grocers This arrangement is much like a wholesaler sponsored chain except it is initiated by the retailers The same degree of
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