Marketing Exam 3 Chapter 16 Third P Place Accounts for about half of marketing costs After producing the product the biggest cost is getting the product to where it needs to be If you want to cut prices need to look at PLACE but PLACE is hardest to change Producers huge quantities of limited variety Customers want tiny quantities with huge variety opposites of each other challenge of place Manufacturers aren t good at making products available need new business to get products when where and how we want them Middlemen are essential in this process o Middlemen buy sell provide transportation and storage provide the finances and risk bearing provide information and promotion o Game of Channels of Distribution Audition process all possible roles manufacturers wholesalers retailers transportation Many possible players for the roles manufacturers don t want to do it and the consumers are not in a position to take over the roles Marketing intermediaries and marketing facilitators do much of this middlemen Competition within these channels of distribution there are large amounts of specialists competition Cost costs are incurred by moving products around the most success in marketing is when people use new technology in channels of distribution There is a bad connotation with middlemen idea that they charge more than manufacturers But they are essential Manufacturers can make more money by going through the middlemen as opposed to doing it themselves MM make product available when where and how the customer wants it therefore increasing its value MM perform more efficiently o Reduce of transactions has more places for one stop shopping o Economies of sale cost advantages when you do things large scale o Specialization very good at what they do example of car companies and how they don t specialize in transporting things from one place to another transportation middlemen are better at that Channel Length How many middlemen Short channel 0 1 Middlemen Long Channel 2 middlemen o Lots of factors influence the need for MM Reduces need for MM products are costly bulky expensive complicated complex Hard to specialize in this Products produced domestically also reduce MM Discourages use of MM buyers are few in number large geographically perishable concentrated When this is reversed encourages need for MM o Need MM when products are international In consumer markets there s almost always need for MM o Some companies use fewer MM and do things themselves even if its more expensive simply because they want control Most Common channels for consumer goods M W R C M R C No MM M C Up to 8 different channels o In B2B there is almost no need for MM bc there s much less consumers and the business are close to each other Basic Pattern Money product money o M W Business or other organization Wholesalers are truly in the middle between these 2 groups of business buyers wither of which could fire wholesalers by taking over their tasks Manufacturers use wholesalers when they think they can do it efficiently Advantages of wholesalers one stop shop closer to customer middlemen when trying to reach a specific consumer o Need Marketing Channel Management also known as supply chain management refers to a set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers manufacturers warehouses stores and transportation intermediaries Wholesalers firms that buy products from manufacturers and resell them to retailers retailers sell products directly to consumers Do selling for manufacturers Retailers are beginning to look for ways to bypass wholesalers becoming smaller business For retailers and other businesses they act as buyers do buying for manufacturers Distribution center a facility for the receipt storage and redistribution of goods to company stores or customers may be operated by retailers manufacturers or distribution specialists Direct marketing channel there are no intermediaries between the buyer and seller Indirect marketing channels one or more intermediaries work with manufacturers to provide goods and services to customers Vertical channel conflict when supply chain members that buy and sell to one another are not in agreement about their goals roles or rewards Horizontal channel conflict can occur when there is disagreement or discord among members at the same level of marketing channel such as two competing retailers or two competing manufacturers Independent marketing channel several independent members manufacturer wholesaler retailer each attempts to satisfy its own objectives and maximize its profits often at the expense of its other members Vertical marketing system a marketing channel in which the members act as a unified system Administered vertical marketing system there is no common ownership or contractual relationships but the dominant channel member controls or holds the balance of power o Power in a marketing channel exists when one firm has the means or ability to dictate the actions of another member at a different level of distribution Reward power offering reward often monetary incentive if one member will do what the more powerful member wants it to do Coercive power arises when one member threatens to punish the other channel member for not undertaking certain tasks Referent power if the supplier desperately wants to be associated with a member because being known as an important supplier enables the member to attract other retailers business Expertise power one member relies on the expertise of another member Information power one member exerts power by providing or withholding specific information Legitimate power is based on getting a channel member to behave in a certain way because of a contractual agreement Contractual Vertical marketing system independent firms at different levels of the marketing channel join together through contracts to obtain economies of scale and coordination and to reduce conflict o Franchising the most common type of contractual vertical marketing agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet by using a name and format developed and supported by the franchisor Combines the entrepreneurial advantages of owning a business with the efficiencies of vertical marketing systems that function under single ownership Corporate vertical marketing the parent company has complete control an can dictate the priorities and objectives of the marketing channel because