Marketing : Notes (2011)

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Main goals of distribution:

1)    Logistical:  Moving products from manufacturers to end users

2)    Strategic:  Achieve logistics goal in a way that:

a.     Value is created for customers

b.     Advantage is gained over competitors

Distribution Channels:

1)    Distribution:  All activities involved in getting product from where they are made to where customer purchases them

2)    Marketing Channel:  Coordinated Organization group & individuals involved in getting products from producers to consumers

Channels create Utility, efficiencies, resolve discrepancies, maximize perceived value, and satisfy/stimulate demand

Intermediaries:  People perform a number of important tasks for the passage of products to end users.

Middlemen:  An Intermediary between manufacturer and end user

What are Indirect/Direct Channels:

Direct Channel:  Producerà Customer

Indirect Channel:  Producerà Intermediaryà Customer

Why are Channels of Distribution efficient?

1)    Reduces overall cost of market exchange

2)    Reduces search costs for customers

3)    Maintain order in marketplace

What Utility do channels create?

1)    Time (product comes when customer wants them)

2)    Place (available in locations customers find efficient

3)    Possession

What are Intensive, Selective, and Exclusive distribution strategies?

1)      Intensive: Using ALL available outlets to distribute a product

2)      Selective:  Using SOME available outlets to distribute a product

3)      Exclusive: One outlet in geographic area to distribute a product

What is Channel Integration?

Vertical:  One-management member coordinate efforts to reach target market àretailer by wholesaler

What is Wholesaling?  Retailing? What do wholesalers and retailers do?

Wholesaling:  Transactions where products are bought for resale for making other products, or for other business operations

1)      Facilitates and expedites wholesale transactions

2)      Handles the physical distribution of goods

3)      Furnishes channel info to facilitate & manage channel

4)      Extend producers sales force

5)      Financial assistance for channel

6)      Transport & warehouse inventories

7)      Channel info to and from sellers to buyers

Retailing:  Final stage in a channel distribution.  All activities involves in sale of goods & services to final consumer for personal, family, or household use.

1)         Creates strategic & attractive product mixes

2)         Provide information

3)         Store products, mark prices, & pay for goods and services

4)         Conclude transactions with final consumers

Major types of Wholesalers?  Retailers?

Wholesalers:  Merchant workers, Brokers and Agents, Manufacturers & retailers’ branches & offices.

What is Product Mix?  What are the main product mix strategies?

Product Mix:  Thoughtful retailers can develop product mixes to appeal to either

Retail product mix is key in:

1)    Retail target marketing

2)    Competitive Differentiation

3)    Staying relevant & attractive to customers

Product mix width and depth:

Why is price so important?

1)    Most easily changed marketing mix tool

2)    Symbolic value to customers

3)    Affects generation directly

4)    Key component in the profit equation:

a.     Profit= total revenue – total costs

b.     Profit= (Price X quantity sold) – total costs

What are the two basic types of competition?

1)    Price Competition

a.     Fast competitive response

b.     Focus on beat/matching competitors prices

c.     Lowest cost firm most profitable

d.     Market with standardized products

e.     Price wars can hurt all firms

2)    Non-Price Competition

a.     Branding, service, quality to differentiate products

b.     Unit sales increased without changing price

c.     Effective when product features are difficult to imitate

d.     Basis for long term loyalty

What does a demand curve tell us?

1)    Demand Curves show us the quantity of products exposed to sell at various prices

2)    Slopes DOWN & RIGHT à

a.     Showing that decreases in price lead to increases in quantity sold

3)    Increased demand = larger quantities sold at same price

What is Price Elasticity of demand?  What is Elastic/Inelastic demand?

Price Elasticity of Demand: Quantity demand by large amount

Inelastic:  Quantity demand drops by small amount

What are fixed costs?  What are variable costs?

Fixed Costs: Costs that don’t change, regardless of the volume sold

Variable Costs:  Costs that increase as volume sold increases

How are Marginal Cost, marginal revenue and profit maximization related?

1)    Marginal Analysis:  looking what happens to costs & revenue when the firm sells one additional product

2)    Marginal Revenue:  Change in total revenue from sale of one additional product

3)    Profit Maximization occurs when Marginal cost = marginal revenue

What is breakeven analysis?  What does it tell us?  How is it calculated?

1)    Breakeven Analysis: The number of units needed to sell to make zero profits, or to just break even

a.     Costs of making a product equal the revenue made from selling it.

2)    Breakeven Point = Fixed costs/per-unit contribution to fixed costs.

3)    Breakeven Point = Total Fixed costs/ (Unit price – Unit variable Costs)

What are three basis’ of pricing?

1)    Cost

a.     Sees cost as the starting point for thinking about pricing

b.     Doesn’t take the customer into account

c.     Taken by itself, is not really a marketing approach

2)    Competition

a.     Competitor’s pricing decisions are the starting point for thinking about pricing

b.     Assumes pricing does not happen in a competitive vaccum

c.     Importance increases when competing products are relatively homogeneous

d.     May require frequent price changes

3)    Demand

a.     Understanding customer is starting point for thinking about pricing

b.     Studies customers preferences

c.     Customers pay higher price when demand is strong & lower when demand is weak

d.     Effectiveness depends on marketers ability to estimate demand accurately

e.     Embodies the marketing concept

What are some objectives of pricing?

1)    Market Share

2)    Survival

3)    ROI

4)    Profit

5)    Cash Flow

What are the steps in price setting?

1)    Determine Pricing objectives

2)    Asses Markets response to Price

3)    Evaluate Competitors prices

4)    Select basis for pricing

5)    Select pricing strategy

6)    Set specific price

How are Price and Value related in the customer’s mind?

1)    Price varies with:

a.     Product type

b.     Type of target market

c.     Purchase situation

2)    Value focus:

a.     Combines product’s price & quality attributes

b.     Helps customers differentiate products

c.     Guides marketers in evaluation of importance of price to the customer