Lamb, Hair, McDaniel Chapter 14 Marketing Channels and Retailing 2013-2014

Lamb, Hair, McDaniel

Chapter 14Chapter 14

Marketing Marketing Channels and Channels and

RetailingRetailing

2013-2014

Explain what marketing channels and channel intermediaries are describe their functions and activities

Describe common channel and strategies, and the factors that influence their choice

Describe channel relationship types and roles, and their unique benefits and drawbacks

Explain the importance of the retailer within in the channel and within the national economy

List and understand the different classifications and types of retailers, as well as their different operational models

Explain the major tasks involved in developing a retail marketing strategy

Discuss the roles of CRM and customer data in retailer decision making

Describe trends in retail and channel management

Explain what marketing channels and channel

intermediaries are, and describe their functions

and activities

Marketing ChannelsMarketing Channels

Marketing ChannelMarketing Channela set of interdependent organizations that

eases the transfer of ownership as products move from producer to business user or

consumer.

Channel Membersnegotiate with one another, buy and sell products,

and facilitate the change of ownership between buyer and seller in the course of moving the

product from the manufacturer into the hands of the final consumer

Marketing Channel FunctionsMarketing Channel Functions

Specialization and division of labor Specialization and division of labor

Overcoming discrepancies Overcoming discrepancies

Providing contact efficiency Providing contact efficiency

Specialization and Specialization and Division of LaborDivision of Labor

Creates greater efficiency

Provides lower production costs

Create time, place, form, and exchange utility

Contact EfficiencyContact Efficiency

RetailerFirms in the channel that sell directly to customers

Retailers simplify distribution by cutting the number of transactions required by consumers, making an

assortment of goods available in one location

Exhibit 14.1Exhibit 14.1How Marketing Channels Reduce the Number of Required How Marketing Channels Reduce the Number of Required TransactionsTransactions

Channel IntermediariesChannel Intermediaries

MerchantWholesalerMerchant

Wholesaler

An institution that buys goods

from manufacturers, takes title to goods, stores them, and resells and ships them.

An institution that buys goods

from manufacturers, takes title to goods, stores them, and resells and ships them.

Agents andBrokers

Wholesaling intermediaries who facilitate the sale of a product by representing channel members.

Channel IntermediariesChannel Intermediaries

Merchant WholesalersMerchant

Wholesalers

Agents and

Brokers

Agents and

Brokers

itle to G

itle to

Factors Suggesting Type of Factors Suggesting Type of Wholesaling Intermediary to UseWholesaling Intermediary to Use

Product characteristicsProduct characteristics

Buyer considerationsBuyer considerations

Market characteristicsMarket characteristics

Channel Functions Channel Functions Performed by IntermediariesPerformed by Intermediaries

Contacting/Promotion

Negotiating

Risk Taking

Researching

Financing

Physically distributing

Storing

Sorting

FacilitatingFunctions

TransactionalFunctions

Logistical Functions

Describe common channel and strategies,

and the factors that influence their choice

Channel StructuresChannel Structures

Exhibit 14.2Exhibit 14.2Marketing Channels for Consumer ProductsMarketing Channels for Consumer Products

Exhibit 14.3Exhibit 14.3Channels for Business and Industrial ProductsChannels for Business and Industrial Products

Alternative Channel Alternative Channel ArrangementsArrangements

Multiple or dual distribution

Strategic channel alliances

Nontraditional channels

Factors Affecting Channel Factors Affecting Channel ChoiceChoice

Producer FactorsProducer Factors

Product FactorsProduct Factors

Market FactorsMarket Factors

Product FactorsProduct Factors

Product FactorsThat Affect ChannelChoices

Product Complexity Product Complexity

Product StandardizationProduct Standardization

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

Product PriceProduct Price

Producer FactorsProducer Factors

Producer FactorsThat Affect ChannelChoices

Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel Control

Levels of Distribution IntensityLevels of Distribution Intensity

IntensiveIntensiveA form of distribution aimed at having a product available in every outlet

A form of distribution aimed at having a product available in every outlet

SelectiveSelectiveA form of distribution achievedby screening dealers to eliminate all but a few in any single area

A form of distribution achievedby screening dealers to eliminate all but a few in any single area

ExclusiveExclusiveA form of distribution that established one or a few dealers within a given area

A form of distribution that established one or a few dealers within a given area

Levels of Distribution Intensity

IntensiveAchieve mass marketselling. Convenience goods.

Selective

Exclusive

Work with selected intermediaries. Shopping and some specialty goods.

Work with singleintermediary. Specialty goods and industrial equipment.

Several

Intensity Level Objective Number of

Intermediaries

Describe channel relationship types and roles, and their unique

benefits and drawbacks

Types of Channel Relationships

Benefits Hazards

Arm’s Length Relationship

Fulfills a one time or unique need; low involvement/risk

Parties unable to develop relationship; low trust level

Cooperative Relationship

Formal contract without capital investment/long-term commitment; “happy medium”

Some parties may need more relationship definition

Integrated Relationship

Closely bonded relationship; explicitly defined relationships

High capital investment; any failure could affect every channel member

Types of Channel Relationships

Global Channel RelationshipsGlobal Channel Relationships

Global Channel Development

Channel policies differ

Gray marketing channels

Social Influences in ChannelsSocial Influences in Channels

PartneringPartnering

ConflictConflict

LeadershipLeadership

ControlControl

PowerPower

Channel Power, Control, Channel Power, Control, and Leadershipand Leadership

ChannelPower

A channel member’s capacity to control or influence the behavior of other channel members

ChannelControl

A situation that occurs when one marketingchannel member intentionally affects another member’s behavior

Channel Leader

A member of a marketing channel that exercises authority/power over the activities of other members

Channel ConflictChannel Conflict

Conflicts may occur if channel members:

Have conflicting goals

Fail to fulfill expectations of other channel members

Have ideological differences

Have different perceptions of reality

By COOPERATING, channel members can speed up inventory replenishment, improve

customer service, and reduce the total costs of the marketing channel.

Channel PartneringChannel Partnering

the joint effort of all channel members to create a channel that serves customers and creates a competitive advantage.

Explain the importance of the retailer within in the channel

and within the national economy

The Role of RetailingThe Role of Retailing

RetailingRetailing

All the activities directly related

to the sale of goods and services

to the ultimate consumer for

personal, non-business use.

The Role of Retailing The Role of Retailing

U.S. retailers employ nearly 15 million people

Retailers account for 10.8 percent of U.S. employment

Retailing accounts for 10 percent of U.S. businesses

Retailers account for two-thirds of the U.S. GDP

Industry is dominated by a few giant organizations, such as Walmart

List and understand the different classifications

and types of retailers, as well as their different operational models

Classification of Retail Operations

Classification Classification of Retail Operationsof Retail Operations

OwnershipOwnership

Level of ServiceLevel of Service

Product AssortmentProduct Assortment

PricePrice

Exhibit 14.4Exhibit 14.4Types of Stores and Their CharacteristicsTypes of Stores and Their Characteristics

Assort-ment Price Gross

Margin

Narrow

Med-Narrow

Medium

Med-Broad

Med-Narrow

Narrow

Mod-High

Moderate

Mod High

Moderate

Mod Low

Mod Lo-low

Low-very low

Low-High

Mod High

Mod Low

Low-High

Type of Retailer

Specialty Store

Supermarket

Convenience Store

Drugstore

Full-line Discounter

Specialty Discounter

Warehouse Clubs

Off-price Retailer

Restaurant

Service Level

Mod Hi-High

Low-Mod

Mod-Low

Low-High

Department Store Broad

Medium

Mod-High

Moderate

Mod High

LowSupermarket

Drugstore

Mod Hi-High

Low-Mod

Department Store

IndependentRetailers

Chain StoresChain Stores

FranchisesFranchises

Owned by a single person or partnership and not part of a larger retail institution

Owned and operated as a group by a single organizationOwned and operated as a group by a single organization

The right to operate a business or to sell a product

Classification Classification of Ownershipof Ownership

Level of Service

Full Full ServiceService

Self Self ServiceService

Product AssortmentProduct Assortment

Classification based on BREADTHBREADTH and DEPTHDEPTH of product lines.

PricePrice

Gross Margin

The amount of money the retailer makes as

a percentage of sales after the cost of goods

sold is subtracted.

Major Types of Retail Major Types of Retail OperationsOperations

Department StoresDepartment Stores

Specialty StoresSpecialty Stores

SupermarketsSupermarkets

DrugstoresDrugstores

Convenience StoresConvenience Stores

Discount StoresDiscount Stores

RestaurantsRestaurants5

Types of Retail OperationsTypes of Retail Operations

Department Store

A store housing several departments under one roof.Each department is headed by a buyer, or department head who selects merchandise.

Specialty Store

A retail store specializing in a given type of merchandise.

Types of Retail OperationsTypes of Retail Operations

SupermarketSupermarket

Large, departmentalized, self-service retailer. Specializes in food. Some use scrambled merchandising.

DrugstoreDrugstoreA retail store that stocks pharmacy-related products and services as its main draw.

A retail store that stocks pharmacy-related products and services as its main draw.

Convenience Store

A miniature supermarket, carrying only a limited line of high-turnover convenience goods.

Categories of Categories of Discount StoresDiscount Stores

Full-LineDiscounters

Specialty Discount Stores

WarehouseClubs

Off-PriceRetailers

RestaurantsRestaurants

• Straddle the line between retail and service establishments

• Sell tangible products (food, drink) but also services (food prep, food service)

• Many could be considered specialty retailers

Nonstore RetailingNonstore Retailing

Automatic VendingAutomatic Vending

Direct RetailingDirect Retailing

Direct MarketingDirect Marketing

Electronic RetailingElectronic Retailing

Automatic VendingAutomatic Vending

Is the use of machines to offer goods for sale.

Vending is the most pervasive retail business in the United States, with 11.5

MILLION vending machines selling billions or dollars worth of goods

annually.

Direct RetailingDirect Retailing

Door-to-DoorDoor-to-Door

Office-to-OfficeOffice-to-Office

Home Sales PartiesHome Sales Parties

Types of Direct MarketingTypes of Direct Marketing

Catalogs and Mail OrderCatalogs and Mail Order

Direct MailDirect Mail

TelemarketingTelemarketing

Electronic RetailingElectronic Retailing

Shop-at-Home NetworksShop-at-Home Networks5

Top E-Tailers by Sales VolumeTop E-Tailers by Sales Volume

America's Top Ten Retail Businesses

Rank Company Web Sales Volume

(in billions)

1 Amazon.com Inc. $48.08

2 Staples Inc. $10.6

3 Apple Inc. $6.66

4 Walmart.com $4.9

5 Dell Inc. $4.6

6 Office Depot Inc. $4.1

7 Liberty Media (owns QVC) $3.76

8 Sears $3.6

9 Netflix Inc. $3.2

10 CDW $3.0

Beyond the Book

The Basic Forms of FranchisingThe Basic Forms of Franchising

Product and Trade Name Franchising

Dealer agrees to sell in products provided by a manufacturer or wholesaler.

BusinessFormat

Franchising

BusinessFormat

Franchising

An ongoing business relationship between a franchiser and a franchisee.

Top 10 FranchisorsTop 10 Franchisors

1. 1. Hampton HotelsHampton Hotels2. 2. SubwaySubway3. 3. 7-Eleven7-Eleven4. 4. ServProServPro5. 5. Days InnDays Inn6. 6. McDonald’sMcDonald’s7. 7. Denny’sDenny’s8. 8. H&R BlockH&R Block9. 9. Pizza HutPizza Hut10. Dunkin Donuts10. Dunkin Donuts

List the major tasks involved in developing

a retail marketing strategy

Retail Marketing Strategy

Retail Marketing StrategyRetail Marketing Strategy

Develop a Retailing Mix

Define & Select a Target Market

Defining a Target MarketDefining a Target Market

STEP 1:Segment the Market

DemographicsDemographics

GeographicsGeographics

PsychographicsPsychographics

Choosing the Retailing MixChoosing the Retailing Mix

STEP 2:Choose the Retailing Mix

ProductProduct

PromotionPromotion

PersonnelPersonnel

PlacePlace

PricePrice

PresentationPresentation

Exhibit 14.6Exhibit 14.6The Retailing MixThe Retailing Mix

Choosing the Retailing MixChoosing the Retailing Mix

Product Offering

The mix of products offered to the

consumer by the retailer; also

called the product assortment or

merchandise mix.

Retail Promotion StrategyRetail Promotion Strategy

Public RelationsPublic Relations

PublicityPublicity

Sales PromotionSales Promotion

AdvertisingAdvertising

The Proper LocationThe Proper Location

Economic growth potential

CompetitionCompetition

GeographyGeography

Choosing a Community

The Proper LocationThe Proper Location

Land costsLand costs

Zoning RegulationsZoning Regulations

Public Transportation

MallMall

Socioeconomic characteristics

Traffic flowsTraffic flows

Choosing a Specific Site

Choosing the Type of Site

Freestanding StoreFreestanding Store

Shopping CenterShopping Center

Retail Prices

QualityImage

High PriceHigh Price Low Price Low Price

Good ValueSingle Price Point

Presentation Presentation of the Retail Storeof the Retail StoreEmployee type and densityEmployee type and density

Fixture type and densityFixture type and density

SoundSound

OdorsOdors

Visual factorsVisual factors

Merchandise type and densityMerchandise type and density

PersonnelPersonnel

Suggestion SellingSuggestion Selling

Trading UpTrading UpTwo Common

SellingTechniques

Channel and Retailing Channel and Retailing Decisions for ServicesDecisions for Services

Prioritize customer service by focusing on four areas:•Minimizing wait times•Managing service capacity•Improving service delivery•Establishing channel-wide network coherence

The Relationship between Retailer The Relationship between Retailer Decision Making and Customer DataDecision Making and Customer Data

Discuss the roles of CRM and customer data in retailer

decision making

Retailing and CRMRetailing and CRM

Retailers gain insight to who

purchases product

Build stronger relationships with

customers

CRM Database

Describe trends in retail and channel

management

New Developments in Retailing

New Developments in RetailingNew Developments in Retailing

M-commerceM-commercePurchasing goods through mobile devices.

Purchasing goods through mobile devices.

Online retailers offer greater variety of options for delivery, including one-use package

delivery boxes.

Chapter 14 VideoNew Balance Hubway

New Balance Hubway is a bike sharing system in the Boston area that uses automated stations to provide a bike service to people looking to go short distances. In this clip, employees discuss how the retailing model works for Hubway, and how the difference between brick and mortar and e-business models allowed them to succeed in the Boston area.

CLICK TO PLAY VIDEO

Part 4 VideoScripps Networks Interactive

Distribution Decisions

Scripps Networks Interactive owns the content on popular networks such as Food Network, DIY, and the Cooking Channel. Deciding how to best get their content (both digital and solid products) into different locations takes some careful thought, and various decision makers discuss the process in this video clip.

CLICK TO PLAY VIDEO

Lamb, Hair, McDaniel Chapter 14 Marketing Channels and Retailing 2013-2014

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Lamb, Hair, McDaniel Chapter 17 Personal Selling and Sales Management 2014-2015 1© Cengage Learning 2015. All Rights Reserved

Chapter 1 1 Lamb, Hair, McDaniel An Overview of Marketing 2014-2015 © Cengage Learning 2015. All Rights Reserved

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