Marketing and Distribution

Ch.11 Marketing
11.1 the American Marketing Association – marketing is the performance of business activities that direct the flow of goods and services from producer to consumer or user. The product must be transported, stored, priced, advertised and sold before the satisfaction of human needs.


11.2 Utilities Created by Marketing
All things must possess four basic utilities before they have value.
FORM UTILITY – some basic human need or want.
PLACE UTILITY – the value added to the product by transporting
TIME UTILITY – an item must be at the proper time
POSSESSION UTILITY – an item must have the ability to change ownership before it has value.

11.3 Marketing Functions
Buying
Selling
Transporting
Storing
Credit Granting
Risk taking
Pricing
Standardizing and grading
Marketing information

11.4 Marketing research –the systematic gathering, recording and analyzing of marketing data.
Defining the problem – before of research, come up with a clear and concise statement of the problem.
Collecting Secondary Data – through examination of records or library research.
Collecting Primary or First Hand Data (observation method, experimental method, survey method – questioning people)
Compiling and collating data (the data is organized manually or with use of electronic data processing equipment) so that it may be studied.
Interpreting the Finding – using the data after it has been analyzed.

11.5 The Marketing Concept
11.6 Market Segmentation
11.7 The Marketing Mix
- Product
- Channels of distributions
- Pricing structure
- Promotional activities
11.8 Consumer vs. Industrial Goods
Convenience goods – inexpensive goods that consumers wish to buy at the most convenient location and with a minimum of effort.
Shopping goods – some goods that people expect to shop for.
Specialty goods – a special effort to buy.

Industrial goods are
- relatively high cost
- frequently complex or technical in nature
- many industrial goods are used by only a small number of firms
6 basic categories of industrial goods:
- Installations
- Raw materials
- Parts
- Accessory equipment
- Supplies
- Service

11.9 The Product Life Cycle
Introduction
Grows
Maturity
Decline

11.10 Legislation Affecting the Product
The Pure Food and Drug Act (1906, amended 1930)
Mean Inspection Act (1907)
Wood Products Labeling Act (1939)
Lanham Act (1946)
Flammable Fabrics Act (1953)
Fair Packaging and Labeling Act (1967)

Ch.12 Channels of Distribution
12.2 Channels of distribution for consumer goods
Manufacturer –consumer, Manufacturer –retailer-consumer, Manufacturer –wholesaler-retailer-consumer, Manufacturer –agent-wholesaler-retailer-consumer.

12.3 Channels of distribution for industrial goods
Manufacturer –industrial user, Manufacturer –agent-industrial user, Manufacturer –wholesaler-industrial user

12.4 Nature of Wholesaling. Wholesalers are marketing institutions who buy goods and then resell to retailers, industrial users, or other wholesalers. Wholesalers do a large dollar volume than do retailers even though there are only 333,000 of them functioning in the US. Why do many retailers prefer to buy from wholesalers than directly from manufacturers? Because wholesalers connect with 1000th manufacturers and focus goods for 1000th users. It is easier then each from manufacturers will connect with all retailers. Most manufactures are specialized and small, with limited capital and marketing know-how. They concentrate on production, not on distribution functions. There is a problem of stocks also. Wholesales simplify the marketing process, collect information about market, grant credit and solve storage problems.

12.5 Types of Wholesales: Merchants and Agents.

Merchant wholesalers legally own the goods.
Full-line wholesalers usually carry a full stock of goods within a given merchandise category. Many provide credit and delivery.
Limited-line wholesalers specialize in a limited line of goods, such as auto parts. This group may include such specialists as: rack jobbers, drop shippers, and truck wholesalers.

Agent Wholesalers make sales on commission basis for the manufacturer. Some specific types of agents are:
manufacturer’s agent (under contract with manufacturer),
commission merchants (similar to manufacturer’s agent, but are usually given much more authority regarding price and terms of sale),
selling agents – they have a contract, but also full authority in price and terms of sale,
brokers –they may represent either the buyer or the seller,
auction companies for dealers– for goods that cannot be accurately graded such as tobacco, livestock, and used cars,
buying agents in the fashion industry.

12.6 Nature of Retailing.
Retailers are middlemen who buy goods from manufacturers, agents, or wholesalers and then store, price, sell, and deliver them to the consumer. Characteristically:
- Most retailers are small and specialized (2 millions persons, 80% are sole proprietorships or partnerships, but they account for only 50%of all retail sales. They generally specialize in specific lines of merchandise)
- Retailing is easy to enter; there are fewer capital and legal requirements.
- Retailing is highly competitive. Therefore, it affords the greatest risk.
- The failure rate is high.

12.7 Types of Retail Operations.

- General Stores started about the time of the industrial revolution and be found in almost every rural town.
- Specialty Stores for specific merchandise.
- Department Stores organize on a departmental base, and each department has its own manager or buyer.
- Supermarket and Discount Houses from 1930th – self-service and lower prices. Discount –with credit and delivery
- Nonstore Retailers: house-to-house selling, mail order, or machine vending.
- Franchising(in the fast-food industry, McDonald’s, Carroll’s, Wendy’s, Gino’s…, auto dealers and gasoline stations) – the franchise agreement
- Shopping Centers – are groups of retailers, often, a major department or discount store, one or more supermarkets, a bank, and a movie theatre are included in such a group arrangement.
- Scrambled lines – supermarkets for nonfood items sucj as housewares, clothing, health and beauty aids.

12.8 Transportation
Freight traffic Carried in the U.S.
Railroads - 36%
Pipelines - 24%
Trucks - 24%
Inland waterways –16%
Air freight - 1%

Source: I.C.C. Report, 1978


Ranking Transportation System in scale 1-best, 4-worst will be for
Rail: cost –2, speed –3, delivery flexibility – 2, bulk carrying –2
Truck: cost –3, speed –2, delivery flexibility – 1, bulk carrying –3
Water: cost –1, speed –4, delivery flexibility – 4, bulk carrying –1
Air: cost –4, speed –1, delivery flexibility – 3, bulk carrying –4

12.9 Storage:
a private warehouse involves either purchase or rental
a public warehouse is always rented; the individual leases a part of an independently owned warehouse serving a variety of customers. In selecting a storage facility, the factors to be considered include the volume of goods to be stored, the length of time for which storage is needed, and the cost. Banks are willing to accept public warehouse receipts because stored goods cannot be released without them.

12.10 Legislation Affecting Channels of Distributions

Sherman Act (1890) prohibits conspiracy to monopolize distribution channels
Clayton Act (1914) – dealing arrangements
Federal Trade Commission Act (1914) – prohibits use of unfair distribution policies
Robinson-Patman Act (1936) prohibits the granting of quantity discounts unless they can be justified in terms of the actual cost of serving different size customers.
Antimerger Act (1950) – amended the Clayton Act.