BUSINESS Chapter 4.doc

Chapter 4Channels of distribution Distribution channel A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. Philip Kotler Alternate distribution channels* Selling direct, such as via mail order, Internet and telephone sales (or through stores of its own)* Agent, who typically sells direct on behalf of the producer * Distributor (also called wholesaler), who sells to retailers * Retailer (also called dealer), who sells to end customers Level of distribution Channels* Direct channel (direct selling) A situation where a producer of a product deals directly with customers, and marketing intermediaries are not involvedAdvantages of direct channel 1) The full difference between the manufacturers cost and the price paid by customer goes to the producer.2) The producer can easily obtain firsthand feedback on the product, allowing quick response to customer complaints and the opportunity to quickly correct any deficiencies in design. Disadvantages of direct channel1) The producer must employ more salespeople.2) The producer must provide all product promotion3) The producer may have to provide credit to customers and incur the risk of bad debtOne-level channel (distributor/wholesaler) One marketing intermediary is between the producer and the customer * intermediary / merchants become owner of product and then resell them.)* Agents matches buyers and sellers without becoming owners One-level channel of distributionTwo-level channelTwo marketing intermediaries are between producer and customer.Small businesses that produce one or a few products commonly use a two-level channel of distribution. Factors that determines the optimal channels of distributionThe optimal channel of distribution depends on the products characteristics:1) Ease of transporting Product that can be easily transported is more likely to involve intermediaries,If not, more likely to sell directly to customers 2) Degree of standardization * Standardized products are more likely to use intermediaries* Products with unique specification for each customer must deal directly with customers 3) Internet ordersFirms that fill orders over the Internet tend to use a direct channel because their websites serves as a substitute for a retail store.Why are marketing intermediaries used? the greater efficiency in making goods available to target markets. Through their contacts, experience, specialization and scales of operation, intermediaries usually offer the firm more than it can achieve on its own.Functions of distribution channels1） Information: gathering and distributing marketing research and intelligence information about factors and forces in the marketing environment that are needed for planning and aiding exchange. (研究，即收集制订计划和进行交换时所必需的信息；) 2) promotion: developing and spreading persuasive communications about an offer 促销，即设计和传播有关商品的信息，鼓励消费者购买；3) contact: finding and communicating with prospective buyer 接洽，即为生产商寻找、物色潜在买主，并和买主进行沟通； 4) matching: shaping and fitting the offer to the buyers needs, including such activities as manufacturing, grading, sorting, assembling and packaging (配合，即按照买主的要求调整供应的产品，包括分等、分类、组装和包装等活动)5) negotiation: reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred (谈判，即代表买方或者卖方参加有关价格和其他交易条件的谈判，以促成最终协议的签定，实现产品所有权的转移；)6) Physical distribution: transporting and storing goods. ( 实体分销，即储藏和运输产品；)7) financing: acquiring and using funds to cover the costs of the channel work. ( 融资，即收集和分散资金，以负担分销工作所需的部分费用或全部费用；)8) Risk taking: assuming the risks of carrying out the channel work. 风险承担，即承担与从事渠道工作有关的全部风险 Types of wholesalersMerchant wholesaler 批发商Independently owned businesses that take the title to the merchandise that they handle1) Full-service wholesalerProvide a full line of services: carry stock, maintaining a sales force, offering credit, making deliveries, provide management assistance, etc.2) Limited-service wholesalerOffer fewer services than full-service wholesaler Different types: * Rack jobber 批发代销商， 超市批发商，货架批发商* Cash-and-carry wholesaler 付款提货批发商* Drop shipper 向厂商直接订货商 ，订货批发商 Rack jobber批发代销商，超市批发商，货架批发商A wholesale company that mainly serves grocery and drug retailers, mostly in non-food item . The rack jobber maintains ownership of the products until they are sold to customers. The retailer and the rack jobber then share the profits from these sales. A rack jobber reduces the risk to retailers that they will purchase merchandise no one will buy.Functions of rack jobber:* Delivery* Display* Pricing* Keeping inventory recordCash-and-carry wholesaler Carry limited line of fast-moving goods and sell to small retailers for cash. Normally do not deliverFunctions:* Holding inventory* Matching: sorting, grading, packaging * Financing : offer open account or credit cardDrop shipper 订货批发商 /向厂商直接订货商* Drop shipper does not carry inventory or handle the product. * Upon receiving an order, they select a manufacturer, who ships the merchandise directly to the customer. * The drop shipper assumes title and risk from the time that the order is accepted to its delivery to the customer. * They operate in bulk industries, such as coal, lumber and heavy equipment.Functions of drop shipper* Contacting (match buyer and producer)* Negotiating* Risk takingDrop shipper 订货批发商 /向厂商直接订货商Drop shipping is a supply chain management technique in which the wholesaler does not keep goods in stock, but instead transfers customer orders and shipment details to producer, who then ship the goods directly to the customer. The wholesaler make their profit on the difference between the factory price and retail priceThe two main benefits of drop shipping : no upfront inventory to purchase and a positive cash flow cycle. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customers money, but has not yet paid the producer. Retail pricing Cost-plus pricing.（成本加成定价法） adding a markup (价格加成，毛利） amount (or percentage) to the retailers cost. Suggested retail pricing. charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer. Psychological prices or odd prices: a little less than a round number, Types of retailersDepartment store a wide range of products without a single predominant merchandise line. Department store The exterior of Harrods in London.Discount store* a type of department store, * Sell at prices lower; * wide assortments of goods; * sell branded goods* pursue a high-volume, low-profit strategy designed to attract price-conscious consumers. A typical Wal-Mart discount department store.Supermarket* a wide variety of food and household merchandise. * larger in size and has a broad selection of goods under a single roof at relatively low prices. * ease of parking and, frequently, the convenience of shopping hours* Certain products are often sold as loss leaders * massive expenses for newspaper and other advertisingPackaged food aisles of Fred Meyer in Portland, OregonHypermarket A hypermarket is a gigantic retail facility which combines a supermarket and a department store. A consumer can ideally satisfy all of his or her routine weekly shopping needs in one trip to the hypermarket. . General shop / corner shop杂货店* located in a small town or in a rural area * a broad selection of merchandise crammed into a relatively small space* Mainly serving customers from the surrounding areas Specialty store 专卖店* small stores which specialize in a specific range of merchandise and related items. (single-line store)* Located in high street, shopping centers* Provide high levels of service and expertise* Pricing policy is generally in the medium to high range Mail order house Mail order order merchandise through a telephone call or web site for mail delivery, as e-commerce or online shopping. In the United States, an advantage of this type of shopping is that the merchant is typically not required by law to add sales tax to the price of the goods, unless they have a physical presence in the customers state. Instead, most states require the resident purchaser to pay applicable taxes. Vending machine 自动售货机Vending machineItems sold via vending machine vary by country. For example, some countries sell alcoholic beverages such as beer through vending machines, while other countries do not allow this. Cigarettes were commonly sold in the U.S. through these machines, but this practice is increasingly rare due to concerns about underaged buyers. Sometimes a pass has to be inserted in the machine to prove ones age. In some European countries, by contrast, cigarette machines remain common. Virtual stores /on-line shop Online shopping is the process consumers go through to purchase products or services over the internet. Online shopping is popular mainly because of its speed and ease of use. Open /charge/credit/account赊购账An account held by a customer at a retail shop that allows him to pay for any goods purchased at the end of a stated period (usually one month)Utility (效用，实用）In economics, utility is the level satisfaction the person derives from a good or service. Utility is inherently subjective and thus difficult to measure Utilities/value added by intermediary * Time utility* Place utility* Ownership utility* Form utility* Information utility* Service utilityPhysical distribution / logistics * Logistics is the art and science of managing and controlling the flow of goods, energy, information and other resources like products, services, and people, from the source of production to the marketplace. It is difficult to accomplish any marketing or manufacturing without logistical support. It involves the integration of information, transportation, inventory, warehousing, material handling, and packaging. Logistics - WarehousingLogistics - Material handling Modes of transportation railan energy-efficient and capital-intensiveModes of transportation truckModes of transportation pipelineOil and natural gas pipelines * Pipeline transport, pioneered in the late 19th century, is the most economical way to transport large quantities of oil or natural gas over land. Compared to railroad, it has lower cost per unit and also higher capacity. Although pipelines can be built even under the sea, that process is both economically and technically very demanding, so the majority of oil at sea is transported by tanker ships. Modes of transportation water Container ships Modes of transportation air * Drop shipper does not carry inventory or handle the product. * Upon receiving an order, they select a manufacturer, who ships the merchandise directly to the customer. * The drop shipper assumes title and risk from the time that the order is accepted to its delivery to the customer. * They operate in bulk industries, such as coal, lumber and heavy equipment.Functions of drop shipper* Contacting (match buyer and producer)* Negotiating* Risk takingDrop shipper 订货批发商 /向厂商直接订货商Drop shipping is a supply chain management technique in which the wholesaler does not keep goods in stock, but instead transfers customer orders and shipment details to producer, who then ship the goods directly to the customer. The wholesaler make their profit on the difference between the factory price and retail priceThe two main benefits of drop shipping : no upfront inventory to purchase and a positive cash flow cycle. A positive cash flow cycle occurs because the seller is paid when the purchase is made. The seller usually pays the wholesaler using a credit card or credit terms. Therefore, there is a period of time in which the seller has the customers money, but has not yet paid the producer. Retail pricing Cost-plus pricing.（成本加成定价法） adding a markup (价格加成，毛利） amount (or percentage) to the retailers cost. Suggested retail pricing. charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer. Psychological prices or odd prices: a little less than a round number, Types of retailersDepartment store a wide range of products without a single predominant merchandise line. Department store The exterior of Harrods in London.Discount store* a type of department store, * Sell at prices lower; * wide assortments of goods; * sell branded goods* pursue a high-volume, low-profit strategy designed to attract price-conscious consumers. A typical Wal-Mart discount department store.Supermarket* a wide variety of food and household merchandise. * larger in size and has a broad selection of goods under a single roof at relatively low prices. * ease of parking and, frequently, the convenience of shopping hours* Certain products are often sold as loss leaders * massive expenses for newspaper and other advertisingPackaged food aisles of Fred Meyer in Portland, OregonHypermarket A hypermarket is a gigantic retail facility which combines a supermarket and a department store. A consumer can ideally satisfy all of his or her routine weekly shopping needs in one trip to the hypermarket. General shop / corner shop杂货店* located in a small town or in a rural area * a broad selection of merchandise crammed into a relatively small space* Mainly serving customers from the surrounding areas Specialty store 专卖店* small stores which specialize in a specific range of merchandise and related items. (single-line store)* Located in high street, shopping centers* Provide high levels of service and expertise* Pricing policy is generally in the medium to high range Mail order house Mail order order merchandise through a telephone call or web site for mail delivery, as e-commerce or online shopping. In the United States, an advantage of this type of shopping is that the merchant is typically not required by law to add sales tax to the price of the goods, unless they have a physical presence in the customers state. Instead, most states require the resident purchaser to pay applicable taxes. Vending machine 自动售货机Vending machineItems sold via vending machine vary by country. For example, some countries sell alcoholic beverages such as beer through vending machines, while other countries do not allow this. Cigarettes were commonly sold in the U.S. through these machines, but this practice is increasingly rare due to concerns about underaged buyers. Sometimes a pass has to be inserted in the machine to prove ones age. In some European countries, by contrast, cigarette machines remain common. Virtual stores /on-line shop Online shopping is the process consumers go through to purchase products or services over the internet. Online shopping is popular mainly because of its speed and ease of use. Open /charge/credit/account赊购账An account held by a customer at a retail shop that allows him to pay for any goods purchased at the end of a stated period (usually one month)Utility (效用，实用）In eco