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Final Review BU352.docx

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Wilfrid Laurier University
Dave Ashberry

Segmentation,Targeting,andPositioning Step 1: Establish Overall Strategy or Objectives Step 2: Segmentation Bases Segmentation Definition Sample Segments Base Geographic Grouping of consumers based on where Country, province, city, urban, rural, they live climate, continent Demographic Grouping of consumes according to easily Age, gender, income, education, measured, objective characteristics occupation, ethnic background, religion, family life cycle Psychographic How consumers describe themselves: self- Lifestyles, values, personality, self-concept values (goals for life), self-concept (image they have of themself), lifestyles Behavioural Grouping of consumers based on the Benefits sought, usage rates, user status, benefits they derive from products loyalty Step 3: Evaluate Segment Attractiveness -Identifiable - Firms must determine who is within their market -Reachable - Potential customer has to know if the product exists, what it can do, and how they can buy it -Responsive - Customers must react positively to firm’s offering -Substantial and Profitable - Once the firm has identified is potential target markets, it needs to measure their size and growth potential Step 4: Select Target Market -Undifferentiated segmentation strategy (mass marketing) – used when the product offers the same benefits to everyone -Differentiated segmentation strategy- several market segments with a different offering for each -Concentrated (or niche) segmentation strategy – a marketing strategy of selecting a single, primary target market and focusing all energies on providing a product to fit that market’s needs -Micromarketing (one-to-one) marketing –tailors a product or service an individual customer’s wants or needs Step 5: Identify and Develop Positioning Strategy -Positioning- the mental picture people have about a company and its products relative to competitors -Position based on value, product attributes, benefits and symbolism, competition, and market leadership -Perceptual map- displays, in two dimensions, the position of products or brands in the consumer’s mind -Positioning statement- expresses how a company wants to be perceived by consumers -For (target customer) -Who (Statement of the need or opportunity) -The (product name) is a (product category) -That (statement of the key benefit – that is compelling reason to buy) -Unlike (primary competitive alternative) -Our product (Statement of primary differentiation) Product, Branding, and Packaging Decisions Complexity of Products -Core customer value – the basic problem-solving benefits that consumers are seeking -Marketers convert core customer value into an actual product -Attributes such as the brand name, feature/design, quality level, and packaging are considered -Associated services- the nonphysical attributes of the product, including product warranties, financing, product support, and after-sale service Types of Consumer Products -Consumer products- products and services used by people for their personal -Specialty -Customers show a strong preference -Will expend considerable effort to search for best suppliers; luxury cars, legal specialists -Convenience -Consumer not willing to spend any effort to evaluate prior to purchase -Frequently used commodity items: beverages, bread, soap -Shopping -Customers will spend a fair amount of time comparing alternatives; furniture, travel -Unsought -Consumers do not think about or do not know about these products -Requires a lot of marketing effort and promotion; GPS when they were new Product Mix and Product Line Decisions -Product mix – the complete set of all products offered by a firm -Product lines – groups of associated items, such as those that consumers use together or think of as part of a group of similar products -Product category – an assortment of items that the customer sees as reasonable substitutes for one another -Brand- the name, term, design, symbol, or any other features that identify one seller’s good or service as distinct from those of other sellers -Product mix breadth- the number of product lines, or variety, offered by the firm -Product line depth – the number of products within a product line -Stock keeping units (SKUs) – individual items within each product category; the smallest unit available for inventory control Change Product Mix Breadth -Increase breadth -Firms often add new product lines to capture new or evolving markets or increase sales -Ex. Band-Aid now has over 40 products to heal cuts -Decrease breadth -Sometimes it is necessary to delete entire product lines to address changing market conditions -McCormick spices eliminates dozens of products each year Change Product Mix Depth -Firms occasionally either add to or delete from their product line depth -Ex. ConAgra expanded its presence in popcorn through 3 popular brands: Jiffy Pop, Act II, and Orville -Pros of a company offering its own competing products in the same category: -Gives consumer choice -Less space for competition -From time to time, it is necessary to delete product categories to realign resources Branding -A brand can use: name, logo symbols, characters, slogans, jingles and even distinctive packages -Consumers can’t buy products that they don’t know exist Brands have Value -Brand facilitate purchasing – brands are easily recognized by consumers -Brands establish loyalty – consumes trust brands and are less likely to switch -Brands protect from competition – consumers are often less sensitive to price -Brands reduce marketing costs – a well-known brand requires less promotion since the brand sells itself -Brands are assets – a brand can be bought and sold -Brands impact market value – a well-known brand can have a direct impact on a company’s value Brand Equity -Brand equity – the set of assets and liabilities linked to a brand that add to or subtract from the value provided by the product or service -Experts look at 4 aspects of a brand to determine its equity: brand awareness, perceived value, brand associations, and brand loyalty Brand Awareness -Brand awareness – measure show many consumers in a market are familiar with the brand and what it stands for -The more aware or familiar customers are with a brand, the easier their decision-making process will be -Marketers create brand awareness through repeated exposure Perceived Value -Perceived value – the relationship between a product or service’s benefits and its cost -Customers usually determine the offering’s value in relationship to that of its close competitors Brand Associations -Brand associations- the mental links that consumers make between a brand and its key product attributes; can involve a logo, slogan, or famous personality -Brand personality – refers to a set of human characteristics associated with a brand, which has symbolic or self-expressive meanings for consumers -Brand personality elements include male, female, young, old, fun-loving and conservative Brand Loyalty -Brand loyalty – occurs when a consumer buys the same brand’s product or service repeatedly over time rather than buying from multiple suppliers within the same category -Firms sometimes reward loyal consumers with loyalty or customer relationship management programs Branding Strategies Brand Ownership -Brands can be owned by any firm in the supply chain -Manufacturer brands (national brands) – brands owned and managed by the manufacturer – Ex. Coke -Private label brands (store brands) – brands developed and marketed by a retailer and available only from that retailer – Ex. PC Cola -Generic – a product sold without a brand name, typically in commodity markets – Ex. Cola Naming Brands and Product Lines -Corporate brand (family brand) – the use of a firm’s own corporate name to brand all of its product lines and products – Ex. Gap -Corporate and product line brands – the use of a combination of family brand name and individual brand name to distinguish a firm’s products – Ex. Kelloggs -Individual brands – the use of individual brand names for each of a firm’s product – Ex. Tide Choosing a Brand Name -Suggest benefits and qualities -Easy to pronounce, recognize, and remember -Capable of registration and legal protection -Translated easily Brand Extension -Brand extension – the use of the same brand name for new products being introduced to the same or new markets – Ex. Colgate -Benefits of brand extension: -Well established name -Brand known for high quality -Lower marketing costs -Synergy among products -Boost sales of the core brand -Not all brand extensions are successful – some can dilute brand equity Brand Dilution -Brand dilution – occurs when a brand extension adversely affects consumer perceptions about the attributes the core brand is believed to hold -To prevent potentially negative consequences of brand extensions, firms must consider the following: -Evaluate the fit between the product class of the core brand and the extension -Refrain from extending the brand name to too many products -Evaluate consumer perceptions of the attributes of the core brand and seek out extensions with similar attributes -Is the brand extension distanced enough from the core brand? Cobranding -Cobranding – the practice of marketing two or more brands together, on the same package or promotion Brand Licensing -Brand licensing- a contractual arrangement between firms, whereby one firm allows another to use its brand name, logo, symbols, or characters in exchange for a negotiated fee Packaging -Packaging provides the UPC label used by retail scanners as well as contents, directions, and other additional product information -The package can also be used to convey the brand’s positioning -Many consumers experience “wrap rage” – a great frustration with packaging that makes it seemingly impossible to get at the actual products -Retailers priorities for packaging – they want convenience in terms of displaying and selling the product Labelling -Labels on products and packages provide information the consumer needs for his or her purchase decision and consumption of the product -Label information is determined by regulations, and labelling rules vary from country to country -A product label is a communication tool Developing New Products New Product Introductions -Product- anything that is of value to a consumer an can be offered through a marketing exchange -New market offerings provide value to both firms and customers -Pioneers- new product introductions that establish a completely new market or radically change both the rules of competition and consumer preferences in a market; also called breakthroughs -First movers – product pioneers that are the first to create a market or product category, making them readily recognizable to consumers and thus establishing a commanding and early market share lead -Slightly repositioned/designed product – new package size for a soft drink -Innovation – the process by which ideas are transformed into new products and services that will help firms grow -Disruptive products require a higher level of learning from consumers and offer much more benefits than predecessor products -Without new products or services, the value of the firm will ultimately decline Diffusion of Innovation/Consumer Adoption Cycle -Diffusion of innovation –process by which a product or service spreads throughout a market group over time (adoption of innovation) -Purchasers can be divided into five groups according to how soon they buy the product after it has been introduced: Innovators – eager to try new products – almost obsessive – need to be first [2.5% of market] Early Adopters – Adopt early in product life cycle – rely more on group norms and values opinion leaders – don’t like as much risk *13.5% of market+ Early Majority – weigh pros and cons. Rely on others for information – like to wait until bugs are worked out. [34%] -Few new products and services can be profitable until this group buys them Late Majority – adopt a product because most of their friends have it [34%] Laggards – tied to tradition – do not rely on group norms – do not like change and may never adopt the new product Factors Affecting the Rate of Product Diffusion (Adoption Cycle) -Compatibility -Most business professionals and execs have to make decisions in a timely fashion and be able to communicate their decisions in a timely manner also -Relative advantage -If a product is perceived to be better than substitutes, then the diffusion will be relatively quick -Complexibility and trialability -The more complex the product, the longer it takes to diffuse -Products that can be sampled will diffuse faster -Observability -The easier the benefits are to communicate, the faster the product will diffuse -How quickly you can communicate the benefits of a product -Visual demonstrations often clearly communicate product benefits How Firms Develop New Products 1. Idea Generation – development of viable new product ideas 2. Concept testing – testing the new product idea among a set of potential customers 3. Product development – development of prototypes and/or the product 4. Market testing – testing the actual products in a few test markets 5. Product launch – full-scale commercialization of the product 6. Evaluation of results – analysis of the performance of the new product and making appropriate modifications *Asked to talk about a new product and how they would go through these steps on the final Step 1 - Idea Generation -Internal research and development -High product development cost – Ex. Pills take a long time to develop but are cheap to make -Often the source of technological products -Often the source of breakthrough products -Customer input -As much as 85% of new business to business products come from customers -Lead users modify existing products according to their own specific needs -Ex. Hockey players using tampons to stop nosebleeds -Licensing -Firms purchase the rights to technology or ideas from other research intensive firms -This approach saves the high cost of in house R&D -Brainstorming -Groups work together to generate ideas -Ideas can be immediately accepted or rejected -Competitor’s products -Reverse engineering – involves taking apart a product, analyzing it, and creating an improved product that does not infringe on the competitor’s patents, if any exist -“Me too” or copycat products -Products with patents or other proprietary protections cannot be copier, s reverse engineered products must be substantively different from their source product Step 2 – Concept Testing -Concept is a brief written description of the product -Concept testing – the process in which a concept statement that describes a product or a service is presented to potential buyers or users to obtain their reactions -Ideas with potential are developed further into concepts -Customers’ reactions determine whether or not it goes forward Step 3 - Product Development -Prototype – Mock-up of product -Alpha testing – internal – done by a firm in its own R&D department -Beta testing – external – potential customers examine a prototype in a real use situation -A prototype allows consumers to interact physically with the product -Product development (product design) – entails a process of balancing various engineering, manufacturing, marketing, and economic considerations to develop a product Step 4 - Market Testing -Premarket tests- conducted before a product or service is brought to market to determine how many customers will try and then continue to use it -Test marketing – introduces a new product or service to a limited geographical area prior to a national launch – mini product launch -Ex. Beer Store accepted credit cards in KW [KW used a lot] Step 5 - Product Launch -If the market testing returns with positive results, the firm is ready to introduce the product to the entire market -Focus on promotion, timing, place (having an adequate quantity of products available for shipment), and price (it is sometimes easier to start with a higher price and offer promotions and then over time lower the price, rather than vice versa) Step 6 - Evaluation of Results -After the product has been launched, marketers must undertake a critical post launch review to determine whether the product and its launch were a success or a failure -Firms measure success of a new product by three factors: its satisfaction of technical requirements, such as performance; customer acceptant; its satisfaction of the firm’s financial requirements, such as sales and profits Why do Products Fail? -Too small target -Poor design -Low product quality -Incorrect positioning -Wrong price strategy -Competition -Poor marketing communication The Product Life Cycle -Product life cycle – defines the stage that new products move through as they enter, get established in, and ultimately leave the marketplace and thereby offers marketers a starting point for their strategy planning -Products pass through four stages: introduction, growth, maturity, and decline -Introduction stage – stage of the product life cycle when innovators start buying the product -Growth stage – stage of the product life cycle when the product gains acceptance, demand and sales increase, and competitors emerge in the product category -Maturity stage – stage off the product life cycle when industry sales reach their peak, so firms try to rejuvenate their products by adding new features or repositioning them -Decline stage – stage of the product life cycle when sales decline and the product eventually exits the market Introduction Growth Maturity Decline Sales Low Rising Peak Declining Profit Negative or low Rapidly rising Peak to declining Declining Typical Innovators Early adopters Late majority Laggards Consumers and early majority Competitors One or a few Few but High number of competitors Low number of increasing and competitive products competitors and products The Shape of the Product Life Cycle Curve -Assumed to be bell-shaped with regard to sales and profits -In reality, each product or service has its own individual shape, some move rapidly and others slow Ways to Extend the PLC -Develop new uses – bounce fabric sheets are promoting as a way to keep laundry hampers and gym bags smelling fresh -Modify product -Increase frequency of use – Ex. Campbells soup recipes -Increase number of users – Swiss Army Knife now comes with an LED light, USB key -Find new users -Reposition product – Vitamin D is now being marketed as a way to ward off cancer -Tweak marketing strategy Pricing Concepts and Strategies: Establishing Value 1 C of Pricing: Company Objectives -Each firm embraces an objective that seems to fit with where management thinks the firm needs to go to be successful -Profit orientation -Maximize profits – attempts to capture all of the factors to explain and predict sales and profits -Target return pricing – designed to produce a specific return on investment -Target profit pricing – uses price to stimulate a certain level of sales at a certain profit per unit -Focus on only making a profit -Sales orientation -Take sales away from competitors even if your profits suffer in turn -A firm may set low prices to discourage new firms from entering the market or encourage current firms to leave the market -Competitor orientation -A firm should measure itself primarily against its competition -To discourage new competitors a firm might price its product low -Customer Orientation -Set prices to match consumer expectations 2 C of Pricing: Customers Price Elasticity of Demand -Price elasticity of demand – measures how changes in a price affect the quantity of the product demanded Price elasticity of demand = % change in quantity demanded % change in price -Elastic (price sensitive) [less than -1] -Inelastic (price insensitive) [greater than -1] -Consumers are generally more sensitive to price increases than to price decreases -Affected by the income effect, substitution effect, and cross-price elasticity -Income effect- change in the quantity of a product demanded by consumers because of a change in income -Substitution effect –consumers’ ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand -Cross-price elasticity – the percentage change in demand for Product A that occurs in response to a percentage change in price of Product B Demand Curves -Knowing demand curve enables to see relationship between price and demand -Prestige product or services have upward sloping curves – high status items -Knowing the demand curve for a product or service enables a firm to examine different prices in terms of the resulting demand and relative to its overall objective rd 3 C of Pricing: Costs -Variable costs – those costs, primarily labour and materials, which vary with production volume -Fixed costs – those costs than remain essentially at the same level, regardless of changes in the volume of production Break-even point (units) = Fixed costs____ Contribution per unit th 4 C of Pricing: Competition -Monopoly – one firm controls the market - Ex. Utility companies, LCBO -Monopolistic competition – many firms selling differentiated products at different prices - Ex. Clothing stores, computers, cars -Oligopoly – a handful of firms control the market - Ex. Communications, bus companies: GO, Greyhound -Pure competition – many firms selling commodities for the same prices - Ex. Agricultural products, soft- drink industry, fast food th 5 C of Pricing: Channel Members -Manufacturers, wholesalers, and retailers can have different perspectives on pricing strategy -Manufacturers must protect against grey market transactions -Grey market – a market where a product is bought and sold outside of the manufacturer’s authorized channels generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer -Ex. Factory Direct – They get it from somewhere other than the manufacturer and that is why the manufacturer’s warranty does not apply to their products Other Influences on Pricing -The Internet -Increased price sensitivity -Growth of online auctions – Ex. eBay and Kijiji – allows consumers to find the best prices -Economic factors -Local economic conditions -Increasing disposable income -Increasing status conscientiousness – consumers like to shop cheap -Cross shopping – buying both premium and low-priced goods -Increasing globalization Pricing Strategies 1. Cost-Based Methods -Cost-based pricing methods start with cost -All costs calculated on a per unit basis -Doesn’t always consider customer’s opinion on price 2. Competitor-Based Methods -Set prices to signal information of how product compares with competitors -Price too low may signal poor quality, and a price set too high might signal low value -Premium pricing – a competitor-based pricing method by which the firm deliberately prices a product above the prices set for competing products to capture those consumers who always shop for the best or for whom price does not matter 3. Value-Based Methods -Setting prices that focus on the overall value of the product -Sellers need to determine consumer value perceptions 1. Improvement value method 2. Cost of ownership method -Improvement value – represents an estimate of how much more (or less) consumers are willing to pay for a product relative to other comparable products -Cost of ownership method – a value-based method for setting prices that determines the total cost of owning the product over its useful life New Product Pricing Strategies -Price skimming – a strategy of selling a new product or service at a high price that innovators and early adopters are willing to pay in order to obtain it; after the high-price market segment becomes saturated and sales begin to slow down, the firm generally lowers the price to capture (or skim) the next most price sensitive segment -Penetration pricing – a pricing strategy of setting the initial price low for the introduction of the new product or service, with the objective of building sales, market share, and profits quickly *always asked on the final Psychological Factors Affecting Pricing Strategies Reference Prices -Reference price – the price against which buyers compare the actual selling price of the product and that facilitates their evaluation process. Can be internal or external -External reference price – a higher “regular price” against which a sales price is compared -Internal reference price – price information stored in the consumers memory -External reference prices influence internal reference prices Everyday Low vs. High/Low Pricing -EDLP – A strategy emphasizing the continuity of their retail prices at a level somewhere between the regular, non-sale price and the deep-discount sale prices their competitors may offer -High/low pricing – a pricing strategy that relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases -EDLP saves search costs of finding lowest overall prices -High/low provides the thrill of the chase for the lowest price Odd Prices -Odd prices – prices that end in odd numbers, usually 9 such as $3.99 -May suggest a good deal or it could suggest low quality The Price-Quality Relationship -Most inexperienced consumer use price as an indicator of quality -Price becomes crucial when consumers have little knowledge about certain products/brands -Ex. We assume $20 bottle of wine is better quality than $7, but that is not necessarily true Pricing Tactics -Pricing tactic – short-term methods, in contrast to long-term pricing strategies, used to focus on company objectives, customers, costs, competition, or channel members; can be responses to competitive threats Seasonal Discounts -Designed to spur buyers into purchasing merchandise early -Increases sales during off-season time Cash Discounts -Reduced invoice cost if buyer pays prior to the end of the discount period -Seller benefits either way -Collect money faster Allowances -Advertising allowance- tactic of offering a price reduction to channel members if they agree to feature the manufacturer’s product in their advertising and promotional efforts -Listing allowance – fees paid to get new products into stores or gain better shelf space -Co-op ad plan – 50/50 – they’ll pay for 50% Quantity Discounts -Quantity discount – pricing tactic of offering a reduced price according to the amount purchases; the more the buyer purchases, the higher the discount -Cumulative quantity discount – pricing tactic that offers a discount based on the amount purchased in multiple orders -Noncumulative quantity discount- pricing tactic that offers a discount based on only the amount purchased in a single order Uniform delivered vs. Geographic Pricing -Uniform delivered pricing – the shipper charges one rate, no matter where the buyer is located -Geographic pricing – the setting of different prices depending on a geography of the delivery areas Pricing Tactics Aimed at Consumers -Price lining: -Marketers establish a price floor and a price ceiling and set prices in between -Allows for easy comparison -Price bundling: -Encourage sales of slow moving items -Encourage trial of new brand -Ex. Washer/dryer, fast food combos -Leader pricing: -Enticing consumers into the store with the popular aggressively priced item and hoping they will pick up other items while shopping Consumer Price Reductions -Markdowns -Enables retailers to get rid of slow moving or obsolete merchandise -Used to generate store traffic – Ex. Clothing stores with 30% off -Coupons and rebates -Coupons - Retailer handles -Rebate - Manufacturer issues -Quantity discounts for consumers -The more you buy, the cheaper the unit cost – Ex. Family sized cheerios box -Seasonal discounts -Price reductions offered on products and services to stimulate demand during off-peak seasons Legal and Ethical Aspects of Pricing -Deceptive pricing - Ex. You cannot put a regular price and a sales price if it has never been sold at regular price -Predatory pricing - Below cost to drive out competition -Price discrimination - Cannot sell it for different prices to different consumers – Ex. Movie ticket prices -Price fixing - You and competition get together and decide on price -Bait and switch - Low advertised product to lure consumers into store and pressure them into a higher- priced item -The Canadian Competition Act is from the Justice Department Marketing Channels: Distribution Strategy The Importance of Distribution -All goods and services organizations, need a well-thought out distribution strategy -A good distribution strategy is key to the successful launch of a new product -Royal Canadian Mint released world’s first coloured circulation coin through Tim Hortons Distribution Channels, Supply Chain and Logistics and Related -Distribution channel – focus on the companies that transfer the ownership of goods from the producer to consumers at the point of consumption -Logistics management – focus on the flow of raw materials and finished goods from point of origin to final consumption -Supply chain management – focus on the sequence of firms required to create and deliver goods to the final consumer -Supply chain management focuses on the relationships among members of the supply chain and distribution channel and the need to coordinate efforts to provide customers with the best value -Firms have come to realize there is tremendous opportunity in coordinating marketing and logistics activities not only within a firm, but also throughout the supply chain Functions Performed by Intermediaries -Transactional function -Buying – purchase goods for resale to other intermediaries or consumers -Risk taking – ownership of inventory that can become outdated -Promotion – promote products to attract consumers -Selling – transact with potential customers -Logistical function -Physical distribution – transport goods to point of purchase -Storing – maintain inventory and protect goods -Facilitating function -Gather information – share competitive intelligence about customers or other channel members -Financing – extend credit and other financial services to consumers Designing Distribution Channels -Channel structures: -Direct distribution – allow manufacturers to deal directly with consumers -Indirect distribution – one or more intermediaries work with manufacturers to provide goods to consumers – may use either push (directed at manufacturer) or pull strategies (at consumers) -Multichannel distribution – uses a combination of direct and indirect distribution channels -Customer expectations: -Manufacturers need to know where their target market customers expect to find their products and those of their competitors -Channel member characteristics: -The larger and more sophisticated the channel member, the less likely that it will use intermediaries -Distribution intensity: - Distribution intensity – the number of channel members to use at each level of the supply chain -Intensive - Products in as many outlets as possible – Ex. Toothpaste -Selective - A few selected outlets in a territory – Ex. Hugo Boss -Exclusive - One or a few retail outlets in a territory – Ex. LuLu Lemon Managing Distribution Channels -If a distribution channel is to run efficiently, the participating members must cooperate -Channel conflict- results when supply chain members are not in agreement about their goals, or roles -Companies can manage distribution channels by developing strong relationships with supply chain partners Vertical Marketing Systems -Independent or conventional supply chain; the several independent members each attempt to satisfy their own objectives -Vertical marketing system – a supply chain in which the members act as a unified system; there are three types; administered, contractual, and corporate -Administered vertical marketing system: a supply chain system in which there is no common ownership, but the dominant channel member controls the channel relationship -Contractual vertical marketing system: independent firms at different levels of the supply chain join together – Ex. Franchising -Corporate vertical marketing system: parent company has complete control Supply Chains Add Value Supply Chain Management Streamlines Distribution -Speeds up distribution of merchandise -Reduce number of transactions -Increase value for consumers Supply Chain Management Affects Marketing -Meeting customer expectations -Reliant on an efficient supply chain -Every marketing decision is affected by and has an effect on the supply chain -Ex. Home Depot’s “you can’t sell it if it’s not on the shelf” Logistics Management: Making Information Flow -Flow 1 (Customer to Store) – Scans the UPC code -Universal product code (UPC) – the black and white bar code found on most merchandise -Flow 2 (Store to Buyer) -Flow 3 (Buyer to Manufacturer) -Flow 4 (Store to Manufacturer) -Flow 5 (Store to Distribution Centre) Data Warehouse -Data can be assessed according to the level of merchandise aggregation: SKU, vendor, category, or all merchandise -Along the vertical axis, data can be accessed by the level of the company: store, divisions, or the total company Electronic Data Interchange -EDI – the computer-to-computer exchange of business documents from a retailer to a vendor and back -Advanced shipping notice – an electronic document that the supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect in the shipment -EDI systems allow for advanced tracking of information -Each system can seamlessly integrate with others, which creates value for both customers and the firm -Intranet – a secure communication system contained within on company, such as between the firm’s buyers and distribution centres -Extranet – a collaborative network that uses Internet technology to link businesses with their suppliers, customers, or other businesses Managing Supply Chains Through Strategic Relationships -Strategic relationship (partnering relationship) – a supply chain relationship that the members are committed to maintaining long term -Want to have: -Open communications -Common goals -Mutual trust -Credible commitments Logistics Management: Making Merchandise Flow Inbound Transportation -Dispatcher – the person who coordinates deliveries to distribution centres -A dispatcher assigns a time slot for each shipment Receiving and Checking -Receiving refers to the process of recording the receipt of merchandise as it arrives at a distribution centre or store -Checking is the process of going through the goods upon receipt to ensure they arrived undamaged and that the merchandise ordered was the merchandise received Storing and Cross-Docking -Three types of distribution centres: traditional, cross-docking, and combinations -A traditional distribution centre is a warehouse in which merchandise is unloaded from trucks and placed on racks for storage -In a cross-docking distribution centre, vendors ship merchandise prepackaged in the quantity required for each store - the merchandise already contains the price and theft detection tags -Most modern distribution centres combine the two approached Getting Merchandise Floor-Ready -Floor-ready merchandise is merchandise that’s ready to be placed on the selling floor immediately -Getting merchandise floor-ready entails ticketing, marking and placing garments on hangers Inventory Management Through Just-in-Time Systems -Just-in-time (JIT) inventory systems (Quick Response (QR)) – inventory management designed to deliver less merchandise on a more frequent basis than traditional inventory systems -Reduces lead time -Lead time – the amount of time between the recognition that an order needs to be placed and the arrival of the needed merchandise at the seller’s store, ready for sale -Increases product availability Listing Fees -Fees range from -a few hundred dollars to $25 000 per item per store to $1 million per grocery chain -Fees get passed on to consumers through higher prices Retailing Retailing -Reta
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