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Final

Final Study Notes

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Department
Business
Course
BU352
Professor
Lisa Giguere
Semester
Fall

Description
Developing New Products 12/03/2013 Why Do Firms Create New Products ­they have to innovate ­they diffuse or spread through a population in a process known as diffusion or adoption of innovation. Changing customer needs Market Saturation Managing Risk Through Diversity Fashion Cycles Innovation And Value 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. Pioneers have advantage of being first movers they become readily recognizable to consumers and thus  establish a commanding and early market share lead.  Why do new products fail? (1) they offer consumers too few benefits compared with existing products;  (2) they are too complex or require substantial learning and effort before consumers can use them, and  (3) bad timing—that is, they are introduced at a time when consumers are not ready for such new products  or services. Adaption of Innovation Diffusion/adoption of Innovation: The process by which the use of an innovation, whether a  product or a service, spreads throughout a market group over time and over various categories of adopters. Innovators: the buyers who want to be the first to have the new prod/service Early Adopters: don’t take as much risk as innovators, but wait after careful review Late Majority: last group of buyers to enter a new product market, buy when product has reached full  market potential Laggards: only make a switch when the traditional products are no longer avail Using the Adoption Cycle ­since firms know which types of custs will buy their new prod/service immediately after intro/later they can  develop effective promotion/pricing ­diff prods are adopted at diff rates marketers need to get that the diffusion curve for the product is like, and  the characteristics of target market on each stage of diffusion Factors Affecting Product Diffusion Relative Advantage: if prod is better than substitutes diffusion will be quick Compatibility:  with life already (such as having a coffee since we already do that, starbucks does well) Observability: when easily observed, benefits are easily communicated to others, enhancing diffusion Complexity and Trialability: less complex prods are usually easy to try, they will generally diffuse  more quickly How Firms Develop New Products ­process is not linear, # of feedback loops at various stages Steps in Product Development Process 1) Idea Generation ­can use internal R&D, collab with other firms, brainstorm, research competitors prods, and/or conduct  consumer research Internal Research and Development ­many firms have r&d departments ­firms expect the developmental costs and revenue from products to make the costs of R&D worthwhile Licensing ­firms buy the right to use technology/ideas from other research intensive firms thru licensing ­saves high costs of in­house r&d, but means firm is banking on existing non­marketed solution Brainstorming ­no idea immediately accepted/rejected ­@ end of session vote for best ideas/combo of ideas Competitors Products ­reverse engineering Customer Input ­relatively 85% of new b2b are from customers b/c theyre relatively few in # firms cn follow their use of  prods closely and survey them often for suggestions ­firms study lead users:  Innovative product users who modify existing products according to their own  ideas to suit their specific needs. 2) Concept Testing ­ideas with potential are developed into concepts, which refers to brief written description of the product, its  technology, working principles and forms, and what cust needs it would satisfy/maybe visual images concept testing: the process in which a concept statement is presented to potential buyers  representative of target market/users to obtain reactions ­reaction help estimate sales value/make changes to enhance/determine if idea is worth development ­whether product is satisfying need that is currently not met by others ­ask about frequency of purchase ­demographic info to analyze which segments are most interested 3) Product Development ­balancing various engineering/manufacturing/marketing and econ conditions to develop a product/services  form and features ­create a prototype ­alpha testing: attempts to determine whether the product will perform according to its design and if it  satisfies need for which it was intended, this occurs in r&d department ­beta testing: uses potential customers, who examine product prototype in real use to determine  functionality, performance, potential problems, and other issues 4) Market Testing ­with trial batch of products, sometimes skip this test b/c of competition, timing,costs Premarket tests: b4 product is actual brought to market to determine how many custs will try and then  continue to use according to small group of potential custs ­nielson BASES­> potential custs exposed to marketing mic, and surveyed, given prod to try, after some  time they are surveyed about whether they would use it again ­generates data about whether to intro product, abandon, redesign, revise marketing plan Test Marketing: intros the offering to a limited geographical area  ­costs more and takes longer than premarket tests ­allows firm to study actual consumer behavior, more reliable than simulated tests ­BehaviorScan utilizes cust data collected passively @ point of sale in stores & thru out home scanning to  measure household first­time trial and repeat purchases 5) Product Launch Promotion Place: Adequate quantity of prod avail for shipment and in stock @ store Price Timing: timing of launch is important (eg. During Christmas time) 6) Evaluation fo Results ­critical post launch review to determine whether the product as its launch were a success or failure and  what additional resources are needed ­measure success on: 1) satisfaction of tech requirements, eg performance 2)customer acceptance 3)satisfaction of firms financial req’ments Product Life Cycle 1) Introductory Stage ­innovators try it ­other firms soon enter market w/ similar/improved prod at lower prices ­intial losses b/c of high start­up costs and low sales revenue, profits at end 2) Growth Stage ­growing # of prod adopters, rapid growth, increases in competitors and # of avail prod versions ­firms reach new custs by producing product variations 3) Maturity Stage: adoption of product by later majority and intense competition for market share  amonf firms ­marketing costs increase, intense competition on price, STRATEGIES TO EXTEND PRODUCT LIFE CYCLE Entry into new markets or market segments:  ­enter new markets where market is less saturated ­find new market segments w/ new emerging trends/changes in consumer tastes 4)Decline Stage: ­position themselves for a niche segment of diehard consumers or those with special needs, or they  completely exit the market.  ­The few laggards who have not yet tried the product or service enter the market at this stage Shape of Product Life Cycle Curve ­bell­shaped w/ regard to sales and profits ­each product has its own individual shape Product, Branding, And Packaging Decisions  12/03/2013 Complexity of Products & Types of Products Product, Branding, And Packaging Decisions  12/03/2013 Complexity of Products ­@ centre of product complexity is core customer value: basic­problem solving benefits that  consumers are seeking ­associated services aka augmented product: the nonphysical aspects of a product such as  warranty, financing, product support, and after sale service Types of Products Consumer Products: used by ppl for personal use Specialty Products Shopping Products/Services:: fair amount of time comparing alternatives Conveniences Prods/Servs Unsought Prods/Serv: do not think about buying/don’t know about, require lots of marketing effort  (eg. When GPSs first came out) Product Mix & Product Line Decisions ­product mix: all products offered by firm ­Product lines: associated items that consumers use together or think of as part of a group of similar  products Each product line has a product category: assortment of items customer sees as substitutes for each  other Product Mix Breadth: # of product lines offered by the firm Product Line Depth: # of products in a product line Change Product Mix Breadth ­change product mix breadth by either adding/deleting entire product lines Product, Branding, And Packaging Decisions  12/03/2013 ­Increase Breadth: to capture new or evolving markets, increase sales, compete in new venues ­Decrease Breadth: to address changing market conditions or meet internal strategic priorities Change Product Line Depth ­Increase Depth: to address changing consumer preferences or pre­empt competitors while boosting  sales, serve new target segments ­Decrease Depth: to realign resources Branding ­way for firm to differentiate its product offerings from those of its competitor Value of Branding for the Customer and the Marketer Brands Facilitate Purchasing: easily recognized, signify a quality level, and contain familiar  attributes to help consumers make quick decisions Brands Establish Loyalty: allow companies to maintain great depth in product lines since customers  will buy other brands in their product mix Brands Protect from Competition and Price Competition: strong brands are somewhat  protected b/c of loyalty Brands Reduce Marketing Costs: brand sells itself Brands are assets: protected thru trademark/copyright Brands Impact Market Value Brand Equity ­the set of assets and liabilities linked to a brand that add to or subtract from the value provided by product  or service Aspects we look at to determine brand equity: Product, Branding, And Packaging Decisions  12/03/2013 1) Brand awareness: how many consumers in a market are familiar with it and what is stands for and  have an opinion of it 2) Perceived Value: relationship between a product/service’s benefits and its cost, good marketing  raises quality perceptions relative to price thus increasing its perceived value 3) Brand Associations: mental links that consumers make between a brand and its key product  attributes (logo/sloga) firms some times develop a brand personality which is a set of characteristics associated with a brand with  symbolic/self­expressive meanings for consumers 4) Brand Loyalty: these consumers are less sensitive to price, marketing costs of reaching loyal  customers are less, can manage brand loyalty thru customer relationship management programs (crm) Branding Strategies Three basic Brand Ownership Strategies: Manufacturer Brands aka National Brands : owned and managed by manufacturer Private Label Brands aka Store Brands: owned and managed by retailers Generic Naming Brands and Product Lines Corporate or Family Brand: use of firms own brand name Corporate and Product line Brands: The use of a combination of family brand name and  individual brand name to distinguish a firm's products. Individual Brands: individual name per product Choosing a Name: Should be descriptive and suggest benefits and qualities associated with it Should be easy to pronounce, recognize and remember Be able to register the brand name as trademark and legally protect Product, Branding, And Packaging Decisions  12/03/2013 Brand Extension: use of same brand name for new products being intro’d to the same/new markets ­allows to use well established brand name, if brand is known for high quality it is carried on,  marketing  costs for new product by established brand are lower as consumers already know brand, when used for  complementary products a synergy exists between two to help increase overall sales, can result in cross  category trial and boost sales Brand Dilution: when brand extension adversely affects consumer perceptions about the attributes the  core brand is believed to hold To Prevent Negative Consequences from brand extensions firms: ­evaluate the fit between product class of the core brand and the extension ­evaluate consumer perceptions of attributes of core brand and seek out similar ones for the extension b/c  brand specific associations are important ­refrain for extending brand name to to many products to avoid diluting brand and damaging brand equity ­consider whether brand extension will be distance from the  core brand, especially if firm wants to use  some but not all of existing brand associations  Cobranding: practice of marketing 2/more brands together on same package/promotion Brand Licensing: contraction agreement between firms whereby one firms allows another to use its  brand name, logo, symbols, and/or characteristics in exchange for a negotiated fee Services: The Intangible Product 12/03/2013 Services Marketing Differs From Product Marketing Four fundamental differences: think of them as the four Is of services in that they are intangible, inseparable from their  providers, inconsistent (variable), and cannot be held in inventory (perishable) How they affect marketing strategies: Intangible: makes it difficult to convey benefits Which is why docs offers cues to perceive service more positively (eg waiting room with TV) ­b/c of the intangibility of services, the images marketers use reinforce the benefit or value that a service  provides Inseparable Production and Consumption ­b/c service production can't be separated from consumption, astute service marketers provide  opportunities for their customers to get directly involved in the service.  ­custs rarely have opportunity to try the service b4 they purchase it, it cant be returned, thus some provide  high warrantee nd satisfaction guarantees Inconsistent: more humans are needed to provide a service, more likely the quality will be  variable/inconsistent ­marketers strive to reduce service inconsistency thru training and standardization ­can tackle by replacing ppl w/ machines ­internet has reduced service inconsistency Inventory:  ­perishability of services provides both challenges and opportunities to marketers in terms of the critical  task of matching demand and supply ­if the demand for and the supply of the service match closely, there is no problem; but, unfortunately, this  perfect matching rarely occurs. ­excess demand results in having to turn customers away in peak periods, while excess capacity may mean  less desirable expense to revenue ratios (still have to pay workers if no clients) Service Recovery: ­sometimes service providers fail to meet customer expectations Services: The Intangible Product 12/03/2013 ­best course of action is to make attempt to make amends with the customer and learn for the experience ­Effective service recovery efforts can significantly increase customer satisfaction, purchase intentions, and  positive word of mouth, though customers' post­recovery satisfaction levels usually fall lower than their  satisfaction level prior to the service failure Effective Service Recovery Entails: 1) Listening To the Customer: ­customer must have opportunity to air complaint completely ­customer may just want to be heard, and the service provider should give the customer all the time he or  she needs to “get it out.” ­welcome the opportunity to be sympathetic ear, listen carefully, and appear anxious to rectify the situation  to ensure it doesn't happen again 2) Finding a Fair Solution ­cust perception of what fair means is based on their previous experience with other firms, how they have  seen other customers treated, material they have read, and stories recounted by their friends. Distributive Fairness: customer’s perception of benefits he or she receive compared w/ costs ­customers typically want tangible restitution, if providing a tangible restitution isn't possible, the next best  thing is to assure the customer that steps are being taken to prevent the failure from recurring. Procedural Fairness: perceived fairness of the process used to resolve them 3) Resolving Problems Quickly ­to resolve quickly firms need clear policies, adequate training for their employees, and empowered  employees. Companies should welcome complaints and make it easy for customers to provide feedback, listening  carefully to what customers have to say Pricing Strategies and Concepts: Establishing Value  12/03/2013 The key to successful pricing is to match the product or service with the consumer's value perceptions The Five Cs of Pricing 1) Company Objectives: each firm embraces objective where management thinks the firm needs to go to be successful, however its defined Profit Orientation -focusing on target profit pricing, maximizing profits, or target return pricing -target profit pricing: particular profit goal as overriding concern, firms use price to stimulate a certain level of sales @ certain profit/unit maximizing profits strategy: relies on econ. theory, if firm can specify a mathematical model w/ all factors required to explain & predict sales & profits, identify price @ which profits are maximized gathering this data is expensive & difficult target return pricing: A pricing strategy implemented by firms less concerned with the absolute level of profits and more interested in the rate at which their profits are generated relative to their investments; designed to produce a specific return on investment, usually expressed as a % of sales. Sales Orientation: believe increasing sales will help the firm more than increasing profits, more concerned w/ overall market share than $ b/c market share reflects success May set prices low to discourage new entrants, encourage current firms to lve, take market share from competitors all to gain market share Competitor Orientation: strategize according to the premise that they should measure themselves primarily against competition some firms focus on competitive party: set prices similar to their major competitors Customer Orientation: concept of customer value and setting prices to match consumer expectations. -firm may attempt to increase value by focusing on customer satisfaction and setting prices to match consumer expectations. Or can use a “no-haggle” price structure to make the purchase process simpler and easier for consumers, thereby lowering the overall price and ultimately increasing value Firms also may offer very high-priced, “state-of-the-art” products or services in full anticipation of limited sales->designed to enhance the company's reputation and image & increase value in consumers 2) Customers Pricing Strategies and Concepts: Establishing Value  12/03/2013 -understanding customers reactions to certain prices Demand Curves and Pricing -knowing demand curve enables a firm to examine diff prices in terms of resulting demand and relative to overall objective -not all products have downward sloping-> prestige products/services in which the higher the price the > the status associated w/ it Price Elasticity of Demand (%change in q. demanded/% c. in price) -how change in price affects quantity of product demand -less than 1 price sensitive Income Effect: as income increases, spending behavior changes, change in quantity demanded b/c of change in income Substitution Effect Cross-Price Elasticity b/c of compelementary products and substitutes 3) Costs -in general price should not be based of cost b/c consumers make purchase decision based on their perceived value, they care ltl about firms costs Break-Even Analysis & Decision Making =fc/price-vc 4) Competition 4 levels of competition w/ its own set of pricing challenges & opportunities: Monopoly: -low competition Oligopolistic Comptition: few firms dominate, change prices in reaction to competition to avoid upsetting an otherwise stable enviro, can result in a price war: two+ firms compete primarily by lowering prices Monopolistic Competition: many firms competing for custs in a market w/ differentiated products Pure Competition: price is usually set according to laws of supply and demand Pricing Strategies and Concepts: Establishing Value  12/03/2013 5) Channel Members -unless channel members communicate their pricing goals & select channel partners that agree w/ them, conflicts will surely arise -grey market: employs irregular but not necessarily illegal methods; generally, it legally circumvents authorized channels of distribution to sell goods at prices lower than those intended by the manufacturer Other Influences on Pricing The Internet: more places to buy/ebay/kijiji/wagjag Economic Factors: two interrelated trends that have merged to impact pricing decisions are the increase in consumers' disposable income and status consciousness. Cross shopping: buying both premium and low-priced merchandise or patronizing both expensive, status-oriented retailers and price-oriented retailers. Pricing Strategies Cost –Based Methods: determine final price to charge by starting w/ cost, all costs be identified, assumes these cost will not vary Competitor-Based Methods: set price to reflect the way they want consumers to interpret their own prices relative to competitors offerings Premium pricing: firm deliberately prices a product above prices set for competing products to capture consumers who stop for best/price doesn’t matter for Value-Based Pricing Method: focus on the overall value of the product offering as perceived by the consume, consumers determine value thru the benefits they expect Improvement value method: estimate of how much more consumers are willing to pay for a product relative to other comparable products Cost of Ownership Method: consumers may be willing to pay more for a product b/c over its lifetime it eventually costs less New Product Pricing -if same as another product, easy b/c approximate value has been established -if “new to the world” determining perception of its value and pricing becomes difficult Pricing Strategies and Concepts: Establishing Value  12/03/2013 Price Skimming: selling a new product or service at a high price that innovators and early adopters are willing to pay 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. -for this 2 work product must be perceived as breaking new ground, for consumers to c benefits -firms may do this to signal high quality to market, or make price high first to limit demand which gives time to build their production capacities, or to quickly earn back r&d, or to test consumers’ price sensitivity -if competitors enter the market the price competition will force prices down & defeat purpose -drawback in the relatively high unit costs associated with producing small volumes of product so firms must consider the trade-off between earning a higher price w/ higher production costs. -consumers who buy when price is high may feel cheated when price falls Market Penetration Pricing: set initial price low for intro of new product/service to build sales, market share and profits quickly b/c of volume of sales thus discouraging competitors -experience curve effect: as sales continue to grow, costs continue to drop, allowing further reductions in price -cons -> firm must have capacity to satisfy rapid rise in demand, low price doesn’t signal high quality, firms should avoid if segments of market are willing to pay more for product Pricing Tactics: -short term methods to focus on select components of the five ‘s, usually respond a short-term response to threat or broadly accepted method of calculating a final price for customer that’s short-term B2B Pricing Tactics and Discounts Seasonal Discounts Cash Discount: if paid by discount period Allowances: returns for specific behaviors Advertising allowances: if manufacturers product is promoted/advertised Pricing Strategies and Concepts: Establishing Value  12/03/2013 Listing Allowances: fees paid to retailers simply to get new products into stores or to gain more/better shelf space Quantity Discounts: reduced price according to amount purchased Cumulative quantity discount: amount purchased over a specific time period & usually involves several transactions, encourages resellers to maintain supplier Noncumulative quantity discount: based on amount purch in single order Uniform Delivered Vs. Geographic Pricing -specific to shipping (a major cost for manufacturers) Uniform Delivered Pricing: shipper charges 1 rate, no matter where buy is Geographic Pricing: diff price depending on delivery areas Pricing Tactics Aimed at Consumers (firm 2 consumer) Price Lining: establishing a price floor and a price ceiling for an entire line of similar products and then setting a few other price points in between to represent distinct differences in quality. Price Bundling: use if: may put slow-moving item w/ fast, or to encourage trial of a new product, or bundle to encourage stocking up, or to provide incentive to purchase a less desirable product/service Leader Pricing: build store traffic by aggressively pricing and advertising a regular purchased item in home that when they come to buy that they’ll buy other stuff with higher margins 2 Consumer Price Reductions Markdowns: enable retailers to get rid of slow-moving/obsolete merchandise, match competitors prices on specific merchandise, promote merchandise and increase sales Quantity Discounts for Consumers: Size discount (bigger box of cereal is cheaper) Seasonal Discounts: stimulate demand during off-beak seasons Coupons and Rebates: coupon retailer handles and rebate manufacturer handles Goal is to prompt consumers to try a product, reward loyal customers/ encourage repurchases Pricing Strategies and Concepts: Establishing Value  12/03/2013 Legal & Ethical Aspects of Pricing -firms can engage in pricing practices that can unfairly reduce competition or harm consumers through fraud and deception Deceptive/Illegal Price Advertising Deceptive Reference Prices -the reference price is bona fide, and fine. If the reference price has been inflated or is just plain fictitious, however, the advertisement is deceptive and may cause harm to consumers. Difficult to see if reference price is bona fide, in general if a seller is going to label a price a regular price the better business bureau suggests that at least 50% of sales have occurred @ that price Loss Leader Pricing: lowering the price below the store's cost-> Unless the markup for the item is 100% cost then not enough revenue from the sale of one unit to cover the store's cost, which means it has essentially priced the total for both items below cost. Bait & Switch: advertise low price w/ out intent to sell any Luring cust in w/ very low prices as bait, then pressures them to buying higher price by making the lower priced item seem worse than the other Predatory Pricing: A firm's practice of setting a very low price for one or more of its products with the intent of driving its competition out of business; illegal under the Competition Act. Price Discrimination: can be considered price disc. If firms sell same product to diff resellers at diff prices, larger firms usually get the lower prices, however quantity discounts are okay b/c theyre available to everyone not just one firm -The Competition Act requires companies to demonstrate only that their price discounts do not restrict competition Price Fixing: colluding w/ other firms to control prices Horizontal Price Fixing: when competitors that product and sell competing products collude/work together to control prices effectively taking price out of decision prices for consumers Vertical Price Fixing: when parties at diff levels of same market channel collude to control prices passed on to consumers Pricing Strategies and Concepts: Establishing Value  12/03/2013 Marketing Channels: Distribution Strategy  12/03/2013 Distribution Channels, Supply Chain, And Logistics Are Related Distribution Channel: set of institutions that transfer the ownership of and move goods from point of production to point of consumption, same as supply chain used interchangeably -can be direct or use intermediaries -supply chain management: set of approaches and techniques firms employ to efficiently & effectively integrate their suppliers/manufacturers/warehouses/stores/transportation intermediaries into a value chain -simplified supply chain is when manufacturers make products & sell them to intermediaries -more intermediaries= greater complexity to reach consumers -home depot & Costco are both retailers and wholesalers -logistics management: integration of two or more activities to plan, implement, and control the flow of raw materials, in-process inventory, & finished goods from origin to consumption eg customer service, inventory control, packaging, warehousing and storage -Distribution channel management traditionally has been the responsibility of marketing departments, under the direction of a marketing vice-president. -Logistics was traditionally the responsibility of operations, under a vice-president of operations. -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. Distribution Channels Add Value -each channel member has a specialized role, if one believes another isn’t doing the job correctly it can usually replace them - One important role played by intermediaries is to reduce the number of marketplace contacts, resulting in more efficient systems. - Intermediaries also match the requirements of individual consumers to the goods that manufacturers produce; handle physical distribution and storage of goods, making them available for customers to purchase; facilitate searches by both buyers and sellers; and standardize exchange transactions. -While channel functions may shift from one intermediary or channel member to another, it's important to recognize that they cannot be eliminated. Marketing Channels: Distribution Strategy  12/03/2013 Designing Distribution Channels CHANNEL STRUCTURE Direct Distribution: manufacturers deal directly w/ consumers Indirect Distribution: 1 or more intermediaries work w/ manufactures to provide goods & services to consumers Push strategy: manufacturer focuses its promotional efforts on channel members to convince them to carry the product Pull strategy: promotional efforts directed @ consumers to build demand for products, in turn convincing retailers to carry them Multichannel Distribution: combo of direct/indirect Consumer Expectation: from retailer’s perspective its important to know which manufacturers custs want to buy, manufacturers need to know where target market custs expect to find it DISTRIBUTION INTENSITY -# of channel members to use at each level of supply vhain Intensive Distribution: get products into as many outlets as possible Exclusive Distribution: exclusive geographic territories to 1 or very few retailers so no other custs in the territory can sell a particular brand Selective Distribution: few selected customers in a territory Managing Distribution Channels -channel conflict: when channel members aren’t in agreement about goals/roles/rewards Managing Channels Through Vertical Marketing Systems -members act as a unified system b/c they realize each party can maximize individual benefits by working together to make the distribution system more efficient rather than individually or at cross-purposes administered vertical marketing system: no common ownership and no contractual relationships, but dominant channel member controls the channel relationship contractual vertical marketing system: independent firms @ diff levels of supply chain join together thru contracts to obtain economies of scale & coordination to reduce conflict (eg. Franchising) corporate vertical marketing system: parent company has complete control and dictates the priorities and objectives of the supply chain Marketing Channels: Distribution Strategy  12/03/2013 Supply Chains Add Value Supply chain management streamlines distribution Supply chain management affects marketing -sales department must coordinate its delivery promises w/ factory or distribution centres -advertising and promotion must be coordinated w/ departments that control inventory and transportation Logistics Management: making info flow -Flow 1 (customer to store) -Flow 2 (Store to buyer): point of sale terminal records purchase info and electronically sends it to buyer at corporate office, sales info is incorporated into inventory management system, and used to analyze sales -Flow 3 (Buyer to Manufacturer): -Flow 4 (Store to Manufacturer): sales data sent directly from store to manufacturer -Flow 5 (Store to Distribution Centre):when inventory drops to certain level, more is shipped and sent to computer system Data Warehouse -customers’ purchase data is collected at point of sale and goes into a huge database known as a data warehouse Electronic Data Interchange (EDI): -computer to computer exchange of business docs from a retailer to a vendor and back -advanced skipping notice: electronic doc that supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect in shipment -enables vendors to transmit info about on-hand inventory status, vendor promotion, and cost changes to retailer, info about purch order changes, order status, retail prices Marketing Channels: Distribution Strategy  12/03/2013 Use of EDI provides 3 main benefits to supply chain members: -reduces cycle time/time between the decision to place an order and receipt of merchandise -improves overall quality of communications thru better record keeping, fewer errors -data transmitted by EDI are in a computer-readable format that can be easily analyzed and used for a variety of tasks, from evaluating vendor delivery performance to automating reorder processes Managing Supply Chains Through Strategic Relationships -supply chain members are committed to maintaining the relationship over long term and investing in opportunities that are mutually beneficial Mutual Trust: When vendors and buyers trust each other, they're more willing to share relevant ideas, clarify goals and problems, and communicate efficiently. Open Communication: to share info, develop sales, forecast together, and coordinate deliveries, supply chain members need to understand what’s driving each other’s business, their roles in the relationship, each firm’s strategy, and any problems that arise Common Goals: gives both members the inventive to pool strengths and abilities and exploit potential opportunities together Credible Commitments: Successful relationships develop because both parties make credible commitments to, or tangible investments in, the relationship. Logistics Management: Making Merch Flow Inbound Transportation: dispatcher assigns time for each shipment to arrive Receiving and Checking: process of recording the receipt of merch as it arrives at a distribution centre or store, checking is going thru goods upon receipt to make sure theyre undamaged and correct merch -today many use EDI to eliminate the process -Radio Frequency Identification Tags (RFID) tiny computer chips that automatically transmit to a special scanner all info about a container’s contents or individual products Storing and Cross-Docking (3 types of distribution centres) Traditional: warehouse where merch is unloaded from trucks and placed on racks/shelves for storage, When the merchandise is needed, a worker goes to the rack, picks up the item, and places it in a bin. A conveyor system or other material-handling equipment transports the merchandise to a staging area, where it is consolidated and made ready for shipment to stores. Marketing Channels: Distribution Strategy  12/03/2013 Cross-Docking Distribution Centre: vendor ships merchandise prepackages in the quantity required for each store, merch already contains price and theft detection tags, and it goes str8 to staging area vs storage Combo of Traditional and Cross-Docking: It is difficult for a firm to operate without some storage facilities, even if merchandise is stored for only a few days, no matter how good a sales forecasting system may be, sometimes the merchandise arrives before it is needed in the stores. In these cases, the retailer must have a system to store the merchandise temporarily. Getting Merchandise Floor-Ready: ticketing & marking (creating price and identification labels and placing on merch), or placing on hangers Shipping Merchandise to Stores: routing and scheduling computer system that considers the rate of sales in stores, road conditions, transportation operating constraints to develop most efficient routes Inventory Management Through Just-In-Time Systems -Just in Time (JIT) inventory Systems AKA Quick Response (QR) systems: inventory management systems designed to deliver less merch on a more frequent basis than traditional inventory systems, they reduce lead time (amount of time between recognition that u need products and delivery), increase product availability and lower inventory investment Retailing 12/03/2013 Retailing: set of business activities that add value to products & services sold to consumers for their personal or family use Choosing Retail Partners -When choosing retail partners, manufacturers must look at the basic channel structure, where their target customers expect to find the products, and channel member characteristic Channel Structure -level of difficulty a manufacturer has in getting retailers to purchase its products is   determined by the degree to which the channel is vertically integrated, the degree to which the manufacturer has a strong brand or is otherwise desirable in the market; and the relative power of the manufacturer and retailer. Customer Expectations -important to know which manufacturers customers want Identifying Types of Retailers Food retailers Conventional Supermarkets Big-Box Food Retailers Convenience Stores General Merchandise Retailers Discount Stores: wide variety of merch, limited service and low prices (walmart) Specialty Stores: concentrate on a limited # of complementary merchandise categories in relatively small stores Category Specialist: offers narrow variety but a deep assortment of merchandise Category killers: give other retailers a difficult time competing Department Stores: diff types of merchandise and lots of items within each type, some customer service and are organized into separate departments to display their merchandise (sears/bay) Drugstores: low margins on prescription drugs, health insurance companies and govt programs pay most costs and health insurance companies negotiated substantially lower prices with drugstores Retailing 12/03/2013 Off-Price Retailers: inconsistent assortment of merch at relatively low prices, typically buy from manufacturers or other retailers with excess inventory or at the end of a season for one-fourth to one-fifth the original wholesale price Extreme value retailers (dollorama) Choosing a Retail Strategy Product: providing right mix of merch and services that satisfy the needs of the target market Price: helps define value of both the merchandise and service, and the general price range of particular store helps define its image Promotion: once in store retailers use displays and signs to inform custs and stimulate purchs Co-operative advertising: agreement between a manufacturer and retailer in which the manufacturer agrees to defray some advertising costs. Using direct salesperson contact, targeted promotions, and services, they attempt to increase their share of wallet—the percentage of the customer's purchases made from that particular retailer—with their best customers Place: convenience is a key ingredient to success, aka convenient locations The Changing Retail Landscape -retailers need to learn to compete in a value-driven world -Value retailers continue to improve their “shopability,” providing more convenient store layouts and shopping experiences that make the task faster and easier. - Generally, retailers enter with low prices, low margins, and low status. Over time, they add more and more service and other improvements and thus, are able to raise prices, earn higher margins, and achieve higher status with consumers. -In the Wheel of Retailing concept, as stores add services and improvements expand the mix of merchandise carried and upgrade their facilities, costs are generally added to the day-to-day operations, which results in higher prices.
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