MGMT 1 Chapter 15: MGMT 1—CHAPTER 15

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Grace Mc Laughlin

MGMT 1—CHAPTER 15: Distributing Products • The Emergence of Marketing Intermediaries: o Managing the flow of goods has become one of the most important managerial function for many organizations o Marketing intermediaries: Organizations that assist in moving goods and services from producers to businesses (B2B) and from businesses to consumers (B2C) o Channel of distribution: A whole set of marketing intermediaries, such as agents, brokers, wholesalers, and retailers, that join together to transport and store goods in their path (or channel) from producers to consumers o Agents/brokers: Marketing intermediaries who bring buyers and sellers together and assist in negotiating an exchange but don’t take title to the goods o Wholesaler: A marketing intermediary that sells to other organizations o Retailer: An organization that sells to ultimate consumers o Channels of distribution help ensure communication flows and the flow of money and title to goods o Why Marketing Needs Intermediaries: ▪ Intermediaries perform marketing tasks such as transporting, storing, selling, advertising, and relationship building faster and more cheaply than most manufacturers could ▪ o How Intermediaries Create Exchange Efficiency: 2 ▪ ▪ Some economists have said that intermediaries add costs and should be eliminated while marketers say intermediaries add value and value greatly exceeds the cost o The Value versus the Cost of Intermediaries: ▪ The public has often viewed marketing intermediaries with a degree of suspicion ▪ Distribution (marketing) may add up to 75 cents for every 25 cents in manufacturing costs 3 ▪ ▪ Three basic points about intermediaries: • Marketing intermediaries can be eliminated, but their activities can’t • Intermediary organizations have survived because they perform marketing functions faster and more cheaply than others can • Intermediaries add costs to products, but these costs are usually more than offset by the values they create • The Utilities Created by Intermediaries: o Utility: In economics, the want-satisfying ability, or value, that organizations add to goods or services when the products are made more useful or accessible to consumers than they were before o Six Kind of Utility: ▪ Form Utility: Changing raw materials into useful products ▪ Time Utility: Adding value to products by making them available when they’re needed 4 ▪ Place Utility: Adding value to products by having them where people want them ▪ Possession Utility: Doing whatever is necessary to transfer ownership from one party to another, including providing credit, delivery, installation, guarantees, and follow-up service ▪ Information Utility: Adding value to products by opening two-flows of information between marketing participants ▪ Service Utility: Adding value by providing fast, friendly service during and after the sale and by teaching customers how to best use products over time • Wholesale Intermediaries: o A wholesale is the sale of goods and services to businesses and institutions for use in the business (B2B) o Merchant Wholesalers: ▪ Merchant wholesalers: Independently owned firms that take title to the goods they handle • Full-service wholesalers perform all the distribution functions • Limited-function wholesalers perform only selected functions o Three common types of limited-function wholesalers: ▪ Rack jobbers: Wholesalers that furnish racks or shelves full of merchandise to retailers, display products, and sell on consignment ▪ Cash-and-carry wholesalers: Wholesalers that serve mostly smaller retailers with a limited assortment of products 5 ▪ Drop shippers: Wholesalers that solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer o Agents and Brokers: ▪ Agents and brokers bring buyers and sellers together and assist in negotiating an exchange ▪ Agents and brokers never own the products they distribute ▪ Agents often maintain long-term relationships with the people they represent, whereas brokers are usually hired on a temporary basis ▪ Agents who represent producers are either manufacturer’s agents or sales agents • Retail Intermediaries: o A retailer is a marketing intermediary that sells to ultimate consumers o 6 o Retail Distribution Strategy: ▪ Three categories of retail distribution: • Intensive distribution: Distribution that puts products into as many retail outlets as possible • Selective distribution: Distribution that sends products to only a preferred group of retailers in an area • Exclusive distribution: Distribution that sends products to only one retail outlet in a given geographic area • Non-Store Retailing: o Small businesses can use non-store retailing to open new chan
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