Term
| What is meant by 'Place'? |
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Definition
| The marketing function of placing products in the hands of the ultimate consumer. |
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Term
| What is the distribution channel? |
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Definition
| The chain that exists between producers and consumers (or organisational buyers in the case of the business-to-business market). |
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Term
| What are intermediaries and which are the main? |
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Definition
The key organisations that make up the distribution channel are clled intermediaries.
Main intermediaries are wholesalers, industrial buyers, agents or brokers, and retailers. |
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Term
| What is indirect distribution? |
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Definition
| This is when producers (especially makers of psysical products) rely on other organisations and individuals to help them get their products to end users |
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Term
| What do effective intermediaries operating in distribution channels achieve when well managed? |
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Definition
- Make products available to the consumer at the time that the consumer wants to purchase them
- Make products available in the locations that the consumer wants to purchase them
- Customise products to the consumer's particular needs
- Make transactions as efficient, simple and cheap as possible for consumers producers and other intermediaries by establishing and managing efficient exchange processes
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Term
| What happens when intermediaries operating in distribution are poorly managed? |
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Definition
| Can add to costs, reduce efficiency, create delays and cause frustration |
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Term
| Different types of distribution channels marketers can choose from: |
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Definition
1. Intensive Distribution
2. Exclusive distribution
3. Selective distribution |
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Term
| Explain Intensive distribution |
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Definition
Distributes products via every suitable intermediary.
- It is an obvious strategy for everyday purchases such as milk
- The consumer invests little time in deciding where, when or how much to buy or how much to pay
- They make their decision based on convenience, often just purchasing at the closest store |
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Term
| Explain Exclusive distribution |
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Definition
Distributes products through a single intermediary for any given geographic region.
- Generally used for products that re only purchased after a great deal of deliberation by the consumer or where exclusivity adds to the appeal of the product
- E.g. Prestige cars and designer furniture |
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Term
| Explain Selective distribution |
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Definition
Distributes products through intermediaries chosen for some specific reason.
- Falls somewhere between intensive and exclusive distribution
- It is most appropriate for goods that require some degree of deliberation by the consumer and where the consumer might visit multiple stores to compare prices and products
- Often chosen when the intermediary can provide some specific value-adding function to the producer's offering |
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Term
Describe Consumer Product Distribution Channels 1
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Definition
- The producer deals directly with the consumer
- This model has increased in use in recent years and is expected to continue to grow as more consumers use the web to research and ultimately purchase products
- Examples include Dell and Apple, which sell their computers and other goods directly to consumers via their websites; Dominoe's Pizza; Just Cuts hairdressing salons which produces and delivers the service at the same time
In choosing distribution channel 1, producers must decide that, in addition to making the product, they are able to effectively manage distribution and deal with customers one-on-one |
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Term
Describe Consumer Product Distribution Channels 2
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Definition
Producers provide their products directly to retailers for sale and consumers.
- Both Dell and Apple use this strategy as well as
- Airlines and hotels can also use this strategy often in combination with distribution channel 1
- From the consumer's perspective, many feel that they receive more personal service from a retailer than a producer, including the ability to examine the goods before purchasing them and often to take possession of the goods when paying for them |
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Term
Describe Consumer Product Distribution Channels 3
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Definition
Producers sell to wholesalers who then sell on the retailers.
- This is a common choice for goods that are sold in high volumes through numerous retailers.
- E.g. grocery items and mass-marketed clothing
- The advantage for the retailer is the ability to buy a range of different lines from one source (the wholesaler) rather than having to deal with large numbers of producers |
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Term
Describe Consumer Product Distribution Channels 4
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Definition
Common choice for exports, where the complexities of dealing with different legal, regulatory and cultural factors suggest an experienced and skilled agent will be able to more effectively deal with intermediaries in the foreign market
- It is also used for mass marketed products where the producer believes an agent can more effectively sell the products to wholesalers |
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Term
Describe Consumer Product Distribution Channels 5
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Definition
- Commonly used in the financial services industry
- For example, mortgage brokers deal directly with consumers and the banks and other financial institutions that offer lians
- For the consumer,, they are able to offer a higher level of service than the financial institutions (e.g. home visits after normal office hours( and the producer (the banks), mortgage brokers can bring new business from otherwise unidentified potential customer |
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Term
Business-to-business product Distribution channel 1
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Definition
- Accounts for the majority of business-to-business product transactions
- Business buyers are usually buying products that are crucial to their own business success often want to deal directly with the producer so they can be sure of direct access to information and assistance |
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Term
Business-to-business product Distribution channel 2
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Definition
| - They purchase commonly used goods such as tools and office supplies from producers and resell them to organisational buyers |
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Term
Business-to-business product Distribution channel 3
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Definition
| - An agent in the business to business products market is an intermediary who lays matchmaker between producers and organisational buyers and is paid a commission on the sales they bring to the producer |
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Term
Business-to-business product Distribution channel 4
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Definition
- Distribution channel 4 combines channels 2 and 3
- The agent takes a commission on sales it secures with industrial distributors
- The industrial distributor then sells to organisational buyers |
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Term
| What is Supply-Chain Management? |
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Definition
| An approach to managing marketing channels based on ongoing partnerships among distribution channel members that create efficiencies and deliver value to customers. |
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Term
| Who is a Channel Captain in the distribution channel? |
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Definition
| A member of the distribution channel that exerts power over the ability of other members of the channel to achieve their goals. Said to have channel power. |
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Term
| What is Horizontal Channel Integration? |
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Definition
Occurs when organisations at the same level of operation are combined under one management structure.
e.g. occurs when. retailer buys out a competitor. |
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Term
| What is Vertical Channel Integration? |
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Definition
Occurs when different stages of the distribution channel are combined under one management structure.
e.g. Occurs when a wholesaler buys a retailer or a transport business.
- Enables closer cooperation and coordination between the two stages of the marketing channel. |
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Term
| Example of Vertical Channel Integration |
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Definition
| Australia Post is an example of a VMS. It owns post boxes situated on street corners; post offices that sell envelopes, stamps, boxes and other goods, as well as accept mail; a fleet of delivery vans and bikes storage and sorting facilities. |
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Term
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Definition
| Franchising is a type of business where the right to sell products or rights to use the main elements of a business model are licensed by one party to another |
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Term
| Give an example of a producer in a retail franchise: |
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Definition
| A producer licenses disruptors to sell its products to retailers. Coca-cola operates like this, licensing bottlers to make up its drinks from syrup and then sell the finished beverage to retail stores |
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Term
| Give an example of a franchisor in a retail franchise: |
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Definition
| A franchisor licenses key aspects of its business model to the franchisee. These are among the best known franchises and include stores |
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Term
| Give an example of a manufacturer in a retail franchise: |
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Definition
| A manufacturer authorises retail stores to sell its brand name item. Examples include agricultural and lawn care products company John Deere and car companies Ford and Toyota |
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Term
| What four sections does Psychical Distribution include? |
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Definition
1. Order processing
2. Inventory Management
3. Warehousing
4. Transportation |
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Term
| What is Order processing? |
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Definition
The term used to describe all of the activities invl=olved in managing the information required to receive, handle and fill a sales order.
- Efficient order processing is important to minimise costs and ensure customer satisfaction.
- It is usually most efficient when computerised systems are involved, but paper-based ordering systems are still common and their relative simplicity and low cost are significant advantages for smaller business |
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Term
| How does the process of Order Processing work? |
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Definition
- Order processing begins when a customer or salesperson places an order.
- An order usually specifies the products wanted, the price to be paid and how the payment will be made, the time the products are wanted and the location to which the products should be delivered.
- The next step is to order handling which involves checking that the terms of the purchase are acceptable (price, credit-worthiness of purchaser and so on) and that the product is in stock (if the product is not in stock, it will be re-ordered)
- When the order details and product availability are verified, the order will be assembled and shipped, and the company records will be updated to reflect completion of the purchase |
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Term
| What does Inventory Management involve? |
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Definition
Involves managing stocks of products to ensure availability to customer while minimising holding costs.
- If a business holds too little stock, it will experience shortages and be unable to meet customer needs, prompting customers to move to other businesses with competing products.
- For many retailers, like supermarkets that are in the fast-moving consumer goods environment, it is important to have stock on show to potential buyers, and not in storage.
Inventory needs to be monitored on an hourly basis so that shelf space can be managed accordingly
- Conversely, if a business holds too much stock it will experience higher warehousing, insurance, handling and other costs |
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Term
| Most businesses have an inventory management system based on: |
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Definition
1. Over lead time - the usual time between placing an order and receiving the stock
2. Usage rate - how much stock is sold during a particular period of time
3. Safety Stock - A quantity of stock held to cover unexpectedly high sales and/or unexpectedly long order lead times |
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Term
| Explain the Just-In-Time (JIT) inventory management method |
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Definition
When a business tries to hold only enough inventory to meet near-term demand - they aim to receive stock just as they are about to use or sell it.
- Maintaining such low inventory levels requires ordering small quantities frequently.
- JIT minimises inventory holding costs, but only works when order lead times and usage rates are predictable and when the supply chain is reliable.
- This requires a high level of supply chain visibility, which refers to the availability of comprehensive and up-to-date information about all aspects of the supply chain |
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Term
| What does an effective Warehouse operation enable? |
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Definition
| Enables businesses to hold surplus stock until consumers require it and to hold a level of safety stock to ensure unexpected demands can be met. |
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Term
| What are some negatives of using Warehousing? |
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Definition
- A warehouse represents a substantial cost to a business, including the purchase or rental, plus maintenance, security, insurance and other costs.
- The increased incidence of direct links between producers and consumers (brought by the internet), increasing demand for customised products and the increasing speed of innovation that quickly renders products obsolete are all factors working against the use of company-owned warehouses |
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Term
| What is Cross Docking/Distribution Centre (variation on the warehouse) |
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Definition
A type of warehouse that focuses on moving rather than storing goods. Are designed to efficiently receive goods, assemble them into orders and ship them to customers iwht minimum handling. At its best, it eliminates the storage component of warehousing.
- Most suited to FMCG - products that are sold quickly and in predictable volumes such as milk and bread |
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Term
| Explain the impact of Technology on physical distribution |
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Definition
The internet and other telecommunications technologies have enabled great advances in the efficiency of physical distribution. E-distribution offers
efficiencies internally and externally. |
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Term
| What are Physical inputs? |
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Definition
The creation and delivery of most services products requires physical inputs. The service business must ensure that the various physical inputs it needs to deliver the service are available.
e.g. A person wanting to get their hair beached blonde requires stylist to have all the right equipment; a state government providing school education to thousands of children needs to coordinate infrastructure, goods and people |
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Term
| What is Delivery Infrastructure? |
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Definition
| Some services are distributed via a physical infrastructure. while you might go to a retailer to purchase a haircut, medical advice or travel advice, some service providers bring the service to you. for example, the electricity supply to your home. |
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Term
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Definition
Scheduling in service businesses is designed to smooth demand.
- Just as producers and sellers of physical products must manage inventory to minimise holding costs yet maximise availability to consumers, service businesses must manage their capacity to ensure customers can be served but that there is not excess labour.
- For example, a restaurant might be able to serve 50 customers a night with three kitchen staff and two waiters. If a 51st customer turns up, the restaurant might be able to cope, but if another ten customers turn up, the restaurant might need to turn them away. On the other hand, if only 20 customers go to the restaurant that night, the restaurant still has to pay the three kitchen staff and two waters.
- Service businesses of to great lengths to smooth demand e.g. restaurant encourage diners to book ahead.
- Some businesses can not so easily control demand for their services. For example, a hospital cannot encourage people to schedule their illnesses and injuries according to a conveniently staggered timeline. Such businesses often face higher costs as they must maintain somewhat higher capacity than will usually be needed to meet demand. |
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