Place Strategy

ChapterTen PlaceStrategySection1 PlaceanddevelopmentofchannelsystemsPlacedecisionsareanimportantpartofmarketingstrategy✓StrategydecisionareasinPlace•Typeofchannel•Customerserviceleveldesired✓Someprofessionalterms•Place:makinggoodsandservicesavailableintherightquantityandlocationswhencustomerswantthem.•Channelofdistribution:anyseriesoffirmsorindividualswhoparticipateintheflowofproductsfromproducerstofinalusersorconsumers.✓Placedecisionsareguidedby‘ideal’placeobjectives•Productclassessuggestplaceobjectives-Convenienceproducts:widespreaddistribution-Shoppingproducts:enoughexposure,andnearsimilarproducts-Specialtyproducts:limiteddistributionisacceptable-Unsoughtproducts:beavailableinplaceswheresimilarproductsaresought-Installation:personalselling-Accessoryequipment:widespreaddistribution-Rawmaterial:transportation&storingiscrucial-Componentparts:deliveryreliability-MRO:widespread-Professionalservice:personalselling•Placedecisionshavelong-runeffects-Ittakesyearsandagreatdealofmoneytodevelopeffectiveworkingrelationshipwithothersinthechannel.-Legalcontractswithchannelmemberslimitchanges.-It’shardtomoveretailstoresandwholesalefacilities.-It’shardtochangeoncecustomershoppingpatternsaresettled.Channelsystemmaybedirectorindirect✓Directdistribution:distributedirecttothefinalcustomerorconsumer.✓Indirectdistribution:distributethroughmiddlemen.Thebestchannelsystemshouldachieveidealmarketexposure✓Idealmarketexposure•Makesaproductavailablewidelyenoughtosatisfytargetcustomers’needsbutnotexceedthem.✓Itmaybeintensive,selective,orexclusive•Intensivedistribution-Isneededforconvenienceproductsandbusinesssupplies-Sellers’intentistosellthroughallresponsibleandsuitableoutlets-Itdependsontargetcustomersshoppinghabitsandpreferences.•Selectivedistribution-Itmaybesuitableforallcategoriesofproducts.-Itmakessenseforshoppingandspecialtyproductsandforthosebusinessproductsthatneedspecialeffortsfromchannelmembers.-Itcanproducegreaterprofitsnotonlyfortheproducerbutforallchannelmembersbecauseoftheclosercooperationamongthem.•Exclusivedistribution-Controlpricesandservice-Retailersofshoppingproductsandspecialtyproductsoftengetexclusivedistributionrightsintheirterritories.-Fast-foodfranchisesoftenhaveexclusivedistribution.-Itusuallyinvolvesaverbalorwrittenagreement.Physicaldistribution✓Physicaldistribution•PDisthetransportingandstoringofgoodstomatchtargetcustomers’needswithafirm’smarketingmix,bothwithinindividualfirmsandalongachannelofdistribution.•LogisticsisanothercommonnameforPD.✓Servicelevel•Physicaldistributioncustomerservice-Howrapidlyanddependablyafirmcandeliverwhattheywant.-PDisapartofmarketingthatis“invisible”tomostconsumers.Itonlygetstheirattentionwhensomethinggoeswrong.-Itusuallycostsmoretoprovidehigherlevelsofservice.•Whatserviceleveltooffer?-Firmsshoulddecidewhataspectsofservicearemostimportanttocustomersandwhatspecificserviceleveltoprovide.Thenfocusonfindingtheleastexpensivewaytoachievethetargetlevelofservice.-Increasingservicelevelsmaybeveryprofitableinhighlycompetitivesituationswherethefirmhaslittleelsetodifferentiateitmarketingmix.✓Thetransportingfunction•Transportingisthemarketingfunctionofmovinggoods.•Whichtransportingalternativeisbest?•Economiesofscaleintransporting✓Thestoringfunction•Storingandinventory-Storingisthemarketingfunctionofholdinggoods.-Inventoryistheamountofgoodstored.•Storingvariesthechannelsystem-Mostchannelmembersprovidethestoringfunctionforsomelengthoftime.-Storingfunctionoffersseveralwaystovaryafirm’smarketingmixanditschannelsystem—by1.adjustingthetimegoodsareheld;2.sharingthestoringcost;3.delegatingthejobtoaspecializedstoringfacility.•Specializedstoringfacilitiescanbeveryhelpful-Privatewarehousearestoringfacilitiesownedorleasedbycompaniesfortheirownuse.-Publicwarehousesareindependentstoringfacilities.Section2 InternationalchannelstructureandlogisticsChannelstructure✓Howtostructurethedistributionchannelsisthemostimportantlong-termmarketingmixdecisionafirmmaymake.✓Channelstructuresaredesignedtomanagemultidirectional(horizontalandvertical)connectionsin:•Physicalmovementofgoodsandservices•Transactionaltitleflows•InformationcommunicationsflowsDeterminantsofchannelstructureandrelationships✓Customercharacteristics•Whatdotheyneed,why,when,andhow?✓Distributionculture•Thestructurallinkagesandfunctionalcharacteristicsofexistingchannels.✓Competition•Whatchannelsdoesthecompetitionuse?✓Companyobjectives•Determinedbycompanyobjectivesformarketshareandprofitability.✓Character•Thenatureoftheproductimpactsthedesignofthechannel.Thechannelmustmatchthepositioningoftheproductinthemarket.✓Capital•Capitaldescribesthefinancialrequirementsforsettingupachannelsystem.✓Cost•Costistheexpenditureincurredinmaintainingachannelonceitisestablished.✓Coverage•Thenumberofareasinwhichaproductisrepresentedandthequalityofthatrepresentation.•Typesofcoverage:--Intensive:throughthelargestnumberofdifferenttypesofintermediariesandthelargestnumberofindividualintermediariesofeachtype.--Selective:choosinganumberofintermediariesforeachareatobepenetrated.--Exclusive:onlyoneentityinamarket.✓Control•Theuseofintermediaries,producttype,andthemarketer’suseofpowerwilldeterminetheamountofmarketcontrol.✓Continuity•Responsibilityofthemarketerandisexpressedthroughmarketcommitment.(sendingpersonnel,offeringtraining,settingwhollyownedsalessubsidiaries,staffinglocals.)✓Communication•Providestheexchangeofinformationthatisessentialtothefunctioningofthechannel.•Social,cultural,technological,timeandgeographicaldistancescauseproblems.•Two-waycommunicationhelps:--conveythefirm’sgoal--solveconflictsituation--marketingproductsoverallIntermediaries✓Typesofintermediaryrelationship•Distributorship:purchaseproductandexercisemoreindependencethanagencies.•Agency:havelessfreedomofmovementthandistributorbecausetheyoperateonacommissionbasisanddonotusuallyphysicallyhandlethegoods.✓Typesofexportingfunction•Indirectexporting:dealingwithanotherdomesticfirm•Directexporting:selldirectlyabroad•Integrateddistribution:makeaninvestmentintotheforeignmarketforthepurposeofsellingitsproductinthatmarketormorebroadly.✓Sourcesforfindingintermediaries•Distributorinquires•Governmentalagencies•Privatesources•Tradefairs•Websites✓Screeningintermediaries•Performance:whetherthecandidateismakingmoneyandbeabletoperformthenecessarymarketingfunctions.•Professionalism•Distributor’sreputation•Itsbusinessstrategy•Itsoverallattitudeintermsofcooperationandcommitmenttomarketers.Graymarkets✓Graymarket:authenticandlegitimatelymanufacturedtrademarkitemsthatareproducedandpurchasedabroadbutimportedordivertedtoacountrybybypassingdesignatedchannels.✓Arguments•For:--Therightto“freetrade”--consumersbenefitfromlowerprices--Discountdistributorshavefoundaprofitablemarketniche•Against:--Graymarketerstakeunfairadvantageoftrademarkowner’smarketingandpromotion--Parallelimportsdeceiveconsumersbynotmeetingproductstandardsorexpectationsofafter-saleservice--Erodelong-termbrandimage--Sourmanufacturer-intermediaryrelations✓Solution•Acontractualrelationshipthattiesbusinessestogether.•Addinggraymarketerstotheauthorizeddealernetwork.•One-pricepolicy•Differentproductsfordifferentmarkets•Promotebenefitsofdealingwithauthorizeddealers.Internationallogistics✓Definition•PD,orlogistics,isthetransportingandstoringofgoodstomatchtargetcustomers’needswithafirm’smarketingmix,bothwithinindividualfirmsandalongachannelofdistribution.✓Internationaltransportationissues•Transportingisthemarketingfunctionofmovinggoods.-Canbecostly-Governmentmayinfluencetransportation-Economiesofscaleintransporting•Transportationinfrastructure:establishedtransportationnetwork,suchasroads,raillines,airports,seaports,pipelines,etc.•Availabilityoftransportationmodes:overlandshipping,oceanshipping,airshipping•Choiceofmodes:transittime,predictability,cost,noneconomicfactors✓Internationalinventoryissues•Inventoryistheamountofgoodsstored.•Inventorycarryingcostscanbeupto25%ofthevalueofaninventory•Just-in-Timepoliciesminimizeinventoryvolumebymakingitavailablewhenneeded.•Inventoriesassistinthemovementofproducts.•Factorsindecidingonthelevelofinventorytomaintain:-Ordercycletime:thetotaltimethatpassesbetweentheplacementofanorderandthereceiptofthemerchandise.-Desiredlevelofcustomerservice-Useofinventoryasastrategictool✓Internationalstorageissues•Storingisthemarketingfunctionofholdinggoods.-Mostchannelmembersprovidethestoringfunctionforsomelengthoftime.-Storingfunctionoffersseveralwaystovaryafirm’smarketingmixanditschannelsystem.•Thestoragefacilitieslocationdecision:-Availability-Adequacy-PhysicalconditionsE-Commerce✓Anyworldwidewebstrategymustbetiedcloselytothecompany’soverallgrowthstrategyininternationalmarkets.✓Companiesmustcometotermswithissuesrelatedtosecurity,privacy,andaccesstoglobalnetworks,atthesametime,promotingglobalcommerceovertheInternet.✓WhatIsE-Commerce?✓Theonlinetransactionofbusiness,featuringlinkedcomputersystemsofthevendor,host,andbuyer.Electronictransactionsinvolvethetransferofownershiporrightstouseagoodorservice.Mostpeoplearefamiliarwithbusiness-to-consumerelectronicbusiness(B2C).CommonillustrationsincludeAmazon.com,llbean.com,CompUSA.com,travelocity.com,andhotels.com,dangdang.com,etc.Questionsfordiscussion1.Relatetothesetwostatements:Achannelofdistributioncanbecomparedtoamarriage. Thenumberonereasongivenfordivorceislackofcommunication.2.Whyshouldcustomerservicelevelsdifferinternationally? Isit,forexample,ethicaltoofferalowercustomerservicelevelindevelopingcountriesthaninindustrializedcountries?3.Isgraymarketingatrademarkissue,apricingissue,oradistributionissue?Howtosolvethegraymarketproblem?