McGraw-Hill OnlineMcGraw-Hill Higher EducationLearning Center
Student Centre | Instructor Centre | Information Centre | Home
Career Corner
Indices & Appendices
Additional Resources
e-Commerce Modules
Technology Corner
E-STAT
PowerWeb
Videos
Glossary
Improve Your Grades!
Learning Goals
eLearning Session
Self Quiz
Internet Exercises
Video Exercise
Web Links
Crossword Puzzle
Key Terms & Glossary
Electronic Lecture Notes
Feedback
Help Center


Understanding Canadian Business 4/e
Understanding Canadian Business, 4/e
William Nickels, University of Maryland
James McHugh, St Louis Community College
Susan McHugh, St Louis Community College
Paul Berman, McGill University and John Abbott College
Rita Cossa, McMaster University

Promoting and Distributing Products Efficiently and Interactively

eLearning Session

The PROFILE at the beginning of this chapter focuses on GUY LALIBERTE of CIRQUE du SOLEIL." He began as a street entertainer and with help from the Quebec government and a careful marketing plan has succeeded in building his troupe into a global success.
  1. THE PROMOTION MIX
    ¨PowerPoint Slide
    1. PROMOTION is an attempt by marketers to inform people about products and to persuade them to participate in an exchange.
      1. The combination of promotional tools an organization uses is called its PROMOTION MIX.
      2. INTEGRATED MARKETING COMMUNICATION (IMC) combines all the promotional tools into one comprehensive promotional strategy.
      3. All the promotional tools and company resources are used to create a positive brand image.
    2. HOW CONSTANT CHANGE IS AFFECTING PROMOTION.
      1. TECHNOLOGY has dramatically changed the role and activities of salespeople.
      2. For example, advertisers must be more creative in trying to reach large audiences because of the increase in the number of television channels available to consumers.
      3. The latest trend is to BUILD RELATIONSHIPS with customers over time.
      4. INTERACTIVE PROMOTION changes the promotion process from a monologue, where sellers tried to persuade buyers to buy thins, to a dialogue in which buyers and sellers can work together to create mutually beneficial exchange relationships.
      5. The text uses the example of Garden.com.
      ¨PowerPoint Slide
  2. ADVERTISING: PERSUASIVE COMMUNICATION.
    1. ADVERTISING is paid, nonpersonal communication through various media by organizations and individuals who are in some way identified in the advertising message.
    2. IMPORTANCE OF ADVERTISING.
      ¨PowerPoint Slide
      1. The total ad volume exceeds $215 billion yearly.
        1. The number one advertising medium in terms of total dollars spent is TV (23% of total.)
        2. NEWSPAPERS are now number two, with 21% of the total.
        3. DIRECT MAIL is number three, with 19%.
        4. INTERNET ADVERTISING, now less than 2% of total expenditures, is growing by 85% a year.
      2. The PUBLIC BENEFITS FROM ADVERTISING in the following ways:
        1. Advertising is INFORMATIVE.
        2. Advertising provides us with FREE TV AND RADIO PROGRAMS, because advertisers cover most of the production costs.
      3. Newspapers, radio, and the Yellow Pages are especially attractive to LOCAL ADVERTISERS.
      4. TV has many advantages to national advertisers, but it is expensive.
        1. However, there are few ways to reach as many people with such impact.
        2. Marketers must choose which media and which programs can best be used to reach the audience they desire.
      5. RADIO ADVERTISING is less expensive than TV advertising and often reaches people when they have few distractions.
    3. THE GROWING USE OF INFOMERCIALS.
      ¨PowerPoint Slide
      1. INFOMERCIALS are TV programs devoted exclusively to promoting goods and services.
      2. They are so successful because they show the product in great detail.
      3. Some products, such as work-out tapes, are hard to sell without showing testimonials.
    4. ADVERTISING AND PROMOTION ON THE INTERNET.
      1. Advertising on the Internet is a relatively new phenomenon.
      2. Most people tend to ignore Internet ads, but companies continue to use them hoping to tap into the huge online marketing potential.
      3. Companies like Wal-Mart have turned to outside professionals to help then crate online promotion systems.
      4. Customer relationship management software makes it possible to track customers' purchases and answer their questions online.
      5. New technologies such as high-speed connections will improve the speed and potential of Internet dialogues.
      6. Using palm-sized computers, consumers are able to CYBERSHOP at the same time they are shopping in a mall.
    5. GLOBAL ADVERTISING.
      1. GLOBAL ADVERTISING refers to developing a product and promotional strategy that can be used worldwide.
      2. Promotion targeted at specific countries is more successful since each country has its own culture, language, and buying habits.
      3. Because of cultural differences, promotional efforts designed specifically for individual countries may work best.
      4. Getting the words right in international advertising is tricky and critical.
      5. Even in Canada, selected groups are large enough and different enough to call for specially designed promotions.
  3. PERSONAL SELLING: PROVIDING PERSONAL ATTENTION.
    ¨PowerPoint Slide
    1. PERSONAL SELLING is the face-to-face presentation and promotion of products and services plus searching out prospects and providing follow-up service.
      1. Effective selling today is more than persuading others to buy; it is helping them to satisfy their wants and needs.
      2. The benefit of personal selling is that there is a person there to help you complete a transaction.
      3. The Internet is changing the way salespeople operate.
      4. Nearly 10% of the total labour force is employed in personal selling.
      5. The average cost of a single sales call to a potential B2B buyer is about $400.
    2. STEPS IN THE SELLING PROCESS.
      1. PROSPECT AND QUALIFY.
        1. PROSPECTING involves researching potential buyers and choosing those most likely to buy.
        2. QUALIFYING means making sure that prospects have the NEED for a product, the AUTHORITY to buy, and the WILLINGNESS to listen to a sales message.
        3. The best prospects are people at companies who were recommended to you by others who use your product.
      2. PREAPPROACH.
        1. Before making a sales call, sales reps must do further research.
        2. Sales people should learn as much as possible about customers and their wants and needs.
        3. Gathering information before the sale takes place is critical.
      3. APPROACH.
        1. You don't have a second chance to make a first impression.
        2. Try to give an impression of friendly professionalism, to create rapport, and to build credibility.
      4. MAKE PRESENTATION.
        1. The idea is to match the benefits of your value package to the client's needs.
        2. This is a good time to use testimonials.
      5. ANSWER OBJECTIONS.
        1. A salesperson should anticipate potential objections and determine proper responses.
        2. Questions should be viewed as opportunities for creating better relationships.
      6. CLOSE SALE.
        1. You have to "ask for the sale" to finalize the sales process.
        2. CLOSING TECHNIQUES include getting a series of small commitments and then asking for the order and showing the client where to sign.
        3. Salespeople must close many times before a long-term relationship is established.
      7. FOLLOW UP.
        1. Selling is more than simply sales, it is a matter of establishing relationships.
        2. Follow-up includes handling customer complaints, making sure that the customer's questions are answered, and supplying what the customer wants.
        3. Often customer service is as important to the sale as the product itself.
      8. The selling process varies somewhat among different goods and services, but the general idea is the same.
        1. Companies today provide many high-tech aids to help salespeople.
        2. SALES FORCE AUTOMATION (SFA) includes software programs that help salespeople design products, close deals, tap into intranets, and more.
    3. USING TECHNOLOGY TO PRACTICE CONSULTATIVE SELLING.
      1. B2B customers are buying more goods over the Internet.
      2. B2B salespeople will have new roles to play in the future.
      3. A CONSULTATIVE SALESPERSON begins by analyzing customer needs and then comes up with solutions to those needs.
      4. Selling to the consumer market will change as dramatically as selling to the B2B market has.
      5. Consumer market salespeople also must function as consultants.
      6. There is still a need for traditional salespeople, but such agents will be fewer and will be paid less.
    ¨PROGRESS CHECK
  4. PUBLIC RELATIONS: BUILDING RELATIONSHIPS WITH ALL PUBLICS
    ¨PowerPoint Slide
    1. PUBLIC RELATIONS.
      1. PUBLIC RELATIONS (PR) is the management function that evaluates public attitudes, identifies the policies and procedures of an individual or an organization with the public interest, and executes a program of action to earn public understanding and acceptance.
      2. A GOOD PUBLIC RELATIONS PROGRAM HAS THREE STEPS.
        1. Listen to the public.
        2. Develop policies and procedures in the public interest.
        3. Inform people of the fact that you're being responsive to their needs.
      3. PR has become one of the three fastest-growing industries in the country.
      4. The text uses the example of Yahoo, whose success is directly attributable to its long-term PR strategy.
      5. The public relations department has responsibility for maintaining close relationships with the media, community leaders, government officials, and other stakeholders.
    2. PUBLICITY.
      ¨PowerPoint Slide
      1. PUBLICITY is any information about an individual, a product, or an organization that is distributed to the public through the media, and that is not paid for, or controlled by, the sponsor.
      2. ADVANTAGES OF PUBLICITY include:
        1. IT'S FREE, if the material is newsworthy.
        2. IT REACHES PEOPLE WHO DO NOT READ ADVERTISING MESSAGES.
        3. IT CAN BE PLACED IN A PROMINENT PLACE (like the front page.)
        4. A story in the newspaper is treated as news, and NEWS IS MORE BELIEVABLE THAN ADVERTISING.
      3. DISADVANTAGES OF PUBLICITY include:
        1. YOU HAVE NO CONTROL over how, when, or if the media will use the story.
        2. Media DOES NOT HAVE TO PUBLISH IT.
        3. The story can be ALTERED so it's not positive.
        4. There IS such a thing as BAD publicity.
        5. Stories are NOT LIKELY TO BE REPEATED; advertising can be repeated as often as needed.
      4. To see that publicity is handled well by the media, establish a friendly relationship with the media and cooperate with them.
      5. Certain ethical questions arise about the use of publicity as it has the power to change public opinion.
    ¨PROGRESS CHECK
  5. SALES PROMOTION: GETTING A GOOD DEAL
    1. SALES PROMOTION.
      ¨PowerPoint Slide
      1. SALES PROMOTION is the promotional tool that stimulates consumer purchasing and dealer interest by means of short-term activities.
        1. Examples of consumer sales include free samples. cents-off coupons, and prizes.
        2. Sales promotion programs are designed to supplement personal selling, advertising, and public relations by creating enthusiasm.
      2. INTERNAL SALES PROMOTION (within company):
        1. Sales training.
        2. Development of sales aids such as flip charts, portable audiovisual displays, and movies.
        3. Participation in trade shows.
      3. EXTERNAL SALES PROMOTION (outside company, including distributors and dealers):
        1. It is important to get distributors and dealers involved so they too are enthusiastic.
        2. Trade shows are important because buyers are able to see products from many different sellers.
        3. Virtual trade shows, trade shows on the Internet, enable buyers to see many products without leaving the office.
      4. The next step is to PROMOTE TO FINAL CONSUMERS.
        1. Sales promotion is an ongoing effort to maintain enthusiasm.
        2. Techniques include samples, coupons, cents-off deals, displays, contests, etc.
    2. SAMPLING IS A POWERFUL SALES PROMOTION TOOL.
      1. SAMPLING is a promotional tool in which a company lets consumers have a small sample of a product for no charge.
      2. It is a quick, effective way of demonstrating a product's superiority at the time consumers are making a purchase decision.
      3. Companies use sampling in conjunction with other techniques such as event marketing.
      4. The text uses the example of Kiehl's skin care products; the company uses no advertising, only sampling.
    3. WORD-OF-MOUTH PROMOTION encourages people to tell other people about products they have enjoyed.
      1. Word-of-mouth is one of the most effective promotional tools.
      2. Anything that encourages people to talk favourably about an organization is effective word of mouth.
        1. Clever commercials and samples can generate word of mouth.
        2. The best way, however, is to have a good product, provide good services, and keep customers happy.
    4. VIRAL MARKETING AND OTHER WORD-OF-MOUTH STRATEGIES.
      1. Some companies have begun creating word of mouth by paying people to go online and hype the product in chat rooms.
      2. These people get free tickets, T-shirts, and other merchandise that the industry calls SWAG.
      3. VIRAL MARKETING is the term now used to describe these Internet promotions.
      4. Websites such as Barnes & Nobles pay a commission for customer recommendations.
      5. An effective strategy for spreading word of mouth is to send TESTIMONIALS to current customers.
        1. These are effective in confirming customers' belief that they chose the right company.
        2. Some companies make it a habit to ask customers for referrals.
        3. However, negative word of mouth can be very destructive to a firm.
        4. Upset customers are now getting on the Internet and publishing their complaints.
    5. OTHER WAYS THAT NEW TECHNOLOGIES ARE AFFECTING PROMOTION.
      1. As people purchase goods and services on the Internet, companies keep track of these purchases and gather facts about these customers.
      2. Using this information companies are able to design catalogs and brochures specifically to meet individual customer needs.
      3. Companies are using traditional promotional tools less and are putting more money into direct marketing.
      4. New high-speed Internet connections enable marketers to send video files and to interact with consumers in real time.
      5. You can also search the Net for the best prices and find product information.
      6. Promotion has become more INTERACTIVE.
  6. MANAGING THE PROMOTION MIX: PUTTING IT ALL TOGETHER.
    ¨PowerPoint Slide
    1. Each target group calls for a separate promotion mix.
      1. Large, homogenous groups of consumers are most efficiently reached through ADVERTISING.
      2. Large organizations are best reached through PERSONAL SELLING.
      3. SALES PROMOTION motivates people to buy now rather than later.
      4. PUBLICITY adds support to the other efforts and can create a good impression.
      5. WORD OF MOUTH is often the most powerful promotional tool.
    2. PROMOTION STRATEGIES.
      1. PUSH STRATEGY involves the producer using promotional tools such as advertising and personal selling to convince wholesalers and retailers to stock and sell merchandise.
      2. PULL STRATEGY involves heavy advertising and sales promotion efforts directed toward consumers so they will request the products from retailers.
      3. A company can use both push and pull strategies at the same time.
      4. The latest in pull and push strategies are being conducted on the Internet.
      5. It is important to make promotion part of a total systems approach to marketing.
        1. Thus promotion would be an integral part of supply chain efforts.
        2. The idea would be to develop a value package to appeal to everyone: manufacturers, distributors, retailers, and consumers.
    3. CREATING AN INTEGRATED MARKETING COMMUNICATION (IMC) SYSTEMS
      ¨PowerPoint Slide
      1. An INTEGRATED MARKETING COMMUNICATION SYSTEM (IMC) is a formal mechanism for uniting all the promotional efforts in an organization to make it more responsive to its customers and other stakeholders.
      2. In the past, advertising was created by ad agencies, public relations by PR firms, and so forth, with little coordination.
      3. Customers could receive conflicting messages.
      4. To implement an IMC system, you start with customers and stakeholders and their information needs.
      5. All messages must be consistent and coordinated.
    4. BUILDING INTERACTIVE MARKETING PROGRAMS.
      An INTEGRATED MARKETING SYSTEM is one where consumers can access company information on their own and supply information about themselves in an ongoing dialogue. The basic steps:
      1. Constantly GATHER DATA about the groups affected by the organization (including customers, potential customers, and other stakeholders.)
        1. An information database is critical to any successful program.
        2. A company can gather such data from sales transactions, letters, e-mail, and companies that specialize in gathering such data.
      2. RESPOND QUICKLY to customer and other stakeholder information by adjusting company policies and by designing wanted products.
        1. A responsive firm adapts to changing wants and needs quickly.
        2. It is important for the marketing department to work closely with the information system department to make the process of ordering fast and smooth.
      3. Make it possible for customers to OBTAIN INFORMATION that they need to make a purchase.
      4. The advantages of interactive marketing include:
        1. Information is available 24/7.
        2. Ads and catalogs can be updated continually.
        3. Buyers and sellers can engage in a dialogue over time.
        4. It can be used by small as well as large businesses.
    ¨PROGRESS CHECK
  7. THE IMPORTANCE OF CHANNELS OF DISTRIBUTION
    ¨PowerPoint Slide
    1. There are hundreds of thousands of marketing intermediaries whose job it is to help move goods from the raw-material state to producers and then on to consumers.
      1. MARKETING INTERMEDIARIES are organization that assist in moving goods and services from producer to industrial and consumer users.
        1. They are organizations (formerly called "middlemen") in the middle of a series of organizations that join together to help distribute goods.
        2. A CHANNEL OF DISTRIBUTION is the whole series of marketing intermediaries who join together to transport and store goods in their path from producers to consumers.
        3. A WHOLESALER is a marketing intermediary that sells to other organizations.
        4. A RETAILER is an organization that sells to ultimate consumers.
      2. CHANNELS OF DISTRIBUTION enhance communication flows and the flow of money and title to goods.
        ¨PowerPoint Slide
      3. The latest trend is to try to eliminate wholesalers and the need for retail stores by selling over the Internet.
    2. WHY MARKETING NEED INTERMEDIARIES
      ¨PowerPoint Slide
      1. Manufacturers don't always need marketing intermediaries to sell their goods to consumer and industrial markets.
      2. Intermediaries perform certain functions better than most manufacturers. These functions include transportation, storage, selling, advertising, and relationship building.
      3. Companies often outsource distribution to others.
      4. BROKERS are marketing intermediaries who bring buyers and sellers together and assist in negotiating an exchange, but do not take title to the goods.
    3. HOW INTERMEDIARIES CREATED EXCHANGE EFFICIENCY.
      1. Intermediaries CREATE EXCHANGE EFFICIENCY by decreasing the number of contacts needed to establish marketing exchanges.
      2. Not only are intermediaries more efficient, but they are more effective than manufacturers.
      3. Intermediaries were often better at performing their functions than a manufacturer or consumer could be.
      4. Recently, technology has made it possible for manufacturers to reach consumers much more efficiently.
        1. Some manufacturers reach consumers directly on the Internet.
        2. Retailers are now so closely linked with manufacturers that they can get delivery several times a day.
      5. Wholesalers are not yet obsolete, but must change their functions to remain viable.
    4. THE VALUE VERSUS THE COST OF INTERMEDIARIES.
      ¨PowerPoint Slide
      1. Some people think that if we could get rid of intermediaries, we could greatly reduce the cost of the things we buy.
      2. The text uses the example of Fiberiffic to illustrate how marketing intermediaries facilitate the movement of goods.
      3. Values discussed include: the value of not driving to Michigan to buy a box of cereal, the value of saving time, and effort by not having to drive to a wholesaler's on the outskirts of town.
      4. The text emphasizes three basic facts about intermediaries:
        1. Intermediaries CAN BE ELIMINATED, BUT THEIR ACTIVITIES CANNOT BE ELIMINATED.
          1. Someone else still has to perform the tasks.
          2. Today many activities are being performed on the World Wide Web, and intermediaries ARE being eliminated.
        2. Intermediaries have survived in the past BECAUSE THEY PERFORM FUNCTIONS MORE EFFECTIVELY AND EFFICIENTLY THAN MOST MANUFACTURERS.
        3. Intermediaries ADD COSTS TO PRODUCTS, BUT THESE COSTS ARE OFFSET BY VALUES THEY CREATE.
  8. WHOLESALE INTERMEDIARIES.
    ¨PowerPoint Slide
    1. DIFFERENCES BETWEEN WHOLESALERS AND RETAILERS.
      1. Some producers won't sell directly to retailers but only to wholesalers.
      2. Some organizations sell much of their merchandise to other intermediaries, but also sell to ultimate consumers
      3. A RETAIL SALE is the sale of goods and services to consumers for their own use.
      4. A WHOLESALE SALE is the sale of goods and services to businesses and institutions for use in the business to others for resale.
    2. MERCHANT WHOLESALERS are independently owned firms that take title to goods that they handle.
      1. FULL-SERVICE WHOLESALERS perform all eight distribution functions: transportation, storage, risk bearing, credit, market information, standardizing, grading, buying, and selling.
      2. LIMITED-FUNCTION WHOLESALERS perform only selected functions, but do them especially well.
      3. RACK JOBBERS furnish racks or shelves full of merchandise to retailers, display products, and sell on consignment.
      4. CASH-AND-CARRY WHOLESALERS serve mostly smaller retailers with a limited assortment of products.
      5. DROP SHIPPERS solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer.
      6. A FREIGHT FORWARDER puts many small shipments together to create a single, large shipment that can be transported more cost-efficiently to the final destination.
    3. BUSINESS-TO-BUSINESS (B2B) WHOLESALING.
      1. Companies are building e-commerce sites aimed at small and midsize businesses.
      2. They hope to sell PCS and other items to businesses just like they do to consumers.
      3. The business-to-business market is bigger than the consumer market.
  9. RETAIL INTERMEDIARIES.
    1. A RETAILER is a marketing middleman that sells to consumers.
      1. The U.S. has about 2.3 million retail stores.
      2. About 11 million people work for retail organizations.
    2. HOW RETAILERS COMPETE
      ¨PowerPoint Slide
      1. PRICE COMPETITION.
        1. Discount stores such as Wal-Mart succeed with low prices.
        2. Service organizations, such as Southwest Airlines, also compete on price.
        3. Price competition is getting fiercer as Internet firms help consumers find the best prices on a variety of items.
      2. SERVICE COMPETITION.
        1. Retail service involves putting the customer first and providing follow-up service.
        2. Consumers are frequently willing to pay a little more if the retailer offers outstanding service.
        3. The benchmark companies are Dayton's, Lord & Taylor, Dillard's, and Nordstrom.
      3. LOCATION COMPETITION
        1. Many services compete effectively by having good locations.
        2. Nothing is more convenient than shopping online.
        3. Competition between brick-and-mortar retailers and online retailers is intensifying.
      4. SELECTION COMPETITION.
        1. Selection is the offering of a wide variety of items in the same product category, such as Toys "R" Us.
        2. CATEGORY KILLER STORES offer wide selection at competitive prices.
        3. Smaller retailers compete with category killers by offering more selection within a smaller category of items.
        4. Many category killer stores are in turn being "killed" by discount department stores like Wal-Mart.
        5. Internet stores can offer products from dozens of suppliers and offer almost unlimited selection.
        6. Service organizations that compete successfully on selection include Blockbuster Video and most community colleges.
      5. ENTERTAINMENT COMPETITION.
        1. The Internet isn't as much fun as a brick-and-mortar store designed to provide entertainment.
        2. More and more malls are offering this "shoppertainment"
    3. RETAIL DISTRIBUTION STRATEGY.
      ¨PowerPoint Slide
      1. Different products call for different retail distribution strategies.
      2. INTENSIVE DISTRIBUTION puts products into as many retail outlets as possible, including vending machines.
      3. SELECTIVE DISTRIBUTION is the use of only a preferred group of the available retailers in an area.
      4. EXCLUSIVE DISTRIBUTION is the use of only one retail outlet in a geographic area.
  10. NONSTORE RETAILING.
    ¨PowerPoint Slide
    1. E-Tailing is another step in the evolution of retailing away from traditional stores to nonstore retailing.
    2. E-TAILING.
      1. E-TAILING means selling goods and services to ultimate consumers over the Internet.
      2. Getting customers is only half the battle; the other half is delivering the goods, providing service, and keeping your customers.
      3. E-tailers are often not adept at SERVICE AFTER THE SALE.
      4. The latest trend in e-commerce is for the traditional retailers like Kmart to go online.
      5. Old brick-and-mortar stores are going online; these are sometimes called "CLICK-AND-MORTAR" STORES
    3. TELEMARKETING.
      1. TELEMARKETING is the sale of goods and services by telephone.
      2. Telemarketing is predicted to be one of the fastest-growing areas in marketing.
    4. VENDING MACHINES, KIOSKS, AND CARTS.
      1. The benefit of vending machines is their CONVENIENT LOCATION.
      2. CARTS and KIOSKS have lower costs that stores, so they can offer lower prices.
    5. DIRECT SELLING
      1. DIRECT SELLING is selling to consumers in their homes or where they work.
      2. Because so many women now work, many companies are sponsoring parties at workplaces and on weekends and evenings.
    6. MULTILEVEL MARKETING.
      1. Each MLM salesperson works as an independent contractor.
      2. They EARN COMMISSIONS on their own sales and create commissions for the "upliners" who recruited them.
      3. They also RECEIVE COMMISSIONS from "downliners" who they recruit to sell.
      4. Multilevel marketing has been successful around the world.
      5. The main attraction of multilevel marketing is the LOW COST OF ENTRY.
      6. Be careful not to confuse multilevel marketing with "pyramid" schemes that are illegal.
    7. DIRECT MARKETING.
      1. One of the fastest-growing aspects of retailing is DIRECT MARKETING, includes any marketing activity that directly links manufacturers or intermediaries with the ultimate consumer.
      2. Direct retail marketing includes direct mail, catalog sales, telemarketing, and on-line shopping.
      3. Examples are L.L. Bean, Lands' End, Dell Computers, and Gateway 2000.
      4. Direct marketing has become popular because it is more convenient for consumers.
      5. Interactive online selling is expected to provide major competition for retail stores in the future.
  11. BUILDING COOPERATION IN CHANNEL SYSTEMS.
    ¨PowerPoint Slide
    1. Firms are often linked together in formal relationships to form efficient DISTRIBUTION SYSTEMS.
    2. A CORPORATE DISTRIBUTION SYSTEM is one in which all the organizations in the channel are owned by one firm.
    3. CONTRACTUAL DISTRIBUTION SYSTEM is one in which members are bound to cooperate through contractual agreements.
      ¨PowerPoint Slide
      1. In FRANCHISING SYSTEMS (such as McDonald's, KFC, Baskin-Robbins, and AAMCO), the franchisee agrees to all of the rules, regulations, and procedures established by the franchisor.
      2. In WHOLESALER-SPONSORED CHAINS (Western Auto and IGA food stores), each store agrees to use the name, participate in chain promotions, and cooperate even though each store is independently owned.
      3. RETAIL COOPERATES (Associated Grocers) is like a wholesaler-sponsored chain except it is initiated by the retailers.
    4. ADMINISTERED DISTRIBUTION SYSTEM.
      1. The management by producers of all the marketing functions at the retail level is called an ADMINISTERED DISTRIBUTION SYSTEM.
      2. Retailers cooperate because they get so much free help.
    5. SUPPLY CHAINS.
      1. The SUPPLY CHAIN is the sequence of linked activities performed by various organizations to move goods from the sources to ultimate consumers.
      2. Channels of distribution are part of the overall supply chain.
      3. Software is available that coordinates the movement of goods so products reach consumers with the least amount of materials, inventory, and time.
      4. By sharing information and providing fast service, these united firms are becoming competitive entities in the global market.
  12. SUPPLY CHAIN MANAGEMENT.
    Describe some supply-chain management problems and how they are solved.
    1. SUPPLY-CHAIN MANAGEMENT
      ¨PowerPoint Slide
      1. SUPPLY CHAIN MANAGEMENT (SCM) is the process of managing the movement of raw materials, parts, work in progress, finished goods, and related information through all the organizations involved in the supply chain.
      2. INBOUND LOGISTICS brings raw materials, packaging, other goods and services, and information from suppliers to producers.
      3. FACTORY PROCESSES change raw materials and parts into outputs.
      4. OUTBOUND LOGISTICS manages the flow of finished products and information to business buyers and consumers.
    2. THE NEW CHALLENGES IN SUPPLY-CHAIN MANAGEMENT.
      1. Outbound logistics has been the biggest problem for new online retailers.
      2. The text uses the example of Peapod Inc. and its problems with order satisfaction.
      3. Those who best manage the supply chain will have a real advantage.
    ¨PROGRESS CHECK
  13. CHOOSING THE RIGHT DISTRIBUTION MODE AND STORAGE UNITS
    ¨PowerPoint Slide
    1. METHODS USED TO MOVE RAW MATERIALS AND FINISHED GOODS.
      1. One concern is selecting a transporting mode that will minimize costs and ensure a certain level of service.
      2. The largest volume of goods is shipped by RAIL.
        1. Railroad shipment is best for bulky items.
        2. Railroads continue to handle about 35 to 40% of the total volume of goods in the U.S.
        3. PIGGYBACK refers to shipping the cargo- carrying part of a truck on a railroad car.
      3. The second-largest surface transportation mode is MOTOR VEHICLES (a little over 25% of the volume.)
        1. Trucks can deliver almost any commodity door-to-door.
        2. Now piggybacking methods involve railroad cars 20 feet high called double-stacks
      4. WATER TRANSPORTATION carries 15 to 17% of the total.
        1. When truck trailers are placed on ships, the process is called FISHYBACK.
        2. When they are placed in airplanes, the process is called BIRDYBACK.
      5. About 21% of the total volume moves by PIPELINE.
        1. Pipelines are used primarily for transporting petroleum and petroleum products.
        2. There have been experiments with sending other solids in pipelines.
      6. Only a small part of shipping is done by AIR.
        1. The primary benefit is SPEED.
        2. The air freight industry is starting to focus on global distribution.
    2. INTERMODAL SHIPPING.
      1. INTERMODAL SHIPPING uses multiple modes of transportation to complete a single long-distance movement of freight.
      2. Railroads are merging with each other and other transportation companies to offer intermodal distribution.
    3. THE STORAGE FUNCTION.
      1. Storage accounts for 25 to 30% of physical distribution costs.
      2. A STORAGE WAREHOUSE stores products for a relatively long time.
      3. DISTRIBUTION WAREHOUSE gather and redistribute products (UPS).
    4. MATERIALS HANDLING is the movement of goods within a warehouse, factory, or store.
    5. WHAT ALL THIS MEANS TO YOU.
      1. The success of a firm often depends on its ability to take orders, process them, and get the goods to customers.
      2. There are many new jobs available in the area of supply-chain management.
    ¨PROGRESS CHECK




McGraw-Hill/Ryerson