CHAPTER 11 Marketing and Distribution CHAPTER 11 SECTION

CHAPTER 11 Marketing and Distribution

CHAPTER 11 SECTION 1 The Changing Role of Marketing

The Development of Marketing � Marketing: all the activities needed to move goods and services from the producer to the consumer � The sole purpose of marketing is to convince consumers that a certain product or service will add to their utility.

The Development of Marketing � Some economists estimate that about 50% of the price people pay for an item today is the cost of marketing. � The development of marketing can be traced by analyzing what it has focused on: production, sales, advertising and consumer sovereignty. � Consumer Sovereignty: the role of the consumer as ruler of the market when determining the types of goods and services produced

The Development of Marketing � Meeting Consumer Utility � Utility: the amount of satisfaction one gets from a good or service � Utility can be divided into four major types: � Form Utility � Place Utility � Time Utility � Ownership Utility

Form Utility � Form utility is converting raw materials into desired/needed products. � Created by production. � Examples: � Transforming cotton cloth into draperies � Refining crude oil into gasoline

Place Utility � Place utility is providing the good/service where the customer wants it to be. � Examples: � Locating a gas station on a busy corner. � Internet shopping

Time Utility � Time utility is providing the good/service at precisely the time the customer wants it. � Examples: �A 24 -hour grocery store or restaurant � Internet shopping

Ownership Utility � Ownership utility is providing goods/services that people are pleased to own. � Examples: � Fine art � Luxury cars � Expensive jewelry

Market Research � Market Research: gathering, recording, and analyzing data about the types of goods and services people want � Should be done before the product is made or service is offered. � In this sense, the market means the potential buyers of the good or service.

Market Research � When should market research be done? � At the very beginning when the first ideas about a new product are being developed. � Test sample products and alternative packaging designs. � Immediately after a product is released for sale � Early market research helps producers determine whethere is a market for the good and can indicate changes in quality.

Market Research � Market Surveys � Market Survey: information gathered by researchers about possible users of a product based on such characteristics as age, gender, income, education, and location � A market survey usually involves a series of carefully worded questions. � Surveys could also use focus groups.

Market Research � Testing New Products � Offer the item for sale in a small market before selling it to a larger area. � Test Marketing: offering a product for sale in a small area for a limited period of time to see how well it sells before offering it nationally � Of all the new products introduced every year in the US, most are not profitable and do not survive in the marketplace.

CHAPTER 11 SECTION 2 The Marketing Mix

Marketing � � � Simply producing a good and offering it for sale is not enough in today’s competitive world Marketing is necessary for companies to be successful. A marketing strategy, or plan, combines the 4 P’s of marketing: � Product � Price � Place � Promotion

Product � When it comes to product, a company must answer certain questions. � What good or service should be produced? � What services should be offered with the product? Consider adding warranties � How should product be packaged? Consider size, design, color, catch phrases and coupons or rebates. � How should product be identified? Consider logos, songs, celebrity endorsements, and packaging.

Price � Determined by law of supply and demand. � Companies must consider the cost of producing, advertising, selling, and distributing the product. � Price leadership occurs when competing companies sell their products for similar prices. � Price Leadership: practice of setting prices close to those charged by other companies selling similar products � Selling a new product for a low price to entice people to buy it is called penetration pricing.

Place � Where should the product be sold? � Past experience with similar products will help the marketing department make this decision. �A cereal company would most likely market a new cereal in grocery stores. � Companies with goods that appeal to a limited market would advertise in specialty shops or on the internet.

Promotion � Promotion: informing customers about product or service � Type of promotion depends upon the product, the target customer, and amount of money the company wants to spend. � Examples of promotions: direct-mail advertising, free samples, cents-off coupons, and rebates.

Product Life Cycle � Product Life Cycle: series of stages from first introduction to complete withdrawal from the market � Four stages: � Introduction � Growth � Maturity � Decline

Product Life Cycle � Marketing programs are different for each stage. � Pricing can be different for each stage. � Marketers try to extend the life of product by changing its looks, uses, and the advertising focus.

CHAPTER 11 SECTION 3 Distribution Channels

Channels of Distribution � Channels of Distribution: routes by which goods are moved from producers to consumers � Decisions about distribution is another function of marketing. � Distribution: moving goods from where they are produced to the people who will buy them

Wholesalers and Retailers � Wholesalers: businesses that purchase large quantities of goods from producers for resale to other businesses � Retailers: business that sell consumer goods directly to the public

Wholesalers and Retailers � Full service wholesalers warehouse goods and deliver them after retailers pay for them. � Drop shippers are wholesalers that buy the goods under the condition that the producer will store and ship the goods after the wholesaler has sold them.

Wholesalers and Retailers � A cash-and-carry wholesaler sells merchandise, but buyer must pay shipping. � A truck wholesaler sells and delivers at the same time.

Storage and Transportation � Storage: storing goods for future sales. � Transportation: Moving goods from producers and/or sellers to buyers. � The type, size, weight of the good and how fast it is needed factor into storage and transportation.

Distribution Channels � Warehouse club shopping lets people buy a limited number of models and brands in huge quantities so the warehouse will get favorable prices from manufacturers. � Direct marketing is done through catalogs, the Internet, and “space ads. ”