chapter 11
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Chapter 11
Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Small Business
Distribution and Location
Learning Objectives
LO1 Recognize the different types of direct marketing and their pros and cons
LO2 Learn how to do non-direct distributionLO3 Differentiate the types of international
strategiesLO4 Identify the factors to consider in
selecting your business location
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Learning Objectives
LO5 Recognize the key issues in leasing.LO6 Know what to look for in a potential site
layoutLO7 Understand the pros and cons of
buying, building, or leasing
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Distribution
Distribution– process of getting your product to your
customers “Where are my customers?” “Where should I be?”
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Typical Distribution Channels
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Figure 11.1
Direct Marketing
Word-of-mouth – A means of spreading information about
your business through the comments friends and customers make to other potential customers.
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Direct Marketing
Direct sales– Methods of going directly to your
customer in order to sell your product. – Vending machines, door-to-door
salespeople, leasing space at a craft fair, farmers’ markets, party sales, and most industrial sales
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Direct Marketing
Direct mail – A method of selling in which catalogs,
brochures, letters, videos, and other pieces of marketing materials are mailed directly to customers from which they can mail, call, or e-mail an order.
– Direct faxing and direct e-mailing are more modern forms of direct mail.
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Direct Marketing
Mail order– Sales made from ads in newspapers or
magazines, with purchases made online or by phone as well as by mail.
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Direct Mail and Its Variants
Microinventory– A set of goods or service that consists of
only one or a few items.
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Direct Mail and Its Variants
Just-in-time inventory– Having just enough product on your
shelves to meet the immediate purchases.
– Usually requires frequent shipment from your supplier.
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Question
Which marketing style is a telephone call from a salesperson?
A.telemarketingB.direct marketingC.guerilla marketingD.direct response advertising
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Direct Marketing
Telemarketing– Contact via telephone for the express
purpose of selling a product or service. – can either be inbound (customer calls
company) or outbound (company calls customer).
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Direct Marketing
Direct response advertising– Placing an advertisement in a magazine
or newspaper, on television or radio, or in any other media.
– ad contains an order blank with a phone number and e-mail or regular mail address with the intent of having the customer place an immediate order.
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Cost per 1,000 for Various Forms of Direct Response Advertising
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Direct Marketing
Guerilla marketing– The use of creative and relatively
inexpensive ways to reach your customer.
– Examples include door-knob hangers, flyers under windshield wipers, T-shirts, balloons, and messages written on sidewalks.
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Direct Marketing
Multichannel marketing – The use of several different channels to
reach your customers, for example, a Web site, direct mail, and traditional retailing.
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Distribution Issues for Direct Marketing
Fulfillment center– A company that
will warehouse your products and fill your customers’ orders for you.
Retailer– A middleman
business which sells to consumers or end-users of a product (typically in single or small quantities).
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Nondirect Distribution
Wholesaler– A middleman business which buys
(typically in large quantities) and sells (typically in smaller quantities) to businesses rather than consumers.
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Nondirect Distribution
Agent– A middleman business which represents
a manufacturer’s product or service to other business-to-business middleman firms.
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Nondirect Distribution
e-tailer– An electronic retailer; a store that exists
only on the Internet. Born international
– A new firm that opens a Web site immediately, thus being exposed to customers from around the world.
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Question
Exporting using no middlemen is __________.
A.Indirect exportingB.Freight forwardingC.Express exportingD.Direct exporting
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Exporting
Direct exporting– Exporting using no
intermediaries
Indirect exporting– Exporting using
intermediaries such as agents, export management companies, or export trading companies.
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Exporting
Freight forwarders– Firms specializing in arranging
international shipments— packaging, transportation, and paperwork.
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Government Sources of Export Assistance
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Exporting
Letter of credit– A document
issued by a bank that guarantees a buyer’s payment for a specified period of time upon compliance with specified terms.
Documentary draft– A draft which can
be exercised only when presented with specified shipping documents.
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Importing
Importing– similar to exporting, but buyers and
sellers are reversed Travel abroad - look for products that are
selling well in the country you’re visiting Trade mission and domestic and
international trade shows are also good sources
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Location
First choice for many entrepreneurs is their hometown– Local banker knows you, more likely to
loan money– You understand market’s needs and
wants– Friends and family are usually first
customers
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Service Firms
Three types of locations At the client’s location At a mutually accessible location At your firm’s location
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Service Firms
At the client’s location– Services include such things as house or
office cleaning, pest control, remodeling, lawn and gardening services, carpet cleaning, and similar services which must be performed at the client’s house
– As the firm grows, it may outgrow its home-based headquarters
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Service Firms
Mutually accessible location:– Too much specialized equipment to be
readily transported– A need for at least some client
involvement– Barbershops, dentist offices, video
rental stores restaurants
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Manufacturers
Contract manufacturing – An existing firm with the correct
manufacturing capabilities makes your product for you.
Sheltered workshop– A nonprofit organization or institution
that provides business services by using handicapped or rehabilitated workers
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Site Selection
High customer contact business– Three critical site selection
considerations:• Traffic• Customer ease• Competition
– Presence of traffic generators in the area– Parking is also an issue
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Site Selection
Low customer contact business– Manufacturing business– Commercial space might be appropriate– Support businesses will be in or near the
area– Business incubator: www.nbia.org
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Leasing: Location Issues
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Leasing : Operational Issues
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Typical Manufacturing Layout
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Figure 11.2
Typical Retail Layouts
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Figure 11.3
Build, Buy, or Lease
Building has the advantage of having the perfect layout in the perfect location and the street appeal of a new building, but it is costly and slow
Buying something already in existence shortens the time and may be somewhat cheaper
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Build, Buy, or Lease
Leasing is an option with a considerably lower initial cash outlay– Often the only feasible choice– Lease expenses are deductible business
expenses
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