CHAPTER 11Marketing and

Distribution

CHAPTER 11SECTION 1The 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 whether there 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 11SECTION 2The 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 11SECTION 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.”