Principles of Marketing BS2101: Delivering The Offer

Principles of Marketing BS2101
Lecture 10 Delivering the Offer
2012/2013
Author: Dr P.Harborne
4 3 5
Week 1 Principles of Marketing 11 6
10 7 8 9
2012/2013 Author: Dr P.Harborne 2
Delivering the Offer

Objectives
To understand: The role of distribution Types of channels and when they are appropriate The changing face of retailing The impact of new technology Issues with new technology Best practice in electronic marketing
2012/2013
Delivering the Offer

Place/Distribution 1. 2. 3. 4. Distribution channels Retailing Direct marketing E-marketing
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DISTRIBUTION CHANNELS
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Distribution Channels
Place is about channels: Channels of communication (cf. previous lecture) Channels of distribution Key dimensions include availability, convenience, channel power, interaction E-commerce and m-commerce have a profound impact on Place
Alternative Distribution Channels

Internet Consumer segment A Direct Marketing Consumer segment B
Producer
Retailers
Consumer segment C
Wholesalers
Dealers
Business segment A
Sales Force
Business segment B
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Author: Dr P.Harborne Figure 6.1. Alternative Distribution Channels
Functions of channels
In performing the task of moving goods from producers to consumers, the marketing channel performs a number of key functions: Physical distribution storage and movement of products from manufacturer to customer Financing of inventories at various stages of the marketing channel Risk-taking investment, title, physical possession and/or payment Information/Research collection and dissemination of market research information about potential and current customers, competitors and other forces in the marketing environment Communications/Promotions providing communications to attract customers Negotiation and order-taking with potential customers Customer service providing pre-transaction and post-transaction utilities (such as responsiveness to requests, flexibility in meeting customer needs, after-sales service, technical advice).
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A new way?
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Channel Decisions
Decisions need to be taken on the responsibilities and targeted levels for the service outputs, including: Product variety this represents the assortment breadth provided by the channel Waiting time the average waiting time for customer delivery of goods or services Spatial convenience the degree to which the channel makes it easy for customers to purchase the product (for instance opening times) After-sales service these include add-on services, credit, delivery, installation and repairs, provided by the channel. Should the product/service price be the same regardless of channel?
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Orientation of marketing channels

Conventional vs horizontal vs vertical? Conventional = multilevel with independent members Horizontal = 2 or more firms at the same channel level work together e.g. supermarket & bank to provide branches at stores Vertical = formal co-operation between 2 or more levels
May be driven by strong brand, or by common ownership or by a wholesaler encouraging retailer cooperation
Intensity of distribution
Intensive, exclusive, selective? Do you always want the widest possible distribution? Consider milk, TV programmes, Bang & Olufsen products Do customers require convenience or will they take time & trouble over a purchase? Is demand so high that over limiting distribution to exclusive outlets will fail? Will customers pay a sufficiently high price to support selective or exclusive outlets?
Channel Power Economic, legitimate (contractual), coercive (reward) power Consider Wal-Mart, McDonalds, Jimmy Choo Who holds the power? Who is the channel leader? If you do not hold the power, how does it affect your strategy?
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Push or Pull What is your marketing strategy? Will you actively sell and push your product through the channel to market? Do you have the channel interested enough? Will you advertise and get customers to demand your product from the distribution channel creating a pull effect? Intel created Intel inside campaigns to create pull through
Tesco and dominance
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Channel and communication strategy
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RETAILING
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Retailing
Conventional channel structure uses retailers as point of contact with customers Many types of retailers (see overleaf) Have seen changes over time e.g. department stores were once a major retail power High streets have become malls; petrol stations are becoming convenience stores; stores are becoming collection points (clicks & mortar) Stores provide tangibility, advice/expertise (think cameras, TVs), after sales service, personal interaction Why would suppliers and consumers use them?
2012/2013 Author: Dr P.Harborne
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Channel - Retailing Variations

Store Type
Convenience Stores Supermarkets Specialty Stores Discount Stores Department Stores Hypermarkets
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Breadth and Depth of Product Assortment

Limited Line of Frequently Purchased Items at a Premium Price e.g. milk Wide Variety of Edible and Non-Edible Products e.g. fruit & shampoo Few Product Lines but a Good Selection Within Those Lines e.g. Victorias Secret General Merchandise; Off-Price; Warehouse Clubs; Factory Outlet. Broad Range of Items & Offer a Deep Selection Within Each Line e.g. Macys Combine the Characteristics of Warehouse Stores and Supermarkets.
Author: Dr P.Harborne 19
Store Design
Setting the stage
Store Layout
Arrangement of Merchandise in the Store; Grid Layout or Free-Flow Layout
Fixture Type & Merchandise Density

Shelves & Racks That Display Merchandise; How Much Stuff is in the Sales Area
Sound of Music Color and Lighting

Use Both to Set a Mood Within a Store
Tesco stores down the tubes? Problem in S Korea Too few stores to compete Produced Virtual Stores Virtual shelves along tube station wall Scan code with smartphone & order Home delivery
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Tesco in S Korea Video
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22
DIRECT MARKETING
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Channel - Direct marketing
Direct marketing is marketing through various advertising media that interact directly with consumers, generally calling for the consumer to make a direct response
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24
Traditional Direct Marketing
Catalogs - from clothing to computers Direct Mail - brochure offering a product or service at one point in time. Door-to-Door Sales - declining in U.S. Parties & Networks - presentations Telemarketing - over the phone
Mail Order
Direct Selling
Best suited to inexpensive merchandise and food and beverages.

Infomercials - 30 to 60 minute commercials Home Shopping Networks - TV channels that sell products
2012/2013 Author: Dr P.Harborne
Automatic Vending
Direct Response Television
25
Direct Marketing
Direct mail and other forms of direct marketing have grown rapidly over the last few years. It can be personalized. Requires significant investment in a database. The more information held, the better the mail-shot can be targeted. Flexible and creative medium. Can help develop relationships with existing customers. Can be used to cross-sell products.
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26
Direct Marketing
Consider small wineries in N. California
Little power if dealing with supermarkets Advertise using the internet, local newspapers and WOM Encourage customers to visit and sample Offer picnic facilities and special Sunday offers Encourage customers to join their wine club and get emails about wine, offer and special events Deliver locally Not quite integrated direct marketing
Integrated Direct Marketing

paid ad with a response channel direct mail outbound telemarketing face-to-face sales call
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Database Marketing
Creation of an Ongoing Relationship With a Set of Customers Who Have an Identifiable Interest in a Product and Whose Responses to Promotional Efforts Become Part of Future Communication Attempts.
Database Marketing is Database Marketing Builds Interactive Relationships Database Marketing is Measurable Database Marketing Database Marketing Stimulates Cross-Selling Locates New Customers
Elements of Database Marketing

Database marketing has 3 key elements: The establishment of a database of current and potential customers. Delivering a differentiated message to these customers based upon their characteristics and preferences. Tracking each relationship to monitor the cost of acquiring the customer and his/her lifetime value. Customer intimacy: Using information technology to maintain detailed information on customers, thereby allowing marketers to differentiate and to direct marketing programs to customers, even on an individualized basis
Database Management
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Marketing Databases
A marketing database is a list of customers and prospects records that enables strategic analysis and individual selections for communication and customer service support. The data is organised around the customer (Tapp, 2000)
Sources: Sales records Registration forms Promotional campaigns Service records Web cookies Marketing research Purchased lists
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marketing database
Uses: Customer profitability analysis Prospecting for acquisition Prospecting for cross-selling Better targeted campaigns Personalised communication Better service
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Database Maintenance
In one European bank: 10 % of accounts in the database did not have a valid name 13 % did not have a full address 47 % did not have a title/sex 55 % did not have a marital status 72 % did not have a phone number 75 % did not have a date of birth 77 % did not have an occupation 85 % did not have a record of the number of dependent children
Source: OConnor & Galvin (2001)

Database Mining
Prospecting the veins of knowledge in the customer database
Examples: Acquisition: Looking for new prospects based on characteristics of current customers Retention: Looking for defection risks based on customer behaviour Customer development: Looking for customer development opportunities based on purchase history Product customisation: Developing products & services based on characteristics of (individual) customers
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Direct Marketing - Issues
Irritation
Unfairness
Deception
ABUSES OF DIRECT MARKETING

Fraud Invasion of privacy
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E-MARKETING
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E-Marketing
Elements of on-line marketing: Web sites Web advertisements Referral programmes Customer communities E-mail
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Digital Technology &Marketing

Unique features of digital technology
Ubiquity Global reach Universal standards Richness Interactivity Information density Personalisation/customisation
Source: Laudon & Traver, 2001
Seller Benefits from Technology

Better communications Interactive & targeted Disintermediation deal direct with customer More proactive role for the buyer =>Customisation Marketing information can be stored, processed and combined into Databases & shared data between functions More potential customers Cost reduction Opportunities for dynamic pricing
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Buyer Benefits of Technology

A global market at our fingertips No need to leave the house Easy price comparisons 24/7 availability of information and services Better tailored products (selection & customisation) Better tailored promotions (less junk mail?) Better & often personalised service Services on-the-go Easy payments
Lets look at what new technology means for pricing

Pricing with electronic commerce

Sellers Offer Customized Deals to Buyers
Price is Used as a Competitive Strategy
Characteristics of E-Commerce
Buyers May Comparison Shop
Sellers Gather Data About Buying Habits

Sustainability benefits from technology

Less wastage (with permission based marketing)
paper for bills and account information Energy usage Disposal of paper & envelopes etc
Less postage, transport and energy usage BUT

2 complex Google searches use same electricity as boiling a kettle Avatar on Second life uses same electricity as average Brazilian
Jonathan Leake * Richard Wood Sunday Times 11 Jan 2009
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Duality of New Technology

Source: Uncles, 2001
Revolutionises marketing
New business models are required Forward planning is no longer possible Entry barriers to markets are gone Dialogue is in; traditional media are out Channel power lies with the consumer Location is irrelevant in the virtual marketspace The new economy works according to new rules Customers will only want customised products and services Need for networks of coopetition
Does not revolutionise marketing

Basic business fundamentals still apply Traditional marketing practices are still very much alive Relationship marketing pre-dates the internet The most successful ventures are clicks and mortar Customisation is nothing new The development of the internet, and its use by business, is not dissimilar from the development of other networks like the telegraph, or the fax
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Major Considerations for New Technology

The digital divide cost & fear Security, Privacy and ethical issues Does the technology fit the target market? Hi-tech versus hi-touch? What is technologically feasible is not always accepted by the market Are you a first mover or fast follower? Sustainable competitive advantage or is it easy to copy? New technologies create new customer expectations May increase price competition. Employee resistance to change Training needs of employees Uncertainty about costs versus benefits of new technologies Complexity of integration/combination of traditional and new technologies Channel conflict - inventory sold online cannibalizes store sales Do people need touch-and-feel information before buying? Still need physical delivery
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Best practices for exploiting New Technology

Strong Branding Easy Access / affiliation with an established high-traffic site
Offer
Easy Site Navigation quick order processing Order Status Information
Safeguards to reduce First-time Purchase Risk

Incentives for Repeat Purchases real-world Promotional Programs
Develop efficient systems that reduce
Cost of Acquiring Customers

Cost of Servicing Customers
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IS DISTRIBUTION CHANGING?
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UK Christmas 2011 Trading

Clothes -Online was a big winner in the UK. e-tailers Shop Direct and ASOS saw year-on-year grow 9% and 10% respectively. Health & Beauty shoppers browsed online for the best deal before purchasing, with mobile in particular driving new shopping opportunities. Boots Health & Beauty Chief Executive Alex Gourlay said: Growth in mobile shopping has been significant, so we are looking to give this our full attention this year. Electronics- It was those that took a more customer service-led approach that profited most. Specialist technology and electronics retailer Maplins, 1.4% yearon-year improvement was seen as a reflection of the value our customers know they can find at Maplin. However, the leisure & entertainment sector was dominated by Amazon, which reported sales up 35% during its fourth quarter to 31 December 2011 Growth was driven by the Kindle (up 117% during Q4) and Kindle books (up almost five times higher). The company also experienced strong trading in consumer electronics, digital entertainment, clothing and consumables.
Author: Dr P.Harborne 47
2012/2013
Summary We have explored: The role of distribution Types of channels and when they are appropriate The changing face of retailing & resultant issues The impact of new technology
Benefits & issues for suppliers & customers Technology based issues ( privacy, social, pricing)
Best practice in electronic marketing


Principles of Marketing BS2101: Delivering The Offer

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Principles of Marketing BS2101

Lecture 10 Delivering the Offer

Week 1 Principles of Marketing 11 6

Delivering the Offer

Delivering the Offer

Alternative Distribution Channels

Author: Dr P.Harborne Figure 6.1. Alternative Distribution Channels

Orientation of marketing channels

Tesco and dominance

Channel and communication strategy

Channel - Retailing Variations

Breadth and Depth of Product Assortment

Fixture Type & Merchandise Density

Sound of Music Color and Lighting

Tesco in S Korea Video

Channel - Direct marketing

Traditional Direct Marketing

Best suited to inexpensive merchandise and food and beverages.

Direct Response Television

Integrated Direct Marketing

Elements of Database Marketing

Source: OConnor & Galvin (2001)

Direct Marketing - Issues

ABUSES OF DIRECT MARKETING

Digital Technology &Marketing

Seller Benefits from Technology

Buyer Benefits of Technology

Lets look at what new technology means for pricing

Pricing with electronic commerce

Price is Used as a Competitive Strategy

Buyers May Comparison Shop

Sellers Gather Data About Buying Habits

Sustainability benefits from technology

Less postage, transport and energy usage BUT

Duality of New Technology

Does not revolutionise marketing

Major Considerations for New Technology

Best practices for exploiting New Technology

Safeguards to reduce First-time Purchase Risk

Develop efficient systems that reduce

Cost of Acquiring Customers

UK Christmas 2011 Trading

Best practice in electronic marketing

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