Chapter One

An Overview of Logistics & Channel

Management
 Origin of Logistics

• The concept of “Logistics” started many years before Christ

and was used by Greek generals (Leon the Wise, Alexander
the Great) in order to describe all the procedures for the
army’s procurement on food, clothing, ammunition, etc.

• Alexander the Great was a big fan of the mobility of his troops
and he didn’t want his troops to stay in one place waiting for
supplies from Macedonia.

• Thus, he tried to resolve the issues of supplies by using

supplies from the local resources of his defeated enemies. For
many years, logistics were always an issue in war affairs.
• Kingdoms and generals with strategic planning on logistics
were those who won the war.

• World War II was the major motivation of logistics to increase

recognition and emphasis, following the clear importance of
their contribution toward the Allied victory.

• Starting from the early ‘60s, many factors, such as

deregulation, competitive pressures, information technology,
globalization, profit leverage, etc., contributed to the increase
of logistics science in the form we now it today.
 Definition of logistics

• Logistics is the management of the flow of things between the

point of origin and the point of consumption in order to meet
requirements of customers or corporations.
• Logistics management tries to have the “right product”, in the
“right quantity”, at the “right place”, at the “right time”, with
the “right cost”
• The resources managed in logistics can include physical items,
such as food, materials, animals, equipment and liquids, as
well as abstract items, such as time, information, particles, and
energy.
• “process of planning, implementing, and controlling the
efficient, effective flow and storage of goods, services, and
related information from point of origin to point of
consumption for the purpose of conforming to customer
requirements.“
• Logistics = Supply + Materials management +
Distribution
 Definition of logistics in different
organizations
• Business Logistics: One definition of business logistics speaks
of "having the right item in the right quantity at the right time
at the right place for the right price in the right condition to
the right customer".
• Business logistics incorporates all industry sectors and aims to
manage the fruition of project life cycles, supply chains, and
resultant efficiencies.
• In business, logistics may have either an internal focus
(inbound logistics) or an external focus (outbound logistics),
covering the flow and storage of materials from point of
origin to point of consumption (see
supply-chain management).
• The main functions of a qualified logistician include
inventorymanagement, purchasing, transportation,
warehousing, consultation, and the organizing and planning of
these activities.
• Logisticians combine a professional knowledge of each of
these functions to coordinate resources in an organization.
• Military Logistics: In military logistics, logistics officers
manage how and when to move resources to the places they
are needed.
• In military science, maintaining one's supply lines while
disrupting those of the enemy is a crucial—some would say
the most crucial—element of military strategy, since an armed
force without resources and transportation is defenseless.
• Medical logistics: is the logistics of pharmaceuticals, medical
and surgical supplies, medical devices and equipment, and
other products needed to support doctors, nurses, and other
health and dental care providers.
• Production Logistics: The term is used for describing logistic
processes within an industry.
• The purpose of production logistics is to ensure that each
machine and workstation is being fed with the right product in
the right quantity and quality at the right point in time.
1.2. The role and importance of logistics
• Its intent is to inform, persuade and influence people.
• Promotion involves an ongoing process of communication
between an organization and its target market.
 8.1. The Communication Process
• Promotion involves an ongoing process of communication
between an organization and its target markets.
• Communication is the process of influencing other’s behaviors
by sharing ideas, information and feeling with them.
• Two major participants in communication are sender
(marketer) and the receiver
 Contd.
• There are six steps in developing effective communications.

The marketing communicator must:

1. Identify the target audience
The target audience will heavily affect the communicator's decisions on
'what will be said, how it will be said, when it will he said,where it
will be said and who will say it.
2. Determine the communication objectives/responses sought:the
marketing communicator must decide what response is sought. there
are 6 buyer readiness states-awareness, knowledge, liking, preference,
conviction, purchase.
3. Design the message: AIDA model-the message should get Attention,
hold Interest, arouse Desire and obtain Action.
 Three problems that the marketing communicator should solve are

a. Message contents(what to say)

• Rational appeals-relate to audience self interest. They show that the
product will produce desired benefits.
• Emotional appeals-attempt to provoke emotions that motivate
purchase. E.g. fear, shame..
• Moral appeals-directed to the audience’s sense of what is right and
proper. E.g. support for clean environment, race relations, equal rights,
etc.

b. Message structures(how to say it logically)

• Whether to draw a conclusion or leave it the audience
• Whether to present a one or two-sided argument
• Whether to bring the strongest arguments first or at last
 Contd.
c. Message format(how to say it symbolically)
• Visual advertising-using novelty & contrast, eye-catching
pictures, colour, shape and movement
• Audio ads-using words, sounds, and voices
• Message source-using attractive sources to achieve higher
attention and recall, such as using celebrities
 Contd.
4. Select the communication channels: choose the media
through which to send the message.
i. Personal communication channel: in which two or more
people communicate with each other directly/face to face,
telephones, direct mail, etc/where feedback is possible.
• It is used for products which are risky, expensive and
complex.
ii. Non-personal communication channels: are Medias that
carry messages without personal contact/feedback.
• It includes media (print, broadcast and display media),
atmosphere and events.
5. Measure the communication’s results: evaluate the effects on
the targeted audience.
Collecting Feedback
 Contd.
• After sending the message, the communicator must research
its effect on the target audience.
• This involves asking the target audience members whether
they remember the message, how many times they saw it,
what points they recall, how they felt about the message, and
their past and present attitudes towards the product and
company.
• The communicator would like to measure behavior resulting in
the message - how many people bought a product, talked to
others about it or visited the store.
 8.2. Promotion Mix
• The promotional mix as the company’s total marketing
communications program consists of a specific blend of
advertising, sales promotion, public relations and personal
selling to achieve advertising and marketing objectives.

• The four major promotional tools are defined as advertising,

public relations, sales promotion and personal selling.
 8.2.1 Advertising

• any paid form of non-personal presentation and promotion of

ideas, goods or services by an identified sponsor.

• Advertising’s public nature suggests that the advertised

product is standard and legitimate.

• It can be used to build a long-term image for product and also

stimulate quick sales.

• Advertising can reach masses of geographically dispersed

buyers at a low cost per exposure.
 Contd.
Advertising has also shortcomings:
 It is impersonal and cannot be persuasive as a company
salesperson.
 It is able to carry only a one way communication with the
audience, and the audience does not feel that it has to pay
attention or respond.
 It can also be very costly
 Major Decisions in Advertising

• Marketing management must make 5 important decisions in

developing an advertising program.
1. Setting advertising objectives: the first step in designing and
advertising program is to set advertising objectives.
• Objectives must be based on information about the target
market, positioning and marketing mix.
• Advertising objective is a specific communication task to be
accomplished with a specific target audience during a specific
period of time.
• Advertising objectives can be classified by their aim: to
inform, persuade or remind.
 Contd.
Informative advertising – is used heavily when introducing a
new product category and when the objective is to build
primary demand.
• When an airline opens a new route, its management often runs
full-page advertisements informing the market about the new
service.
Persuasive advertising –becomes more important as
competition increases and a company’s objective becomes
building selective demand.
• Some persuasive advertising has become comparison
advertising, which compares one brand directly or indirectly
with one or more other brands.
 Contd.
Reminder advertising–is important for mature products,
because it keeps consumers thinking about the product.

2. Setting the advertising budget: after determining the ad

objectives, a company can establish ad budget for each
product.

• The role of ad is to affect demand for a product. The company

wants to spend the amount needed to achieve the sales.
 specific factors that should be considered when setting a
budget
a. Stage in the product lifecycle: new products typically need
large advertising budgets to build awareness and gain
consumer trial.
• Mature brands usually require lower budgets as a ratio to
sales.
b. Competition and clutter: in a market with many competitors
and heavy ad support, a brand must be advertised more
frequently to be heard above the noise of the market.
c. Market share: high market share brands usually require greater
advertising expenditures as a percentage of sales than do low
share brands.
 Contd.
• Building a market or taking share from competitors requires
larger ad budgets than maintaining current share.
d. Advertising frequency: larger advertising budgets are essential
when many repetitions are needed to present the brand’s
image.
e. Product differentiation: a brand that closely resembles others
in its product class requires heavy advertising to set it apart.
• When a product differs greatly from other competitors, ad can
be used to communicate differences to consumers.
 Contd.
3. Message decision: a large ad budget does not guarantee a
successful advertising campaign.
• Studies have shown that creative advertising messages can be
more important than the number of dollars spent.
• No matter how big the budget, advertising can succeed only if
messages get attention and communicates well.
• Thus, just to gain and hold attention, today’s ad messages
should be better planned and more imaginative, entertaining
and rewarding to consumers.
• Developing a creative strategy requires 3 message steps:
generation, evaluation and selection and execution.
 Contd.
A. Message generation: the travel and tourism industry face an
inherent barrier to effective communication with its
customers.
• This is because of the intangibility nature of the products
• This characteristic of services general poses genuine
challenge for message creation.
• Creative people have different ways of developing ad
messages.
• Many start by talking to consumers, dealers, experts, and
competitors.
• Others imagine consumers using the product and determine
the benefits that consumers seek.
 Contd.
B. Message evaluation and selection: the advertiser must
evaluate possible appeals on the basis of 3 characteristics.

• Messages should be meaningful-pointing out the benefits that

make the product more desirable or interesting to the
consumer.

• Appeals should be distinctive-they should tell how the product

is better than competing brands.

• The message must be believable-realistic/credible

 Contd.
C. Message Execution: The impact of the message depends on
what is said and how it is said-message execution.

• The advertiser or sponsor has to put the message across in a

way that wins the target market’s attention and interest.

• The advertising agency’s creative staff must find a style, tone,

words, and format for executing the message.

• Any message in the advertisement can be presented in

different execution styles, such as the following:
 Contd.
Slice of life – shows one or more people using the product in a
normal setting.
Lifestyle – shows how a product fits with a lifestyle.
Fantasy creates a wonder world around the product or its use.
Mood or image – builds a mood or image around the product
such as beauty, love or serenity.
Musical – shows one or more people or cartoon characters
singing a song about the product or dancing to a particular
tune.
 Contd.
Personality – symbol creates a character that represents the
product.
Technical expertise – shows the company’s expertise with the
product.
Scientific evidence – presents survey or scientific evidence that
the brand is better or better liked than one or more other
brands.
Testimonial evidence – features a highly believable or likable
source endorsing the product.
 Contd.
4. Media decisions: the 4th step is to choose the media to carry the
message. The major steps in media selection are the following.
A. Deciding on reach, frequency and impact
• Reach is a measure of the percentage of people in the target
market who are exposed to the ad campaign during a given
period of time.
• Frequency is a measure of how many times the average person
in the target market is exposed to the message.
• Impact is the qualitative value of message exposure through a
given medium.
E.g. for products that must be demonstrated, TV messages using
sight and sound are more effective.
 B. Choosing among major media types

• The media planner has to know the reach, frequency and

impact of each major media types. The major media types
include newspaper, TV, direct mail, out door, e-mail, etc.
C. Selecting specific media vehicles
• Costs should be balanced against the media vehicles: audience
quality, ability to gain attention, and editorial quality.
D. Deciding on media timing
• The advertiser must decide on how to schedule advertising
over the year based on seasonal fluctuation in demand, lead
time in making reservations.
5. Advertising evaluation
• Managers of ad programs should regularly evaluate the
communication effects of advertising.
 8.2.2 Public Relations

• Public Relations: building good relations with the company’s various

publics by obtaining favourable publicity, developing a good
corporate image and handling or heading off unfavourable rumour,
stories or events.

• PR is an important marketing tool that until recently was treated as a

marketing stepchild.

• Advertising costs continue to rise, while audience reach continues to

decline.

• PR departments perform the five activities discussed below, not all of

which feed into direct product support.
 Major Activities of PR Departments

Press Relations: The aim of press relations is to place

newsworthy information into the news media to attract
attention to a person, product or service.
• Most types of publicity are viewed by the consumer as third-
party information.
Product Publicity: Product publicity involves various efforts to
publicize specific products.
• New products; special events, such as food festivals;
redesigned products, such as a newly renovated hotel and
products that is popular because of current trends.
 Contd.
Corporate Communication: covers internal and external
communications and promotes understanding of the
organization.

• One important marketing aspect of corporate communication

is communication directed toward employees, such as
company newsletters.

• Companies also need to manage their communication with

their stockholders to make sure the stockholders understand
the company’s goals and objectives.
 Contd.
Lobbying: Lobbying involves dealing with legislators and
government officials to promote or defeat legislation and regulation.

• Large companies employ their own lobbyists, whereas smaller

companies lobby through their local trade associations.
Public affairs. Building and maintaining local, national and
international relations.
Counselling: Counselling involves advising management about public
issues and company positions and image.

• Counselling is important when there maybe sensitive issues

associated with the business.
 Public Relations Process
• Effective public relations are the results of a process.

• This process must be integrated with the firm’s marketing strategy.

• One common misconception about public relations and publicity is

that quantity is more important than quality.

• Some PR firms measure success by the number of articles placed in

media.

• As in other marketing efforts public relations should be meaningful

to the target market.
 The PR process consists of the following
steps
1. Researching to understand the firm’s mission, culture and
target of the communication.
• It should know the vehicles that will be effective in delivering
messages to the target audience.
• Mush of the information needed by a PR manager will be
contained in a well-written marketing plan.

2. Establishing the marketing objectives:

Build awareness – PR can place stories in the media to bring
attention to a product, service, person, organization or idea.
Build credibility – PR can add credibility by communicating
the message in an editorial context.
 Contd.
Stimulate the sales force and channel intermediaries – PR
can help boost sales force and franchisee enthusiasm.
Hold down promotion costs – PR costs less than direct
mail and media advertising.
• The smaller the company’s promotion budget is, the
stronger the case for using the PR to gain share of
mind.
 Contd.
3. Defining the target audience. Effective PR practitioners
carefully identify the publics that they wish to reach.
• Then they study these publics and find media that can be used
as vehicles to deliver their message.
4. Choosing the PR message and the vehicles.
• The PR practitioner is now ready to identify or develop
interesting stories about the product or service.
• If the number of stories is insufficient, the PR practitioner
should propose newsworthy events that the company can
sponsor.
 Contd.
5. Implementing the marketing PR plan
• Consider the matter of placing information in media.
• However, most press releases are less than great and might not
get the attention of busy editors.
• A chief asset of publicists is their personal relationship with
media editors.
• Public relations practitioners are often ex-journalists who
know many media editors and what they want.
• PR people look at media editors as a market to satisfy, so that
they will continue to use the company’s press releases.
 6.Evaluating Public Relations results

Exposures –the number of exposures created in the media.

• Publicists supply the client with a clipping book showing all
the media that carried news about the product and a summary
statement.
Awareness/Attitude Change – A better measure is the change in
the product awareness/attitude resulting from the campaign
(after allowing for the effect of other promotional tools).
• For example, how many people recall hearing the news item?
How many changed their minds after hearing it?
Sales and Profit Contribution
• A well-planned public relations campaign is usually part of an
integrated promotional campaign.
 Major Tools in Marketing Public Relations (PR)

Publications – Companies can reach and influence their

target market via annual reports, brochures, cards, articles,
audio-visual materials and company newsletters and
magazines.
Events –Companies can draw attention to new products or
other company activities by arranging special events.
News –PR professionals cultivate the press to increase better
coverage to the company.
Speeches -Speeches create product and company publicity.
The possibility is accomplished by printing copies of
speech or excerpts for distribution to the press,
stockholders, employees and other publics.
 Contd.
Identity media – Companies can create a visual identity that
the public immediately recognizes, such as with company’s
logos, stationery, signs, business forms, business cards,
buildings, uniforms and dress code.
Public service activities –Companies can improve public
goodwill by contributing money and time to good causes, such
as supporting community affairs.
 8.2.3 Sales Promotions
• consists of short-term incentives to encourage the purchase or
sales of a product or service.
• Sales promotion includes a variety of promotional tools
designed to stimulate earlier or stronger market response.
• It includes:
 consumer promotion (samples, coupons, rebates, price-off,
premiums, contests, demonstrations),
 trade promotion-buying allowances (free goods, cooperative
advertising) and
 sales force promotion (bonuses and contests).
 Steps in setting sales promotion

1. Setting sales promotion objectives. It vary widely and can

include increasing short-term sales, increasing long-term sales,
getting consumers to try a new product, luring customers away
from competitors or creating loyal customers.
2. Selecting sales promotion tools.
• The promotion planner should consider the type of market, the
sales promotion objectives, the competition and the costs and
effectiveness of each tool.
• Common sales promotion tools include samples, coupons,
premiums, patronage rewards, point-of-purchase (POP),
contests, sweepstakes and games.
 Consumer Promotion Tools

Samples – are offers of a trial amount of a product. Some

samples are free. For others, the company charges a small
amount to offset its cost.
• Sampling is the most effective but also the most expensive
way to introduce a new product.
Coupons – are certificates that offer buyers’ savings when they
purchase specified products.
• It can be mailed, included with other products or placed in ads.
Packages –packages of a number of the company’s products.
• Packages are particularly popular with hotels and resorts that
have a number of products to offer.
 Contd.
Premiums – are goods offered either free or at low cost as an
incentive to buy a product.
Patronage Rewards – are cash or other awards for regular use
of a company’s products or services. For example, most
airlines offer frequent flyer plans that award points for miles
travelled.
Point-of-Purchase Displays- include displays and
demonstrations that take place at the point of purchase or sale.
Contests, Sweepstakes and Games – give consumers a chance
to win something, such as cash or a trip.
 Contd.
3. Developing the sales promotion program. The following
steps are involved in developing a sales-promotion program:
 Decide on the size of the incentive.
 Set the conditions for participation.
 Decide how to promote and distribute the promotion program.
 Set promotion dates.
 Decide on the sales promotion budget.
 decide on the creative idea and the mechanics of the
promotion.
 The duration of the promotion
 Contd.
4. Pretesting and implementing the plan
 pretested to find out if they are appropriate and of the
right incentive size.
 pretested quickly and inexpensively.
5. Evaluating the results. The company should evaluate
the results against the objectives of the program.
 compare sales before, during and after a promotion.
 to have attracted new triers and more buying from
current customers.
 8.2.4 Personal Selling
• oral presentation in a conversation with one or more
prospective purchasers for the purpose of making sales.
• the most effective tool at some stage of the buying process,
particularly in building buyer preference, conviction and
purchase.
• Sales personnel serve as the company’s personal link to
customers.
• The sales representative is the company to many customers
and in turn brings back much-needed customer intelligence.
• Personal selling is the most expensive contact and
communication tool used by the company.
 Contd.
• Cost estimates for making a personal sales call vary depending
on the industry and the company, but one conclusion remains
constant., the cost is high.
• It is high in the sense that a salesperson’s salary, cost of travel,
technical support people and cost of presentations and
allowances are to be included in this tool.
• The cost of obtaining a new client thus becomes enormously
high.
• Despite the high cost, personal selling is often the most
effective tool available to a hospitality company.
 Contd.
• Sales representatives perform one or more of the following
tasks for their companies:
Prospecting –find and cultivate new customers.
Targeting –decide how to allocate their scarce time among
prospects customers.
Communicating-communicate information about the company’s
products and services.
Selling –know the art of salesmanship: approaching, presenting,
answering objections and closing sales.
 Contd.
Servicing –provide various services to the customers –
consulting on their problems, rendering technical assistance,
arranging financing and expediting delivery.
Information gathering–conduct market research and
intelligence work and fill-in call reports.
Allocating – decide which customers to allocate scarce products
during product shortages.
Relationship Marketing –The art of creating a closer working
relationship and interdependence between the people in two
organizations.
 Recruiting and Selecting Sales
Representatives
• the effective salesperson has two basic qualities: empathy, the
ability to feel as the customer does; ego drive, a strong
personal need to make the sales.
1. When to recruit – there are three methods: recruit and train
salespeople in batch process; recruit only as needed for
replacement and growth; and always recruit.
2. Training – there are three types of training: product/service
training; policies, procedures and planning training; and sales
techniques training.
 Contd.
3.Directing sales representatives – responsibilities are
developing norms for customer calls; developing norms for
prospect calls; using sales time effectively (travel, food and
break, waiting, selling, administration).
The Sales Process –prospecting and qualifying, pre-approach,
approach, presentation and demonstration, overcoming
objections, closing and follow-up and maintenance.