SUPPLEMENTARY

NOTES OF MKT243
(FUNDAMENTALS OF
MARKETING):
FOR STUDENT’S
REVISION PURPOSE

PREPARED BY:
MADAM NURUL SYAQIRAH BT
ZULQERNAIN
Faculty of Business & Management
UiTM Kelantan (Machang Campus)

Source: C.W. Lamb, Hr. J. F. Hair, Jr., & Mc Daniel, C. ‘Marketing’ 12th
Edition, South-Western College Publishing (2018)

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CHAPTER 6: PLACE
Syllabus content:
1. Channel intermediaries and their functions
2. Consumer channel structure and
3. Level of channel distribution intensity
4. Understanding retailing
 Major types of retail operations
 Non store retailers
5. Franchising
 Franchisor and franchisee
 Basic forms of franchises
_____________________________________________________________________
Channel intermediaries and their functions:

Intermediaries in a channel negotiate with one another, facilitate transfer of ownership for

finished goods between buyers and sellers, and physically move products from the producer

toward the final consumers. The most prominent difference separating intermediaries is

whether they take title to the product.

Taking title means they actually own the merchandise and control the terms of sale, for

example; price and delivery date. Retailers and merchant wholesalers are examples of

intermediaries that take title to products in the marketing channel and resell them.

Types of channel intermediaries:

Retailers Those firms in the channel that sell directly to consumers as

their primary function. A critical role fulfilled by retailers

within the marketing channel is that they provide contact

efficiency for consumers.

Merchant wholesalers Organizations that facilitate the movement of products and

services from the manufacturer to producers, resellers,

governments, institutions, and retailers, and that receives

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 and takes tittle to goods, store them in its own warehouses,

and later ships them.

Agents and brokers Wholesaling intermediaries who do not take title to a

product, but facilitate its sale from producer to end user by

representing retailers, wholesalers, or manufacturers.

Functions of channel intermediaries:

Transactional functions Involve contacting and communicating with prospective

buyers to make them aware of existing products and to

explain their features, advantages, and benefits.

 Contacting & promoting

 Negotiating

 Risk-taking

Logistical functions Include transportation and storage of assets as well as their

sorting, accumulation, consolidation, and/ or allocation for

the purpose of conforming to customer requirements.

 Physical distributing

 Storing

 Sorting out

 Accumulation

 Allocation

 Assortment

Facilitating functions Includes research and financing. Research provides

information about channel members and consumers by

getting answers to key questions: Who are the buyers?

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 Where are they located? Why do they buy?. Financing

ensures that channel members have the money to keep

product moving through the channel to the ultimate

consumer.

 Research

 Financing

Consumer channel structures:

Direct channel A distribution channel in which producers sell directly to

consumers. when possible, producers use a direct channel to

sell directly to consumers in order to keep purchase prices

low. For example, direct marketing activities including

telemarketing, mail order and catalog shopping, and forms

of electronic retailing such as online shopping and shop-at-

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 home television networks, which there are no

intermediaries.

Retailer channel Most common where the retailer is large and can buy in

large quantities directly from the manufacturer.

Wholesaler channel Commonly used for low-cost items that are frequently

purchased, such as candy, cigarettes, and magazines.

Agent/ broker channel When one or more channel members are small companies

lacking in marketing power, an agent/broker channel may

be the best solution. Agents or brokers bring manufacturers

and wholesalers together for negotiations, but they do not

take title to merchandise. Ownership passess directly from

the producer to one or more wholesalers and/or retailers,

who sell to the ultimate consumer.

Levels of channel distribution intensity:

Intensive distribution A form of distribution aimed at having Coca-Cola,

a product available in every outlet Nestle

where target customers might want to

buy it.

Selective distribution A form of distribution achieved by HP, Samsung

screening dealers to eliminate all but a

few in any single area.

Exclusive distribution A form of distribution that establishes BMW, Apple

one or a few dealers within a given

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 area.

Understanding retailing

Definition of retailing: all the activities directly related to the sale of goods and services to

the ultimate consumer for personal, nonbusiness use.

Major types of retail operations:

Department stores A store housing several departments under Example: Jaya

one roof. Carries a wide variety of shopping Jusco, Sogo,

and specialty goods including apparel, Parkson, Aeon

cosmetics,electronics,etc. Purchase are made

within each depatment.

Specialty stores A retail store specializing in a given type of Example:

merchandise. Narrow product line with a Toy “R” Us, The

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 deep assortment within that line. Body Shop,

Merchandise is tailored to specific target BATA

markets.

Supermarkets A large, departmentalized, self-service Example: Giant

retailer that specializes in food and some Supermarket

nonfood items. Who operate low-cost, low

margin, high-volume and self-service

serving customer’s total needs for food,

laundry and household.

Drugstore A retail store that stocks pharmacy-related Example:

products and service as its main draw. Carry Watsons,

a wide selection of over the counter (OTC) Guardian,

medications. Products offer included Pharmacy

medicines, cosmetics, health products,

beauty items.

Convenience store A miniture supermarket, carrying only a Example:

limited line of high-turnover convenience 7-Eleven

goods. Set up near residential areas and

remain open 24 hours, 7 days a week, charge

high price to make up higher operating

costs, lower sales volume.

Discount stores A retailer that competes on the basis of low Example:

prices, high turnover, and high volume. Wallmart, Mydin

Discount stores can be classified into several Hypermarket

major categories: (Full-line DS)

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 1. Full-line discount store

- a discount store that carries a vast

depth and breadth of product within IKEA (Specialty

a single product category. DS)

2. Specialty discount store

- a retail store that offers a nearly Tupperware

complete selection of single-line (Warehouse DS)

merchandise and uses self-service,

discount prices, high volume, and TJ Maxx,

high turnover. Eco RM2 Shop

3. Warehouse discount store (off-price DS)

- a large, no-frills retailer that sells

bulk quantities of merchandise to

customers at volume discount prices

in exchange for a periodic

membership fee.

4. Off-price discount store

- a retailer that sells at prices 25

percent or more below traditional

department store prices because it

pays cash for its stock and usually

doesn’t ask for return privileges.

Restaurants Provide both tangible products- food and Example: Olive

drink and valuable services- food Garden Italian

preparation and presentation. Most Restaurants,

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 restaurants are also specialty retailers in that Starbucks

they concentrate their menu offerings on a Coffeehouses

distinctive type of cuisine.

Non-store retailing: shopping without visiting a store.

Types of non-store retailing:

Automatic vending The use of machines to offer goods for sales. Example: the soft

Snack vending machines found in college drink, candy, or

cafaterias and office buildings. Due to the snack vending

convenience, consumers are willing to pay machines

higher prices for products from a vending

machine than for the same products in

traditional retail settings.

Direct retailing Representatives sell products door-to-door, Example: Avon,

office-to-office, or at home sales parties. Mary Kay

Cosmetics,

Tupperware

Direct marketing Includes techniques used to elicit purchase Victoria’s Secret

(Direct-response from consumers’ homes, offices, and other Catalog

marketing) convenient locationss. Common direct

marketing technique includes:

1. telemarketing

2. direct mail

3. mail order catalogs

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 shoppers using these methods are less bound

by traditional shopping situations.

Electronic retailing Includes the 24-hours, shop-at-home Astro Go Shop

television networks and online retailing. TV Network, CJ

Wow Shop TV

Network,

mudah.my,

shoppee, lazada

Mobile retailing/ Involves consumers using wireless mobile PepsiCo and

M-Commerce devices to connect to the Internet and shop. Coca- Cola have

Essentially, m-commerce goes beyond text developed smart

message advertisements to enable vending

consumers to purchase goods and services technologies that

by using wireless mobile devices, such as utilize a

mobile telephone and handheld computers. “cashless”

payment system

that accepts

credit cards,

RFID devices,

and even hotel

room keys.

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Definition of franchising: a continuing relationship in which a franchisor grants to a

franchisee the business rights to operate or to sell a product.

The franchisor originates the trade name, product, methods of operation, and so on. The

franchisee, in return, pays the franchisor for the right to use its name, product, or business

methods.

Basic forms of franchising:

Product and trade name A dealer agrees to sell certain Example: Michelin tyres,

franchising products provided by a Coca- Cola bottler

manufacturer or a wholesaler.

This approach has been used

most widely in the auto and

truck, soft-drink bottling, tire,

and gasoline service industries.

Business format An going business relationship Example: Mc Donald’s,

franchising between a franchisor and a Wendy’s, Burger King,

franchisee. Typically, a KFC, Exxon Mobil

franchisor “sells” a franchisee Corporation, Hyatt

the rights to use the franchisor’s Corporation, Domino’s

format or approach to doing Pizza

business. This form of

franchising has rapidly

expanded through retailing,

restaurant, food-service, hotel

and motel, printing, and real

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estate franchises. Franchisors

usually allow franchisee to alter

their business format slightly in

foreign markets.

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