PowerPoint Slides to Accompany Marketing Channels 7th Edition

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PowerPoint Slides to AccompanyMarketing
Channels7th Edition

• Anne T. Coughlan, Northwestern University
• Erin Anderson, INSEAD
• Louis W. Stern, Northwestern University
• Adel I. El-Ansary, University of North Florida

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PowerPoint Slides to AccompanyMarketing
Channels7th Edition

• Anne T. Coughlan, Northwestern University
• Erin Anderson, INSEAD
• Louis W. Stern, Northwestern University
• Adel I. El-Ansary, University of North Florida

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Chapter 10Legal Constraints on Marketing Channel
Policies
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FIGURE 10-1 PRINCIPAL U.S. FEDERAL LAWS
AFFECTING MARKETING CHANNEL MANAGEMENT
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FIGURE 10-2 LEGAL RULES USED IN ANTITRUST
ENFORCEMENT
Per se illegality The marketing policy is
automatically unlawful regardless of the
reasons for the practice and without extended
inquiry into its effects. It is only
necessary for the complainant to prove the
occurrence of the conduct and antitrust
injury. Modified rule of reason (also called
"Quick Look") The marketing policy is presumed
to be anticompetitive if evidence of the
existence and use of significant market power
is found, subject to rebuttal by the
defendant. Rule of reason Before a decision is
made about the legality of a marketing policy,
it is necessary to undertake a broad inquiry
into the nature, purpose, and effect of
the policy. This requires an examination of
the facts peculiar to the contested policy,
its history, the reasons why it was
implemented, and its competitive significance.
Per se legality The marketing policy is
presumed legal.
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Chapter 11Retailing
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TABLE 11-1 THE WORLDS TOP 100 RETAILERS (2003)
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Notes Source 2005 Global Powers of
Retailing, Stores, January 2005, available on
http//www.stores.org . (i) Continents are
abbreviated as follows Af. Africa N. Am.
North America C. Am. Central America S. Am.
South America Asia Asia Eur. Europe Pac.
Pacific (Australia, New Zealand). (ii) Target was
part of Dayton-Hudson Corporation in 1998.
Dayton-Hudson itself was ranked 14th in 1998
sales, and if Targets 1998 sales are taken
alone, it would have ranked 25th in sales in 1998
among global retailers. n.l. not listed in
top 100 retailers in 1998.
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TABLE 11-2 PROFIT PERCENTAGES AT SAKS FIFTH
AVENUES FLAGSHIP STORE (1996)
Source adapted from Jennifer Steinhauer (1997),
"The Money Department," The New York Times,
Magazine Section 6, April 6, pp. 62-64.
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TABLE 11-3 EXAMPLE OF ASSORTMENT AVAILABLE
ATBOOK BARON (www.bookbaron.com)
Author Sue Grafton, a popular mystery writer
book titles each start with a letter of the
alphabet, beginning with A is for Alibi,
published in 1982. R is for Ricochet was
published in 2004. Some of the Sue Grafton books
available at www.bookbaron.com on July 5, 2005
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TABLE 11-4 SALES, GENERAL ADMINISTRATIVE
(SGA) COSTS AS A PERCENTAGE OF NET SALES FOR
SELECTED RETAILERS
Source annual reports for 2004/2005 for each
company. Depending on the companys fiscal year
end, 2004 or 2005 figures are used. The actual
fiscal years overlap in all cases.
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TABLE 11-5 A TAXONOMY OF RETAILER TYPES
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FIGURE 11-1 U.S. E-COMMERCE SALES, IN MILLION
AND AS A PERCENTAGE OF TOTAL U.S. RETAIL SALES
Source U.S. Census Bureau, Released May 20,
2005, available at http//www.census.gov/mrts/www.
ecomm.html .
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FIGURE 11-2 PERCENTAGE CHANGE FROM ONE YEAR
AGO, IN TOTAL U.S. RETAIL SALES AND U.S.
E-COMMERCE SALES
Source U.S. Census Bureau, Released May 20,
2005, available at http//www.census.gov/mrts/www.
ecomm.html
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FIGURE 11-3 PERCENTAGE DISTRIBUTION OF
E-COMMERCE SALES BY MERCHANDISE LINE, 2003 (for
U.S. Electronic Shopping and Mail-Order Houses)
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FIGURE 11-4 E-COMMERCE AS A PERCENT OF SALES,
2003(for U.S. Electronic Shopping and Mail-Order
Houses)
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TABLE 11-6 DIRECT SALES BY COUNTRY
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TABLE 11-6 DIRECT SALES BY COUNTRY (CONTINUED)
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FIGURE 11-5 A SAMPLE MULTI-LEVEL DIRECT SELLING
ORGANIZATION STRUCTURE AND COMPENSATION
Source Anne T. Coughlan and Kent Grayson
(1998), "Network marketing organizations
Compensation plans, retail network growth, and
profitability," International Journal of Research
in Marketing, Vol. 15, p. 403.
COMMISSION SCHEDULE
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FIGURE 11-6 DESCRIPTION OF TRADE DEALS FOR
CONSUMER NONDURABLE GOODS

• Off invoice. The purpose of an off-invoice
  promotion is to discount the product to the
  dealer for a fixed period of time. It consists
  of a temporary price cut, and when the time
  period elapses, the price goes back to its normal
  level. The specific terms of the discount
  usually require performance, and the discount
  lasts for a specified period (e.g., 1 month).
  Sometimes the trade can buy multiple times and
  sometimes only once.
• Bill-back. Bill-backs are similar to off-invoice
  except that the retailer computes the discount
  per unit for all units bought during the
  promotional period and then bills the
  manufacturer for the units sold and any other
  promotional allowances that are owed after the
  promotional period is complete. The advantage
  from the manufacturer's position is the control
  it gives and guarantees that the retailer
  performs as the contract indicates before payment
  is issued. Generally, retailers do not like
  bill-backs because of the time and effort
  required.
• Free goods. Usually free goods take the form of
  extra cases at the same price. For example, buy
  3 get 1 free is a free-goods offer.
• Cooperative advertising allowances. Paying for
  part of the dealers' advertising is called
  cooperative advertising, which is often
  abbreviated as co-op advertising. The
  manufacturer either offers the dealer a fixed
  dollar amount per unit sold or offers to pay a
  percentage of the advertising costs. The
  percentage varies depending on the type of
  advertising run. If the dealer is prominent in
  the advertisement, then the manufacturer often
  pays less, but if the manufacturer is prominent,
  then he pays more.
• Display allowances. A display allowance is
  similar to cooperative advertising allowances.
  The manufacturer wants the retailer to display a
  given item when a price promotion is being run.
  To induce the retailer to do this and to help
  defray the costs, a display allowance is offered.
  Display allowances are usually a fixed amount
  per case, such as 50 cents per case.

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FIGURE 11-6 DESCRIPTION OF TRADE DEALS FOR
CONSUMER NONDURABLE GOODS (CONTINUED)

• Sales drives. For manufacturers selling through
  brokers or wholesalers, it is necessary to offer
  incentives. Sales drives are intended to offer
  the brokers and wholesalers incentives to push
  the trade deal to the retailer. For every unit
  sold during the promotional period, the broker
  and wholesaler receive a percentage or fixed
  payment per case sold to the retailer. It works
  as an additional commission for an independent
  sales organization or additional margin for a
  wholesaler.
• Terms or inventory financing. The manufacturer
  may not require payment for 90 days, thus
  increasing the profitability to the retailer who
  does not need to borrow to finance inventories.
• Count-recount. Rather than paying retailers on
  the number of units ordered, the manufacturer
  does it on the number of units sold. This is
  accomplished by determining the number of units
  on hand at the beginning of the promotional
  period (count) and then determining the number of
  units on hand at the end of the period (recount).
  Then, by tracking orders, the manufacturers know
  the quantity sold during the promotional period.
  (This differs from a bill-back because the
  manufacturer verifies the actual sales in
  count-recount.)
• Slotting allowances. Manufacturers have been
  paying retailers funds known as slotting
  allowances to receive space for new products.
  When a new product is introduced the manufacturer
  pays the retailer X dollars for a "slot" for the
  new product. Slotting allowances offer a fixed
  payment to the retailer for accepting and testing
  a new product.
• Street money. Manufacturers have begun to pay
  retailers lump sums to run promotions. The lump
  sum, not per case sold, is based on the amount of
  support (feature advertising, price reduction,
  and display space) offered by the retailer. The
  name comes from the manufacturer's need to offer
  independent retailers a fixed fund to promote the
  product because the trade deal goes to the
  wholesaler.
• Source Robert C. Blattberg and Scott A. Neslin
  (1990), Sales Promotion Concepts, Methods, and
  Strategies (Englewood Cliffs, NJ Prentice-Hall),
  pp. 318-319.

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TABLE 11-7 OBJECTIVES OF TRADE DEALS FOR
NONDURABLE GOODS
Objectives Retailer merchandising activities,
Loading the retailer, Gaining or maintaining
distribution, Obtain price reduction, Competitive
tool, Retailer "goodwill." Source Robert C.
Blattberg and Scott A. Neslin (1990), Sales
Promotion Concepts, Methods, and Strategies
(Englewood Cliffs, NJ Prentice-Hall), p. 321.