Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

12. Distribution Customer
    Service and Logistics

Text © The McGraw−Hill

Companies, 2002

330 Chapter 12

Choosing the right channel of distribution is crucial in getting products to the

target market’s Place. But as the Coke case shows, that alone is usually not enough

to ensure that products are available at the right time and in the right quantities.

Whenever the product includes a physical good, Place requires logistics decisions.

Logisticsis the transporting, storing, and handling of goods to match target cus-

tomers’ needs with a firm’s marketing mix—both within individual firms and along

a channel of distribution. Physical distribution (PD)is another common name for

logistics.

PD provides time and place utility and makes possession utility possible. A mar-

keting manager may have to make many decisions to ensure that the physical

distribution system provides utility and meets customers’ needs with an acceptable

service level and cost.

Logistics costs are very important to both firms and consumers. These costs vary

from firm to firm and, from a macro-marketing perspective, from country to coun-

try. However, for many physical goods, firms spend half or more of their total

marketing dollars on physical distribution activities. The total amount of money

involved is so large that even small improvements in this area can have a big effect

on a whole macro-marketing system and consumers’ quality of life. For example,

during the past decade many supermarket chains and producers that supply them

collaborated to create a system called Efficient Consumer Response (ECR) that cut

grocers’ costs, and prices, by about 11 percent. That translates to savings of about

$30 billiona year for U.S. consumers! The basic idea of ECR involves paperless,

Coke is also working to

increase fountain-drink sales

in domestic and international

markets. As part of that effort,

Coke equips restaurants and

food outlets with Coke dis-

pensers. Once a Coke

dispenser is installed, the

retailer usually doesn’t have

room for a competitor’s dis-

penser. And when a consumer

wants a fountain drink, Coke

isn’t just “the real thing,” it’s

the only thing. The number of

fountain outlets has grown so

rapidly that one Coke account

rep serves as many as a 1,000

customers in a geographic

area. That means that the little

guys could get lost in the

shuffle. However, to give them

the service they need at a

reasonable cost, Coke recently

initiated Coke.net, a password-

protected Web portal where

fountain customers can access

account managers online, track

syrup orders, request equip-

ment repairs, or download

marketing support materials.

Of course, Pepsi is a tough

competitor and isn’t taking all

of this sitting down. In recent

years it has added more non-

cola products, and its edgy

ads for Mountain Dew and

other products are helping it

gain market share—which

means it gets more shelf

space and more Pepsi stocked

at the point of purchase. Coke

is pushing on new fronts as

well. So the competition is

becoming even more intense.

It’s not just the “Cola Wars”

any more but rather the wars

for cola, juice, water, sports

drinks, tea, and many other

beverages. And who wins cus-

tomers and profits in this

broader competition will

depend on overall marketing

programs—but clearly Place

has an important role to play.^1

Physical Distribution Gets It to Customers