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

343

than 10 percent of transport revenues. In the United States, as in other countries,

they carry heavy and bulky goods—such as raw materials, steel, chemicals, and

coal—over long distances. By handling large quantities, the railroads are able to

transport at relatively low cost. For example, in the United States the average cost

to ship by rail runs about 2 to 3 cents a ton-mile. Because railroad freight moves

more slowly than truck shipments, it is not as well suited for perishable items or

those in urgent demand. Railroads are most efficient at handling full carloads of

goods. Less-than-carload (LCL) shipments take a lot of handling and rehandling,

which means they usually move more slowly and at a higher price per pound than

carload shipments.^17

The flexibility and speed of trucks

make them better at moving small quan-

tities of goods for shorter distances. They

can travel on almost any road. They go

where the rails can’t. They are also reli-

able in meeting delivery schedules, which

is an essential requirement for many of

today’s logistics systems that require rapid

replenishment of inventory after a sale.

In combination these factors explain why

at least 75 percent of U.S. consumer

products travel at least part of the way from producer to consumer by truck. And

in countries with good highway systems, trucks can give extremely fast service.

Trucks compete for high-value items. This is reflected in their rates, which average

about 26 cents per ton-mile in the United States. Critics complain that trucks con-

gest traffic and damage highways. But trucks are essential to our present

macro-marketing system.^18

Water transportation is the slowest shipping mode—but usually the lowest-cost

way of shipping heavy freight. Water transportation is very important for interna-

tional shipments and often the only practical approach. This explains why port

cities like Boston, New York City, Rotterdam, Osaka, and Singapore are important

centers for international trade.

Trucks are more

expensive, but flexible

and essential

Babbages Changes the Rules to Win Game Lovers’ Business

Winning the hearts, wallets, and loyalty of elec-

tronic game fanatics isn’t easy, but Babbages’

marketing strategy has done just that. Imagine, for

instance, the week in which the folks at Babbages

shipped 500,000 units of 73 different games by

overnight delivery to 900 different stores. Or there

was the time they filled tractor-trailer trucks at

Nintendo’s loading dock, at midnight, and then

rushed to a chartered jet so that a highly anticipated

game would be available in stores the same day it

was released. Have they lost their minds? No, but

some people think that their customers have. Big-

spending game enthusiasts want to be the very first

to get a new game when it comes out. So Babbages

ships every new game for overnight delivery. While

Wal-Mart and Best Buy stores can stock more at a

lower price, it takes longer for games to work through

their distribution centers and get to store shelves. By

then, Babbages would like to be sold out. The shelf

life of a new game is only about 15 weeks, and most

sales are at the beginning. So gamers will drive

across town to get a game sooner at Babbages, even

if it’s more pricey. That way, when someone asks their

opinions about a new game, they will be in the know.

In fact, game manufacturers like Nintendo know that

avid gamers post reviews of a game on the Internet

within 24 hours of when it gets to Babbages. If

reviews say that a game is really hot, the manufac-

turer can ramp up production. That saves time

because the factories are in Asia, and it takes about

three weeks to reorder and get more product on

shelves.^16

http://www.

mhhe.

com/

fourps

Ship it overseas—but

slowly