‘At the end of this lesson, the students will be able to 1, diseuss.the mecning of channel. of distribution, 2. identify the two main types of channel of distribution, 13 3. deseribe retailing and the different of Place ee of wholesalers. LET'S DISCOVER The “Suki” System One of the more popular ways of doing business in the Philippines is through the ‘suki approach. The’ suki is an informal relationship, absent of a contract, which involves a mutual commitment between the buyer and the seller, In the absence of a contract, the relationship serves as a sort of agreement bound only by trust between the two parties. Establishing this mutually beneficial relationship takes time. The customer has to regularly buy goods from the vendor before he or she is considered a sure buyer or patron, Other actions that would eventually lead to agood relationship between buyer and vendor is if the former often asks the latter for recommendations regarding the best product to buy, A significant factor in establishing the suki relationship is when the customer treats the vendor well, which results in. improved service and even preferential treatment for the customer. The customer benefits from this relationship because he or she often avails of price discounts, extra servings or additional units of the product, and ease in transactions. In turn, the customer often recommends the vendor to his or her acquaintances, resulting in increased patronage and better sales. Based on trust and friendship, the suki is a unique Filipino tradition that goes beyond the vendor-customer relationship. Discussion Question: 1. How would you define the suki system? 2. Doyou have a suki relationship with a vendor? Describe your transactions with this vendor. 3. Why do you think the suki system is an effective approach in selling products?LET’S LEARN The third “P” in the marketing mix is place or the channel of distribution. All products intended for consumers’ for ‘their “personal consumption as well as those for industrial and production purposes need a channel of distribution. Establishing an excellent channel of distribution ensures that the product will reach the target customers. Distribution entails the use of marketing intermediaries, who are people or organizations responsible for linking the producers or manufacturers to consumers. They may also interact with other intermediaries in bringing products and Services to consumers. Marketing Term Marketing intermediaries are necessary because of the expertise they can provide in distributing the products to the final customers. While employing intermediaries entail additional costs to the producer or manufacturer, their accessibility to target customers provide greater efficiency for customers to compare one product or brand to another without having to g0 directly to the manufacturer itself. A channel of distribution is classified according to distribution intensity or the extent of using the different marketing intermediaries for a product to reach its target customers. A distribution entity has three levels: intensive, selective, and exclusive. It is intensive when a product needs many intermediaries. It is selective when there are few intermediaries needed. It is exclusive when only one intermediary is needed. There are two main marketing or distribution channels—retailers and wholesalers. The conventional or typical channel of distribution starts when the product goes to the wholesaler from the manufacturer, Then, the wholesaler distributes the product to the retailers who will finally sell it to the target consumers. Manufacturers, wholesalers, and retailers act independent of each which results in the tendency to maximize their own individual profits at the expense of the overall profits of the market. Retailing Retailing, as defined by the American Matketing Association, refers to all activities involving the sale of goods or services directly to the final consumers. Individuals Seek in retailing are collectively called retailers. Retailers get their goods from wholesalers and resell them to consumers usually in smaller quantities. In the channel of distribution, retailers are the link between the wholesalers and the consumers. Thus, retailers maintain a good relationship with customers in order to ensure healthy patronage and offset the purchase cost of products.Retailers usually display their goods in their stores or shops and. mostly rely on advertisements to promote their products. However, retailers can only cater to customers in a limited area. Retailing as Part of Phil Sari-sari stores are small retail shops found in neighborhoods that cater to the residents of a particular community. The word sari-sari is a Filipino term which means “variety.” Sar/-sari stores are also found in streets where retailing is less formal and the products offered are limited. pine Culture: Sari-sari stores Retailing is an important part of Filipino culture. Many low-income familiés prefer buying goods from sari-sari stores not only because of accessibility but also because they can, avail of the products on credit (utang). Sari-sari stores usually carry basic necessities such as canned goods, instant noodles, candies, soft drinks, basic toiletries, cooking ingredients, and others. Sari- sari stores also offer goods per piece (tingi) and most of them are packed in sachets, which are manageable purchases for those buying on credit. According to a survey made by Nielsen in 2014, there are about a million sari-sari stores in the Philippines. They usually carry around 200. products in stock, and more than half are food products. Maggi Magic Sarap and Milo are the top food brands, while Surf and Coca Cola are the top non-food and beverage brands that most sari-sari stores usually provide customers. ~ Marketers can gain valuable insights by understanding how sari-sari store owners choose the products they carry, Also, sari-sari stores are proof that despite a lack of proper promotional tools, abusiness can still attract customers, Finally, it is important to ensure the constant availability of products to guarantee continual profit. Retailing as a Business Retailing is also an important part of formally established and widely-recognized businesses. Compared to the sari-sari store, these businesses offer customers a wider range of products and brands'to choose from. These businesses may also offer retailing services either in physical stores or online mediums. Retailing can be performed as a formal business in drugstores, department stores, convenience stores, hypermarkets, and through non-store retailing. Supermarkets are the most common form of retailing because there is low manpower requirement for maintenance and high. efficiency, in, providing the product to customers. Supermarkets utilize a self-service approach, where customers locate, compare, and. obtain the goods they need and collect them all in their push carts before heading to the counter for payment. The goods are displayed on shelves, freezers, and gondolas, which are free-standing blocks of shelves used to display goods. Sign boards indicating the category are placed on shelves so customers can easily locate the products they need.Drugstores are composed of pharmacies which are found in supermarkets’or malls, or as stand-alone stores in convenient locations. They sell prescription and over-the-counter drugs, as well as personal products, food and beverages, and beauty products. Some malls or supermarkets that have drugstores are SM Malls, Ayala Malls, and Puregold. The largest drugstore chains in the country are Mercury Drug and Watson's, Department stores. These refer to large stores which offer a variety of products that are organized into departments or areas such as clothes for men, women, or kids; jewelries; home appliances; fashion accessories; bags; shoes; toys; and kitchenware. Department stores are ‘usually located in malls. Some famous malls that have department Stores are SM Malls and Ayala Malls, while there are also stand-alone department stores such as Rustan’s, H&M, and Uniqlo. Convenience stores, These are retail stores which carry a limited number of goods such as basic food items, personal care products, office supplies, over-the-counter drugs, and commonly purchased items. They are strategically located where supermarkets ar@ not readily accessible and where there is customer traffic. The most popular convenience stores are 7-Eleven and Ministop which are open 24/7: Kantar Worldpanel, an international company monitoring consumer panel, conducted a study in 2015 and found that convenience stores are the fastest growing retail channels in the Philippines, Their survey of 3,000 Filipinos homes in urban and ruralareas in the country reveals that 18.5% of Filipino households are now buying in convenience stores, which is 2% higher than in 2014, Hypermarkets are huge superstores that offer a greater variety of products, They are bigger and more spacious than supermarkets. Shopping malls put hypermarkets as satellite branches, typically in locations with high consumer traffic or at other towns, to target more customers and promote their brands. Non-store retailing. This approach in retailing involves the selling of goods in mediums outside a physical store. One of the common forms is online retailing. Sellers can now set up online stores where they can offer their goods for sale. Customers can then choose among the products, order them online, and even request personal custo tions before purchase. Since they have no physical stores, online retailers usually offera delivery service which is either free of charge or paid upon delivery; pick-ups or meet-ups are sometimes offered as an option as well. The most common products sold online are apparels, shoes, bags, accessories, books, kitchenwares, gadgets, food, and grocery items. Wholesaling Wholesaling includes all activities involved in selling products to merchandisers or producers for business use, Merchandisers buy goods from wholesalers and then resell those to customers. Many wholesalers are classified as middlemen who purchase goods from producers or manufacturers and sell them to retailers or directly to consumers. They carry a wider assortment of products which are offered cheaper when bought in bulk. There are two types of wholesalers: merchant and full-service wholesalers,Merchant wholesalers buygoadsin bulk from producersandthenresell them toretailers with a mark-up. They are sometimes referred to as distributors. Meanwhile, full-service wholesalers provideawide range of services totheir customers suchas recruitment of salespeople, conducting inventory, and delivery of goods: They have higher income than merchant wholesalers but the cost of their operations is also higher because of the wide range of services that they provide to customers. There are four types of full-service wholesalers: 1. General merchandise wholesalers offer a wide variety of goods. Their products include non-perishable goods such as cosmetics, laundry detergents, and cigarettes. . 2. Limited line wholesalers provide an assortment of goods that are limited to a few specific product lines but offer a broad selection of items. For example, a hardware store might offer products related to automotive repair, electric machineries, and plumbing, among others. 3)” Specialty tine wholesalers are comprised only of a single product line but offer extensive customer service for the products. A rack jobber is a type of specialty line wholesaler who maintains the displays and stock of goods in retail stores. They usually handle non-food items such as cosmetics, books, magazines, etc. 4. Brokers ‘and agents are also’considered wholesalers. Brokers facilitate the purchase and sale of goods between buyers and sellers, acting asa third party in transactions. On the other hand, an agent acts in behalf of one transacting party. In general, they negotiate the price, terms and conditions, and other aspects of the transaction between manufacturers and customers and ensure a fair or advantageous purchase or sale of goods for the firm they represent. Both retailers and wholesalers are effective channels of distribution which assistin ensuring that products reach end users or consumers. >> SUMMARY<< © Achannelofdistributionis defined as the manner through whichaproduct reaches its target customers. Distribution channels involve marketing intermediaries who link product manufacturers to consumers. * The two main channels of distribution are retailers and wholesalers. «Retailing refers to all activities involving the sale of goods or services directly to the final’consumers. * _ The different types of retailers include sari-sari stores, supermarkets, department stores, drugstores, convenience stores, non-store retailers, and hypermarkets.At the end. of this lesson, the students: will be able to 1. identify ond discuss the elements ‘of promotion, 2. discuss relevant promotional teols, 3 discs advertising ts objectives 14 Promotion nae Impacts product performance ond : _ sales, and 5. evaluate how companies conduct promotion. LET’S DISCOVER Well-loved Filipino Advertisements What makes a commercial memorable? Of the dozens of commercials that people see each day, what sets apart the ones that audiences remember years after first watching them?, A good commercial must represent a brand and reflect what it stands for. It must express an idea or tell a story by establishing and developing a clear, simple character or theme. A good commercial must also make a big impact on the audience within the time constraints of a commercial, Here are some Filipino commercials that have stood the test of time and made a big impact on viewers. 1. McDonald's “Karen Po” In this commercial, a young woman named Karen and her grandfather are eating at McDonald’s. Karen struggles to remain patient as her grandfather, showing signs of senility, keeps referring to her as “Gina;" despite her correcting him. She then takes notice as he cuts his hamburger in half and wraps up one of the halves, as if to save it for later. “This,” he explains, “is for my favorite granddaughter, Karen.” What makes this commercial distinctly Filipino is its subtle yet powerful use of the themes of familial bonds and respect for one’s elders—traits that are highly valued in Filipino culture. Karen’s pasalubong in the form of half a hamburger, symbolizes the kind of undying love that not even senility can erase. That a McDonald's burger is the mode of expression for such love is an example of effective corporate branding.PLDT's “Suportahan Ta Ka" This commercial also banks on Filipino family values, but goes in a different direction: A young man nervously calls up his father, saying that he will be shifting courses from medicine to fine arts, The father expresses his confusion and exasperation ina single word: “BAKIT?” (WHY?) By his attire, we'can surmise that the father himselfis a doctor, and it may have been upon his insistence that his son took up medicine. By shifting to fine arts, his son is disobeying his wishes—something almost unthinkable among consetvative Filipino families. The son then explains that his heart is not in medicine, and that he hopes his father understands. After a brief pause, the father responds: “Whatever makes you happy, I will support you.” The backbone of this commercial is the text that serves as subtitles to'the scenario: “May mga usapang dapat masinsinan. May mga usapang dapat malinaw. Buti/na lang’may maaasahan." (Some conversations need a special focus:\Some conversations need clarity. It’s a good thing there’s someone we can trust.) Through this, PLDT positions itself/as the medium for vital communication between loved ones, capable of providing not only clarity, but also the immediacy and intimacy that such important conversations require. Fita’s “Kahilingan” = Some commercials find success not by tugging at heartstrings or discussing “serious” themes, but through humor: A young man seated on a park bench gives a Fita cracker to a small child. As he is about to put the last remaining cracker in his mouth, an ald woman appears beside him, visibly hungry. He pauses, then breaks the cracker in two, giving the old woman one half and eating the other. The old woman magically transforms into a beautiful fairy, and offers to grant the young man one wish in return for his “generosity.” He asks for a red sports car. Lo and behold! Before him appears a red sports car—cut in half, As the young man had shared his last cracker less than wholeheartedly, his reward is also less than expected. Purefoods’ “Goodbye, Carlo” A young girl writes in her diary that her crush, Carlo, sat beside her today, and said that she is pretty, albeit fat because she eats too much. She decides to go on a diet: “Goodbye, chocolates. Goodbye, spaghetti. Goodbye, hotdogs” She pauses and glances wistfully at the two Tender Juicy hotdogs sitting on a plate on her bedside table. She crosses out the last line in her diary, and below it, writes, “Goodbye, Carlo” She then happily takes a bite out ofa hotdog. Despite the rather humorous outcome, it is worth seriously considering the assertion made in this commercial’s twist: In a moment of self-actualization, the girl decides that no matter how much she likes Carlo, her insecurities over her looks should not take precedence over her own happiness—and one of the paths to her happiness is eating hotdogs!5. Sarsi's “Angat sa Iba” This commercial begins with several depictions of uniformity: Office workers doing the same tasks, synchronized swimmers, bank tellers; and women wearing the same clothes and sporting the same hairdo, The accompanying music, written by Ryan Cayabyab, reflects the imagery in both form. and content: It starts asian acapella choral piece which, although executed excellently, feels somewhat dated and restricted in its formality. The singers lament, “Ganoon nga bang talaga / Pare-pareho na lang’ba?” (Is\it really like that / Is it all just the same?) Halfway into the commercial, both the imagery and music change drastically. Drums kick in, and the choir affects.a sound much more reminiscent of pop music, celebrating the uniqueness of Sarsi: “Mag-Sarsi ka para maiba,/ Pagkakataon umangat sa iba / Mag-Sarsi ka para maiba / Dahil may pagpipilian ka.” (Drink Sarsi to be different / This is a chance-to rise above the rest / Drink Sarsi to be different / Because you now have a choice.) From strict uniformity, the characters in the video burst out in unique individuality, They change from drab, muted outfits into different clothes with bright, vibrant colors. Even their movements are no longer rigid and synchronized, but are now less angular and more natural. The message is loud and clear: Why conform and settle for the other brands, when you can stand out with Sarsi? Discussion Questions 1, What do you think are the factors that make commercials impactful and memorable? 2. Choose ‘one of the advertisements and research further on that brand. Does the advertisement effectively convey the characteristics of the brand? LET’S LEARN ‘The last Pin the marketingmixis promotion, which isalso called marketing communication. This comprises the activities done to increase the target customers’ knowledge of the product, The promotions that a company will undertake depend on the budget it sets aside, and there are several ways to set a promotional budget. The first is to allocate a set percentage of the sales (or, alternatively, the net profits). Although this practice is fairly common and makes sense on paper, some marketing practitioners criticize it because it is generally difficult to accurately predict sales and profits. An inaccurate prediction may mean that the predetermined promotional budget is either too big or too small.Asecond method for setting a promotional budget is by examining a competitor's. budget, then adjusting the budget to be less than, equal to, or more than theirs. However, while this method ensures that spending will be at a similar pace to the competitor's, it also means that their practices will restrict the company’s pacing. Another method is to plan out the different tasks and types of promotion tobe done within a certain timeframe, and setting the budget according to the requirements of those tasks, This is the most sophisticated approach to setting a promotional budget, as itlays out the specific objectives of a promotional campaign, and the methods to be used to achieve those objectives. The right combination of methods for setting a budget, and adjusting them according to the situation, can be the deciding factor in whether or not a promotional campaign succeeds. Advertising Generally speaking, advertising is a nonpersonal form of communication, meant to bring a product or service to the attention of potential or current customers. More formally, the American Marketing Association define it as the"placement of announcements and persitasive messages in time or space purchased in any of the mass media by business firms, nonprofit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience about their products, services, organizations, or ideas.” It is the most expressive among the promotion types because it relies heavily on visuals, color, words, and sound. Well-executed advertisements are remembered for a long time, and the product being advertised enjoys strong brand recall. When using advertising, it is important to understand the company’s advertising objectives, A company cannot launch an advertising campaign without a clear grasp of its objectives. Reach is the percentage of the target market who is exposed to a particular advertisement, while frequency is the number of times the target audience is exposed to the message. Impact is the value of the exposure to the target audience. The most widely used medium today is television. Marketers can choose from various timeslots: the early morning slot, the noontime and mid- afternoon slot, the early evening slot, the primetime slot, and the late evening slot. Networks have different rates on the various time slots. Rates'also depend on the show’s ratings. Top-raters usually have high advertising rates. Pricing for print ads can vary greatly depending on factors such as size, color, and the popularity of the publication selling the ad space, Billboards also depend on size and location. Many billboards are placed strategically along expressways and highways, In addition to outdoor advertising such as billboards, tarpaulins, and ads on buses and taxis, companies may also opt for indoor advertising in malls, restaurants, bars, airports, and even restrooms. An alternative to print ads is advertising on the Internet. Companies may buy ad space on existing websites, and/or create their own and use this as a communication arm.Websites offer some flexibility and creativity. Aside from advertising, they may be used as online stores; repositories of information such as events, new product offerings, and job vacancies, or as avenues for customer service. Inmarketing, there are two types of websites. The first type is the intermediary website, which acts as gateway to different content. Common examples are social network sites like Facebook, ‘Twitter, and LinkedIn. The second is the destination site which provides information on specific subjects, products, and services. Examples include travel companies, manufacturer websites,and thelike. ‘The objective of advertising are: 4. to inform — advertising is a tool for informing target customers about a new product, a new feature, or an added benefit of a product; 2. to,persuade - the ultimate goal of advertising is to persuade customers to buy a product; 3... to compare - one of the best ways of comparing one brand to another is through the use of advertisements; and. 4. te remind ” advertising helps in brand recall and reminds customers about the product from time to time. ‘Advertising messages can be expressed through the following execution styles: 1. . Lifestyle. This shows how aproductfits a certain lifestyle. Sanitary napkins like Modess, Whisper, and Kotex usually execute their ads using lifestyle as a theme. 2. Slice of Life. This depicts scenarios where the product is used in normal, day-to- day settings. Examples are detergent ads like Tide, Surf, Ariel, and Breeze. Laundry detergents like Ariel choose ordinary people in its commercials which often depict a typical day for a housewife, washing clothes. 3. Fantasy. This style typically depicts idealized or even exaggerated effects of the product/ service in question, allowing the customer to fantasize about such a scenario. 4, _ Mood. This style attempts to build amood or thematic atmosphere (such aslove, beauty, extravagance, etc.) around a product or service. Perfume ads are known to utilize this style. 5: Musical. This style expresses the message of the ad through music; which may be an existing song adapted and licensed for use in the ad, ora jingle composed specifically for the ad. 6. Technical/Scientific evidence. This style uses technical knowledge or scientific evidence to assert a product's superiority over its competitors. This is most commonly used in ads for personal care products such as soaps, toothpaste, and medicine. :7. Testimonial. This style features an individual or group of peoplegiving positive feedback on the product, attesting to the product's high quality. These endorsers may or may not be celebrities. Personal Selling Personal selling is a face-to-face technique wherein the salesperson uses his or her persuasive skills to convince a customer to buy a particular good or service. Personal selling is effective in many ways. Good salespersons can effectively boost sales by building strong and binding relationships with customers who value the time and effort they put into’ promoting a product. Many doctors rely on medical representatives who build lasting friendships with them. They endorse the brands from medical representatives who respond to their needs. Personal selling requires excellent communication skills and flexibility from the salesforce because of the direct interaction between the buyer and the seller. The salesforce represents the company and the products it offers to the customers, thereby requiring the right approach to potential ‘customers. The salesforce should be knowleadgeable about the product and should be able to answer all pertinent questions that customers may ask about it. They should be more than willing to clarify any objections during product demonstrations. Customers may approach the salesforce or vice versa. Either way, sales personnel should handle their customers well. The objective is to build lasting relationships with customers by offering quality customer service. Sales Promotion Sales promotions consist of sales activities which’ help increase-sales for a product or service: Sales promotion often provides quick response. There are two types of sales promotion: consumer schemes and trade promotions. Sales promotions intended for customers are called consumer schemes. A discount coupon elicits response by giving an incentive to purchase the product within a specified period. Customers take advantage of this opportunity to save a few pesos. However, sales promotion is good only in the shortrun, A strong brand recall is more effectively achieved through advertising. Furthermore, needs are still the biggest determining factor in making a purchase. Despite discounts, coupons, and other types of sales promotions, if a product is not in the customer's priority tist, they will not buy it. Other types of consumer schemes include cash coupons and rebates, which are common in supermarkets, and patronage rewards, which are popular in department stores. One of the most popular patronage rewards is that used by SM and National Bookstore. Frequent shoppers earn points for every purchase, and may avail of rebates on accumulated points.Contests and raffles are also popular. Supermarkets and car dealers use this type of promotion. Free samples may be used to introduce a product to potential new users. Products may also be bundled with freebies such as keychains, mugs, t-shirts, and the like. Many paper products like bond paper or pad paper come with free eco-friendly bags for customers who buy in bulk. Trade promotions include freebies, incentives, commissions, and discounts given to wholesalers, retailers, and distributors. They are given to add more stocks and increase visibility on store shelves. Pub Public relations is the practice of communicating with the media and the general public in order to establish a strong relationship between a target audience and an organization, company, or individual, and create and maintain a positive image of that organization, company, or individual. While public relations goes hand-in-hand with advertising, it is different in that although it may indirectly result in increased sales, its primary goal is to ensure that public opinion of the organization, company, or individual in“question remains positive: Furthermore while advertisements are usually paid for, public relations activities generally are not. Practitioners ‘engage in public relations through a number of varied tools and techniques, including press releases, newsletters, social media, attendance at public events, and participating in or even hosting charitable events. Relations Direct Marketing Direct marketing is a form of marketing and advertising in which a company communicates and interacts with its target audience directly, without “middlemen” or intermediary entities, such as retailers, distributors, or wholesalers. It may be done through several methods, such as door-to-door marketing, physical mail, email, telemarketing, coupons, direct-response TV (e.g, infomercials), and kiosk marketing. It is often characterized by a call to action, such as inviting potential customers to call a specific phone number, or to click a link to subscribe. While it can be difficult to specifically and accurately measure the effectiveness of general marketing and advertising, the call-to-action feature of direct marketing gives marketers an immediate and easy way to measure the effectiveness of their direct marketing campaign. However, since it is often unsolicited, if it is done too aggressively or in excess, it may backfire and negatively affect a company’s reputation.