The Exchange Functions

Buying.As a buyer, the firm assembles goods from a number of sources and brings them together at one location for the convenience of the customer. A supermarket buys canned goods from numerous manufacturers such as Pills-bury, Campbell, and R. J. Reynolds, thereby providing a service for its custom­ers. The supermarket buyer must evaluate quality, price, availability, and other factors from more than 40,000 grocery items available before selecting the 8,000 to 9,000 items carried in the average supermarket. For serving as the consumer's purchasing agent, the retailer is compensated by the markup (the increase in price over his cost) he places on his products.

Selling . Selling is primarily the process of promoting the product to the con­sumer by use of personal selling (use of a sales force), advertising, sales pro­motion, and publicity. Promotion is providing essential information to the poten­tial buyer about the product or service, such as a description of product features or characteristics, its availability, its benefits, its price, available credit terms, and so forth. Selling is probably the best known marketing function. In fact, until the marketing concept became well established, many people believed selling to be the only function of marketing.

After a good is produced, it must be placed in its potential market. Physical distribution it's concerned with the transportation and storage of goods and services as they move from producer to dealer to consumer.

Transporting. Five major modes of transportation are available: trains, trucks, ships, planes, and pipelines. Obviously, not all modes are appropriate to every good, and any particular commodity may employ more than one transport mode as it moves to market. Also, each mode has a different cost structure. Generally, the speedier the movement and the more valuable the item, the higher will be the transportation costs.

A marketing manager must consider all these facts in determining how to ship merchandise. For instance, a marketing manager for a midwest refrigerator manufacturer will probably employ trucks or a combination of trucks and trains to move refrigerators to the dealers.

2.Give the summary of the text Physical Distribution Functions1

After a good is produced, it must be placed in its potential market. Physical distribution it's concerned with the transportation and storage of goods and services as they move from producer to dealer to consumer.

Transporting. Five major modes of transportation are available: trains, trucks, ships, planes, and pipelines. Obviously, not all modes are appropriate to every good, and any particular commodity may employ more than one transport mode as it moves to market. Also, each mode has a different cost structure. Generally, the speedier the movement and the more valuable the item, the higher will be the transportation costs.

A marketing manager must consider all these facts in determining how to ship merchandise. For instance, a marketing manager for a midwest refrigerator manufacturer will probably employ trucks or a combination of trucks and trains to move refrigerators to the dealers. Rail and highway transportation are of course slower than air freight (but faster than water transportation, even if it is available). However, shipment of 400-pound refrigerators by air would be pro­hibitively expensive; freight costs would probably exceed production costs. On the other hand, a custom-made² jewelry manufacturer in New York will probably send orders to San Francisco by air. The jeweler's customers want their prod­ucts reasonably quickly, and air freight costs, although high, are low as a per­centage of the value of the items. Moreover, air shipment provides much greater security from loss or theft³ of such small and valuable items.

Storing In a very narrow sense, storing amounts to little more than holding goods in a warehouse until they are distributed for sale. However, the manage­ment of the inventory—the stock of merchandise within the warehouse—is much more complex. The inventory must be appropriate to market conditions. There must be enough goods and a proper mix of them to respond quickly when dealer supplies are depleted⁴. On the other hand, the stock must not be too large since each unsold product in the warehouse represents idle investment dollars. Inventory management also requires that goods in storage be sold and replaced regularly so that merchandise does not spoil or become dated or obso­lete⁵. Accordingly, inventory managers must also process orders expeditiously⁶ so that they move quickly to buyers.

All physical distribution activities must be viewed by the marketing manager as closely related to customer service. For example, hypothetical manufacturer of machine tool repair parts, ABC Corporation, is based in Columbus, Ohio but has a concentration of customers in the New York, New Jersey, and Connecticut trading area. Delivery time for truck shipments from central warehouses in Ohio currently average three-to-five days from receipt of order. Due to the critical nature of these tools, downtime (the time lost due to machine malfunction⁷) is very costly to the user. ABC's customers consequently have kept their own inventory of spare parts in order to minimize production stoppages. If a part is required, the company will draw a unit from its own inventory and simulta­neously order a replacement unit from ABC.

Recently, a local competitor, New Jersey Tool, Inc. has offered overnight delivery to ABC's customers enabling them to avoid having to maintain a large inventory of parts. The marketing manager at ABC must plan the response to this development. The following is a partial list of options open to ABC:

Open a warehouse in New York to supply the region's requirements with overnight delivery.

Contract with an air freight firm and add a freight forwarding firm in New York City to air freight parts from Columbus overnight.

Reduce the product's price sufficiently to induce customers to stay with ABC, despite the superior delivery service from New Jersey Tool.

Provide a one-year guarantee for ABC repair parts.

Allow the customers to pay their invoices (bills) in sixty days instead of the normal industry requirement of thirty days.

The list of possible responses goes on and on, and is not limited to adjusting transportation and storage policy.

As you can see, physical distribution activity is not a separate function, isolated and irrelevant to other marketing activities. It is an active, dynamic mar­keting device. Physical distribution operates in the same way that advertising, price competition, guarantees, and services do. It is a useful tool available to the marketing manager.

Facilitating Functions

Facilitating functions are those activities of standardization, grading, financing, risk bearing, and market information gathering which aid in the functioning of the overall marketing system.