Wholesale Sources For eBay Sellers
Wholesalers now face growing competitive pressures, more-demanding customers, new technologies, and more direct-buying programs on the part of large industrial, institutional, and retail buyers. As a result, they have taken a fresh look at their marketing strategies. As with retailers, their marketing decisions include choices of segmentation and targeting, differentiation and positioning, and the marketing mix product and service assortments, price, promotion, and distribution (see Figure 13.2 on page 416).
Furthermore, obsolescence is especially quick for some high-technology solutions with high variable costs, like computers or consumer electronics. Cellular phones or PDAs, for instance, may lose as much as 10 of their value each month so after 7 months, their value is more than halved. Thus, today major cellular phones or PC distributors have negotiated the right to return unsold products to the vendor at no cost. capacities had actually boosted early demand for phony orders placed by distributors concerned about short supplies. Then, products did not move because the market was not buying, but the producer did not figure that out and wrongly decided to expand production on the sole basis of first impressions. Such a situation explains why the most successful B2C high-tech companies have adopted the build to order model. By doing so, they have managed to cut their inventory cost dramatically and boost their cash flow and profitability while improving the satisfaction of their...
Traditionally, pharmaceutical wholesalers are local operators, with no single company operating worldwide, in marked contrast to the pharmaceutical company, which tends to be global. Generally, drug wholesalers tend to be fragmented, with few firms serving an entire national territory. The majority are family-owned firms and most of the large ones grew from small operations. Globally, there arc no standard channel structures and systems differ from country to country. However, many arc affected by common operational and regulator)' conditions. In countries where the wholesalers plays a dominant role in supply, the traditional channel system bears the following features and trends Wholesalers tend to consolidate goods from all manufacturers and deliver them to a specific group of clients (primarily pharmacies, hospitals and other bulk buyers of medicines). In the principal developed economies, the majority of pharmaceutical products reach patients through the wholesaler-pharmacy route....
The wholesale sector is in serious decline the reasons for this are increased retail concentration and a more volatile fashion driven clothing market. Jaeger, perhaps anticipating these trends, withdrew in 1987, as did Jacques Vert in 1998. The large multiples and department store groups deal directly with their suppliers, often overseas companies, through central buying departments. They are therefore able to avoid using wholesalers and the associated costs. Indeed Marks and Spencer, the market leader in many areas of the retail market, was one of the first, if not the first, to deal directly with a manufacturer (Corah) and so break the grip of the wholesalers. Besides financial savings and better control over product quality, dealing directly with suppliers allows retailers to satisfy their, or more correctly, customers' needs. A measure of exclusivity in terms of fabric, design content, etc., enables them to differentiate themselves from their competitors. Although they carry fewer...
Traditional distributors use their Web sites simply to sell products and take orders. The goods are stored, shipped, and invoiced manually. Shareware sites such as Tucows also list, review, and make software available for download and purchase (if found acceptable). It is here that traditional retailing breaks down. Several Web-based distributors have taken to selling directly to the public at prices that are frighteningly close to wholesale. So the market and margins previously enjoyed by dealers are being eroded and they are casting around for other ways to make money. This may create an opening of one kind or another for you. With traditional distributors less keen to take on new companies and the ease of setting up your own Web site, there is nothing to stop you from becoming your own distributor. However, it might prove na ve to bypass the other avenues of distribution that could add more power to your elbow.
Don't just jump in because you must have distribution. Don't assume just because they have done a good job for X they will do a good job for you. You have to vet distributors and direct dealers as carefully and reflectively as you do when you are hiring staff. The process of courting dealers and distributors is theoretically very simple. The practice is long winded so start as early as practicable. Distributors need to see the following If you choose a large distributor you will have no real control over their dealers, which is why it is better, if yours is a specialized product, to hand pick your dealers yourself. Whichever way you go about it, it is important to establish that there is no conflict of interest with any competitive products. At the end of the day, distributors and dealers will promote the products from which it is easiest to make the most. Good relationships with distributors and dealers are worth working at, because they can be valuable in their own right. Software...
Distributors' acceptance of the two product lines was critical for L'Oreal's successful launch of both Synergie and Belle Couleur. At one time, manufacturers had more control in the channel of distribution than retailers. Retailers, however, had been gaining power as a result of the increasing size of retailers, the development of chains with their central buying offices, and the proliferation of new brands with little differentiation from brands currently on the market. Retailers had also increasingly been offering their own private-label products, since they earned a higher percentage profit margin on their own brands.
Wholesalers fall into three major groups (see Table 13.3) merchant wholesalers, agents and broker, and manufacturers' sales branches and offices. Merchant wholesalers are the largest single group of wholesalers, accounting for roughly 50 percent of all wholesaling. Merchant wholesalers include two broad types full-service wholesalers and limited-service wholesalers. Full-service wholesalers provide a full set of services, whereas the various limited-service wholesalers offer fewer services to their suppliers and customers. The several different types of limited-service wholesalers perform varied specialized functions in the distribution channel. Brokers and agents differ from merchant wholesalers in two ways They do not take title to goods, and they perform only a few functions. Like merchant wholesalers, they generally specialize by product line or customer type. A broker brings buyers and sellers together and assists in negotiation. Agents represent buyers or sellers on a more...
Every country seems to have at least one of these. These are wholesalers who sell exclusively to the trade (normally dealers), but never to end users, at least that's the theory. Large end users, corporations, and government departments frequently place significantly larger orders than many dealers, so distributors frequently suppress their ethical objections. The increase in electronic delivery and software activation makes this shortcut particularly tempting. Where distributors won't play ball, it is not unknown for large organizations to create trade fronts to enable them to purchase goods at trade discounts. The main distributors may have literally thousands of dealers on their books, giving you an instant multiplier effect. Through their brochures, catalogs, and Web site, your product is available at a stroke to a vast array of potential purchasers. However, such opportunities come at a cost. Distributors will hardly ever take on a new product from an unknown source unless you...
The task environment includes the immediate actors involved in producing, distributing, and promoting the offering, including the company, suppliers, distributors, dealers, and the target customers. Material suppliers and service suppliers such as marketing research agencies, advertising agencies, Web site designers, banking and insurance companies, and transportation and telecommunications companies are included in the supplier group. Agents, brokers, manufacturer representatives, and others who facilitate finding and selling to customers are included with distributors and dealers.
In general, a business unit has to monitor key macroenvironment forces (demographic-economic, technological, political-legal, and social-cultural) and microenvironment actors (customers, competitors, distributors, and suppliers) that affect its ability to earn profits (see Chapter 4 for more detail). Then, for each trend or development, management needs to identify the associated marketing opportunities and threats.
The sales representative of a savoury snacks manufacturer was visiting ANUGA, a major trade fair for the food industry in Cologne. In conversation with a major distributor of grocery products in Germany he was told that there could be an opportunity for the export of his company's unique range of adult-oriented exotic snack products. During the course of the trade fair he explored this idea further with other distributors and retailers and the idea was greeted positively. On return to the UK, he filed his report and met with the international marketing manager. A pan-European research project was commissioned with the support of the DTI. Ten months later the first export orders for the snacks were processed. The company has now carved a profitable European niche for its products._
In both consumer and industrial markets, product and brand managers are responsible for product planning and strategy preparing annual marketing plans and sales forecasts working with advertising and merchandising agencies to create programs and campaigns stimulating support among sales reps and distributors ongoing research into product performance, customer and dealer attitudes, opportunities and threats and initiating product improvements to meet changing market needs.
In the Your Business column, list the key aspects of the physical appearance of your business. We can't do this for you because there are thousands of types of businesses. To give you ideas, we've included at the top of the worksheet a list of elements that commonly apply to retail and wholesale businesses, organized by category outside elements such as signage
If you don't have a good grievance procedure, an employee who feels there is no internal structure to deal with a problem about termination, demotion or salary may seek help outside the business. This can often mean either that employees will sue you, or try to organize a union. For example, we know a small wholesale business which recently unilaterally and without consultation changed a series of employee rights and benefits. In the view of management, the benefits conferred on the employees by the change were much greater than what the employees lost in perks. So when the employees turned to the Teamsters Union, management was initially both flabbergasted and angry. It never occurred to them that the employees, suddenly facing a whole new set of work rules, some of which they thought were very unfair (for example, loss of pay for lunch hour), went outside the company for help because there was no fair grievance and appeal procedure or, for that matter, any process that allowed them...
Many information services use agency distributors, including big online networks such as CompuServe, to extend their reach around the globe. But in the Internet age, these traditional delivery channels are costly and old-fashioned. So providers of business information are adapting their proprietary services to allow access from the Web.
In preparing the marketing plan it is also important to decide on timing and sequencing of events. Here it is necessary to establish a time schedule which can be incorporated into the operational plan. It is also necessary to identify the resources needed which means dealing with manpower, manufacturing materials and financial support. At this stage it may be necessary to specify roles for people in different parts of the organization and the organization's expectations of outside agencies and intermediaries such as banks, advertising agencies, distributors, and transport organizations. Finally, the organization is concerned with determining how the objectives will be attained. The basic principle to be applied in deciding the appropriate marketing activity is that the objective should govern the means, i.e. no activity should be justified unless it is clearly related to the accomplishment of an objective.
We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.
Licensing is the main way that ownership of intellectual property is shared. For example, books are licensed to filmmakers, films are licensed to video cassette distributors, toy designs are licensed to manufacturers, promotional advertisements are licensed to local TV stations and inventions are licensed to manufacturers. We have seen many businesses confronted with a retailer or wholesaler who says, I'll carry your product only if I can have an exclusive agreement in this area for selling it. At first examination, it makes sense The retailer or wholesaler may make
Developing new markets means identifying markets abroad not yet properly served. It could also mean using new distribution channels or information sources such as the Internet. Market integration would probably mean establishing marketing agreements, taking over distributors or retail outlets, which may or may not be feasible. Very often successful firms start by selling locally to give the firm a strong competitive presence in the market. Firms sometimes also integrate forward into the market by acquiring manufacturers who would assemble or produce locally.
At present, the one thing holding the widespread adoption of the technology back is other businesses in the supply chain and those who are either unwilling or unable to adopt the technology. Some simply do not understand its value, while others are unaware of the emerging technological benefits of the system. In order for any new technology to reach its potential, all of those in a supply chain need to be using the same technology. That way, the needs of the customer can be paramount and can drive the day-to-day use of the technology. Husni El Assi, the general manager of Sony Ericsson Middle East, explained the difficulties One of the main challenges is the lack of awareness in the technology itself and its benefits. We have an ongoing educational program for our distributors and retailers, and that is how we update our business partners on the latest innovations and the latest technologies available in the mobile communications industry. In addition to that, we have our...
This strategy is directed toward realizing the benefits of both a standard and a customized product. By manufacturing a standard product, the business unit seeks economies of scale at the same time, by offering modifications, the product is individualized to meet the specific requirements of the customer. The experience of a small water pump manufacturer that sold its products nationally through distributors provides some insights into this phenomenon. The company manufactured the basic pump in its facilities in Ohio and then shipped it to its four branches in different parts of the country. At each branch, the pumps were finished according to specifications requested by distributors. Following this strategy, the company lowered its transportation costs (because the standard pump could be shipped in quantity) even while it provided customized pumps to its distributors.
This resource value criterion also concerns the issue of the appropriability of the value and attempts to discover who captures the value that the resource creates. The value of the resource is subject to bargaining among customers, suppliers, distributors and employees. In many situations the firm that owns the resource does not capture the full value of the resource the value dissipates to other firms in the business system. This is a matter of concern in the new market entry decision whereby some distribution channels may favour the appropriation of value to the firm while others do not.
It's one thing to market an established business by convincing customers that you do a better job or offer extra service, and quite another to let people know about a business in a field they have never heard of. For example, if you are a businessperson who sells wholesale lapidary supplies or structural mylar members, very few people will know what you do from a quick perusal of a business card. Even if your business isn't quite this obscure say you are a freelance video technician, a computer-aided drafting firm or the operator of a papermaking studio ex-actly what you do may not be clearly understood.
Leading software companies such as Microsoft, Intuit, and Cadence, as well as successful hardware firms such as IBM, HP, Acer, and Legend, are using CRM programs also to manage, synchronize, and coordinate all customer contact points, such as sales representatives, but also call centers, the Web, field organization, and third parties like distributors.
When reviewing options for Internet marketing strategy, it is also useful to keep in mind that Internet strategy involves much more than the narrow focus of a strategy to develop web site services. Although this is part of Internet marketing strategy, marketers also examine broader issues of using the web, e-mail and databases strategically as communications and relationship-building tools which must integrate with other marketing communications. Internet strategy may also involve redesigning business processes to integrate with partners such as suppliers and distributors in new ways. Figure 1 in the Preface suggests the range of digital marketing activities that must be managed within an Internet marketing strategy. The figure shows that the operational activities which need to be managed can be usefully divided into those for (1) acquisition, (2) conversion and proposition development and (3) retention and growth. Many of these activities and much of Internet marketing strategy...
The natural feed additives firm, Alltech Inc, faced the competitive challenge in the early 1990s of working closely with integrators and large animal feed compounders and its suppliers of scientific knowledge, minerals and trace elements to define new innovative products to reduce the cost of production of beef, pork and poultry while at the same time being friendly to the consumer, the animal and the environment (Figure 6.5). Alltech Inc had to do this while protecting its ideas deriving from its core capabilities based on fermentation technology and other scientific knowledge of biotechnology processes. In contrast, at the start of the new century the competitive challenges were to dominate key market segments and sign agreements with critical lead customers, suppliers and distributors. The co-operative challenges were to continue to work with customers and suppliers to achieve critical mass in its sector. It is possible to speculate that Alltech Inc's ambitions for the maturity
Marketing intcrmcdiaries are firms that help the company to promote, sell and distribute its goods to final buyers. They include resellers, physical distribution firms, marketing services agencies andfinancial intermediaries. Resellers are distribution channel firms that help the company find customers or make sales to then). These include wholesalers and retailers which buy and resell merchandise. Selecting and working with resellers is not easy. No longer do manufacturers have many small, independent resellers from which to choose. They now face large and growing reseller organizations. These organizations frequently have enough power to dictate terms or even shut the manufacturer out of large markets.
Comparing distributors (which is essentially part of an IFAs role) with manufacturers and customers, Zank and Vokurka (2003) found that distributors were more likely to believe that the role of e-business in overall strategy was a necessary response to competition than the other groups. Therefore, it seems that e-business strategy is primarily a reactive approach for distributors and may explain the inconsistency is how strategic issues have been reported between the interviews and the survey. This may explain why the internet boom in general is ranked higher than the influence of clients or product providers, suggesting a reaction to general internet excitement rather than a response to either client needs or requests from trading partners.
As stated above understanding customers and more importantly identifying who they are, what they want in terms of products or services, how and where they want it to be available and delivered and at what price they will purchase it are some of the most important decision criteria a manager must be aware of. However, due to the globalised and very complicated system of branch offices, wholesalers, and retailers a barrier is created between managers and their widely scattered consumers. Therefore, most managers are far removed from their customers - the individuals who in the final analysis determine success or failure of an organization.2
A business has introduced a new confectionary brand that comes in flavors such as mint chocolate, mocha, chocolate almond, and raspberry-almond with white chocolate. The confections are wrapped in iridescent colors and sold in re-closable cartons. The business also intends to do this with its other, already established brands. The new products carry a higher wholesale price for the company ( 0.48 per ounce versus 0.30 per ounce for the original product). They also come with higher
In general, more dollars and items are involved in sales to business buyers than to consumers. Consider the process of producing and selling a simple pair of shoes. Hide dealers must sell hides to tanners, who sell leather to shoe manufacturers, who sell shoes to wholesalers, who sell shoes to retailers, who finally sell them to consumers. Along the way, each party in the supply chain also has to buy many other goods and services, which means that every business seller is a business buyer, as well.
We are all customers now', notes the author Peter Mullen, 'in every area of customer inter-relationship from the supply and consrimption of education and health care to the queue in the Post Office and the ride in an Inter-City express train, and in every financial transaction from the buying of biscuits to the purchase of a shroud.' Marketing is not only for manufacturing companies, wholesalers and retailers, but for all kinds of individuals and organizations. Lawyers, accountants and doctors use marketing to manage demand for their services. So do hospitals, museums and performing arts groups. No politician can get the needed votes, and no resort the needed tourists, without developing and carrying out marketing plans. Principles of Marketing helps students learn and apply the basic concepts and practices of modern marketing as used in a wide variety of settings in product and service firms, consumer
Electronic communications are disruptive technologies that have, as we saw in Chapter 2, already caused major changes in industry structure, marketplace structure and business models. Consider a B2B organisation. Traditionally it has sold its products through a network of distributors. With the advent of e-commerce it now has the opportunity to bypass distributors and trade directly with customers via a web site it also has the opportunity to reach customers through new B2B marketplaces. Knowledge of the opportunities and threats presented by these changes is essential to those involved in defining marketing strategy.
Publishing is a great way to demonstrate your value to clients in a nonselling manner. Do you wonder if publishing that white paper you've been thinking about will yield results According to a report by Bitpipe and Forbes.com, 77 percent of corporate and IT executives pass on white papers to colleagues, and 68 percent use them to contact distributors and vendors.*
Exclusive distribution means that one particular retailer serving a given area is granted sole rights to carry a product. For example, Coach leather goods are distributed exclusively through select stores in an area. Several advantages may be gained by the use of exclusive distribution. It promotes tremendous dealer loyalty, greater sales support, a higher degree of control over the retail market, better forecasting, and better inventory and merchandising control. The impact of dealer loyalty can be helpful when a manufacturer has seasonal or other kinds of fluctuating sales. An exclusive dealership is more willing to finance inventories and thus bear a higher degree of risk than a more extensive dealership. Having a smaller number of dealers gives a manufacturer or wholesaler greater opportunity to provide each dealer with promotional support. And with fewer outlets, it is easier to control such aspects as margin, price, and inventory. Dealers are also more willing to provide data...
Only departments with technological expertise can carry out an evaluation and a serious monitoring of the competitors' possibilities. The marketing manager must then be able to compare these evaluations and monitoring activities to his or her own sales, financial, and industrial data. Is a company with a new revolutionary manufacturing process really a dangerous competitor Are its distributors or its customers not satisfied with the current product's poor performance and ready to switch to another company Is the company on the edge of bankruptcy If so, which other competitor has sufficient cash flow and strategic interest to buy out this company
The multiple-channel strategy refers to a situation in which two or more different channels are employed to distribute goods and services. The market must be segmented so that each segment gets the services it needs and pays only for them, not for services it does not need. This type of segmentation usually cannot be done effectively by direct selling alone or by exclusive reliance upon distributors. The Robinson-Patman Act makes the use of price for segmentation almost impossible when selling to the same kind of customer through the same distribution channel. Market segmentation, however, may be possible when selling directly to one class of customer and to another only through distributors, which usually requires different services, prices, and support. Thus, a multiple-channel strategy permits optimal access to each individual segment.
City directories, locally produced maps, tourist publications, international directories and publications of county, state and federal government agencies that operate in specialized fields. Online listings on electronic bulletin boards may also be useful. Remember also that local training schools (such as a culinary academy), trade schools and wholesalers commonly publish directories, some of which may be appropriate for your business.
Unfortunately, that date keeps being postponed. Test marketing took six months longer than planned, and a national rollout was still more than a year off. Part of the delay resulted from a change in advertising. Initial ads, which had a patriotic theme, failed to emphasize quality and low price. Gillette has also cut the wholesale price on the generics from 1.25 to 1.09.
Especially for a new small business, a trade show offers a unique opportunity. Typically, retailers, wholesalers, sales reps, industry press, importers, exporters and agents are all under one roof, and business is conducted in a myriad of ways. If you have a good product and display it well, one trade show can put your business on the map.
Previously the UK textile industry had a reputation for being dictatorial and short on choice. This was blamed on the nature of the relationship between retailers and manufacturers. Clothing retailing was dominated by a few large groups who exercised enormous power in the wholesale market for garments and fabrics. Retailers emphasized basic garments with very little fashion content, and Marks and Spencer in particular set very detailed specifications for fabrics, making-up and quality. Manufacturers such as Courtaulds and Carrington Viyella geared their production to large volumes of basic fabrics for a few major customers. It became uneconomic to deal with orders that either were small or required much design detail. Competition among retail chains was over the price and quality of garments.
1 supply-side partners (upstream supply chain) such as suppliers, business-to-business exchanges, wholesalers and distributors 3 sell-side partners (downstream supply chain) such as business-to-business exchanges, wholesalers, distributors and customers (not shown, since they are conceived as distinct from other partners)
You are an owner of a small independent chain of coffeehouses competing head-to-head with Starbucks. The retail price your customers pay for coffee is exactly the same as at Starbucks. The wholesale price you pay for roasted coffee beans has increased by 25 percent. You know that you cannot absorb this increase and that you must pass it on to your customers. However, you are concerned about the consequences of an open price increase. Discuss three alternative price-increase strategies that address these concerns.
A significant downstream channel threat is the potential loss of partners or distributors if there is a channel conflict resulting from disintermediation (see section on new channel structures below). For example, a car distributor could switch to an alternative manufacturer if its profitability were threatened by direct sales from the manufacturer. The Economist (2000) reported that to avoid this type of conflict, Ford US are now using From this review of the competitive forces, it should be apparent that the extent of the threats will be dependent on the particular market a company operates in. Generally, the threats are greatest for companies that currently sell through retail distributors and have products that can be readily delivered to customers across the Internet or by parcel.
The Home Club, a wholesale membership store, used a brochure made to look like a rock in a direct-mail campaign to solicit new members. Sticking with the rock theme, the club talked about its rock bottom prices and their location that was only a stone's throw away, and offered, as a free gift to new members, a phony rock with a well in it to hide a spare key. The mailing pulled a remarkable 7 percent response. But the promotion was so unique it was written up in Target Marketing Magazine (7 90) and mentioned on local talk radio.
Remember, unless you are selling direct, you only receive a fraction of the retail price. Suppose you are selling a product for 100. If you end up halving the price you must sell more than twice as many units to net the same profit because you encounter increased freight, accounting, and support costs. Distributors and dealers might give up on the product or renegotiate a tougher deal to compensate them for their additional work. Table 13-3 demonstrates the profit differential if you reduce the product price by half.
Many manufacturers and distributors also use a service strategy to differentiate themselves. Acme Construction Supply in Portland, Oregon, has invested more than 135,000 in its Night Owl delivery service Acme personnel deposit orders into lock-boxes at construction sites during the nighttime hours, so materials are available first thing in the morning. Says the company's regional team leader, People that are very, very price sensitive don't do business here. But people who see the overall value we provide do. And it's very intimidating to our competition. They have to walk around our delivery boxes every day to make their sales calls. 4
For example, over the last 10 years, the average life cycle of the PC has decreased from 4 years to 9 months. At a given time, 70 of the products in the portfolio of a typical PC vendor have been introduced in the last 6 months. Consequently, manufacturers must juggle powerful suppliers' demanding lead times as high as 4 months (like for disk drives) and distributors unwilling to carry large inventories. Other industries such as mobiles
Channel decisions involve selecting, managing, and motivating intermediaries such as wholesalers, distributors, brokers, and retailers that help a firm make a product or service available to customers. These intermediaries, sometimes called resellers, are critical to the success of a company's marketing program. Most consumer-product companies distribute through indirect channels, usually using a network of wholesalers (institutions that sell to other resellers) and or retailers (which sell primarily to the final consumer).
In Chapters 14 through 17 we continue the IMC emphasis by examining other promotional tools that are used in the integrated marketing communications process. Chapter 14 looks at the rapidly growing areas of direct marketing. This chapter examines database marketing and the way by which companies communicate directly with target customers through various media. Chapter 15 provides a detailed discussion of interactive media and marketing on the Internet and how companies are using the World Wide Web as a medium for communicating with customers. We discuss how this medium is being used for a variety of marketing activities including advertising, sales promotion and even the selling of products and services. Chapter 16 examines the area of sales promotion including both consumer-oriented promotions and programs targeted to the trade (retailers, wholesalers and other middlemen). Chapter 17 covers the role of publicity and public relations in IMC as well as corporate advertising. Basic...
The Family owned FOSS group is the world leader as supplier of dedicated, high-tech analytical solutions which measure and control the quality and production of agricultural, food, pharmaceutical and chemical products. Main activities are initiated from Denmark, Sweden and USA with headquarters domiciled in Hillerod, DK. The products are marketed globally by 23 sales companies and an extensive net of distributors. In line with the corevalue to be 'First', the company intends to expand its market position.
How can a company identify 'best-practice' companies As a good starting point, it can ask customers, suppliers and distributors whom they rate as doing the best job. Alternatively, it can contact big consulting firms that have built large files of 'best practices'. An important point is that benchmarkers need to resort to industrial espionage. Japan's Canon and the United Kingdom's Lucas Industries encourage reciprocal visits from companies that they use as benchmarks. 'Industrial dating agencies', such as the Benchmarking Centre and the international Denchmarking Clearing House (IBC), now exist to help firms find partners.
For each of those three channels, the strategic decision always will be between using a direct (in-house) channel, belonging to the firm, or a third party indirect (outside) channel, or a hybrid solution combining the use of direct and indirect channels. This comes at a time when new channels like the Internet and on-line services continue to emerge 5 , and new management tools, like data networks tracking in real time the inventories of all distributors in a market, have combined to speed up the evolution of more traditional channels. As a matter of fact, the majority of the high-technology companies use their own sales forces to sell products directly to customers. However, the most successful organizations also count on other distribution channels in order to reach all the customers of a targeted market segment in the most efficient way 6 . Today, for instance, value-added resellers, system integrators, and distributors are becoming more prominent in the distribution of electronic...
The development of microcomputers during the 1980s led to a greater use of distributors, who became the key success factors for Apple and Compaq. Similarly, the popularity of microcomputers brought about the development of direct marketing. Dell was the first company to sell its computers directly by mail order without any physical intermediary and has since been imitated by a score of other firms.
Standard products justify the use of external distributors. These products have well-defined characteristics products such as a computer memory or a standard microprocessor are sold in large quantities and at unit costs much lower than those for nonstandardized products, justifying the use of distributors. On one side, if a company does not have enough resources to provide any customer service, it should depend upon its distributors. On the other side, if the distributor is not able to perform customer service, the product's or the technology's quality image can be seriously jeopardized, which in turn can challenge an entire marketing strategy. It is said that Michael Dell started Dell Computer to sell PCs directly by phone to consumers after he strove to buy PCs from dealers who knew less about computers than he did. A failure in the PC distribution channel gave birth to one of the most formidable new entrants in the PC industry.
Some channels decisions are dictated by the bargaining power of the company. Actually some distributors are open and willingly share their customer and price lists as well as any other information about customer. But others are so independent that they are unmanageable. They are secretive about not sharing any information and carry out their sales policy as they think best. This has been the case recently in China on the PC market 10 . Many western PC makers have found that most of the local distributors were not able to provide technical support, customer service or maintenance services, contrary to what they claimed. The most capable distributors have quickly been taken over by leading Chinese PC manufacturers, such as Legend, which had cultural advantages. Furthermore, when a distributor is successful, it has a financial interest in being secretive and in handling its own marketing policy.
However, recruiting and training a network of distributors takes time and requires an investment since this network cannot be put into effect immediately. In the high-technology-product world, product ranges follow each other at a high rate and market segments are constantly changing, which makes establishing a distributor network even more difficult. In the telecom or the computer industry, distributors have replaced a traditional sales force but are now threatened by direct marketing channels, such as phone or the Internet. However the most successful marketing companies do not throw out the baby with the bath water. They know that it takes time and energy to set up, train, motivate and manage a channel. Consequently they try to extract the maximum value of their different channels instead of turning one off, as soon as it is seems to be less effective. For instance, in 2002, Cisco initiated some major changes in its distribution strategy in Europe, as well as in Middle East and...
Successful value creation needs successful value delivery. Holistic marketers are increasingly taking a value network view of their businesses. Instead of limiting their focus to their immediate suppliers, distributors, and customers, they are examining the whole supply chain that links raw materi components, and manufactured goods and shows how they move toward the final consumers. Companies are looking at their suppliers' suppliers upstream and at their distributors' customers downstream. They are looking at customer segments and how company resources can best be organized to meet needs. Failure to coordinate the value network properly can have dire consequences.
Distribution historically means packing the goods on a camel, trudging them across Asia, transferring the wares to a ship, sailing across an ocean, loading the goods onto a train, hoisting them onto a cart, and wheeling them across to some central wholesalers who then deliver the product to your friendly neighborhood dealer who sells them across the counter. Every time the product passes from one link in the chain to the next, there's a price hike.
Over time, product line managers tend to add new products either to use up excess manufacturing capacity, or because the sales force and distributors are calling for a more complete product line to satisfy their customers, or because the firm needs to add items to the product line to increase sales and profits.
So take a tip from Claude Ganz of Dymo. When he was very young, Claude bought a chunk of shares in a new company working out of a garage in Berkeley. They were distressing vinyl tape to form letters for signs. The other vice presidents didn't want anything to do with Claude, but he held a considerable chunk of the shares. One day when Claude asked yet again for a role, the others suggested he take over international sales. Claude, being adventurous, booked a world tour. Wherever he went, he demonstrated his plastic nameplate-making gun and appointed distributors.
In preparing the alternative courses of action that The Lock Company would consider when determining a new brand name for its international markets, he found there was much more to renaming a company than simply coming up with a new name and figuring the associated costs. For instance, the language, culture, and laws of each foreign market had to be considered. Nor could established relationships with distributors and customers be neglected. All in all, there were many associated issues to consider, not just a name change. Arriving at a new brand name would require expert consultants, brand awareness studies (both nationally and internationally), studies on the distribution networks used by both Kortec and Wrenware, and a significant amount of related analysis. The Lock Company would need hard facts to back up any decision it would make.
Distributors have strict guidelines that must be adhered to if you want to do business with them. The distributors dealer may charge the customer a discretionary restocking fee on any goods returned. If they do, 15-20 percent is typical. You do not get any part of the restocking fee. Dealers have the right to refuse the return if the goods are incomplete (without a receipt) or not in a merchantable state (for example, they are scuffed damaged). Most distributors will only sell your products if you provide support in the geographical area they cover. Some have small, dedicated teams to support their top-selling products. You and your distributors need a clear understanding about whether unsold inventories shall be returned when your product is updated. Whatever you decide, keep dealer stocks low in the run up to any major upgrade otherwise, you or your dealers will have significant amounts of outdated product to get rid of as best you can. Many manufacturers find distributors excellent...
Companies need to plan and implement careful training programs for their distributors and dealers because the intermediaries will be viewed as the company by end users. Microsoft, for example, requires third-party service engineers who work with its software applications to complete a number of courses and take certification exams. Those who pass are formally recognized as Microsoft Certified Professionals, and they can use this designation to promote business.
Supermarkets can jeopardize manufacturers' sales promotion plans by forward buying special wholesale deals which allows them to stock up far more product than they expect to sell during the promotion. After the promotion period these supermarkets can obtain a wider margin by selling the surplus product at the regular price. Of course, most organizations attempt to avoid such consequences by agreeing mutually acceptable terms in advance during the negotiations phase.
Experience shows that the selection of communication tools varies significantly according to a company's push marketing strategy (which pushes the product to the customer using distributors) or its pull marketing strategy (which attracts customers with advertising). This selection also depends upon whether the company sells its products or services to businesses or to individual consumers. Finally, it depends on the competitive position of the company.
T Royalty A percentage of the licensee's wholesale revenue (often set at or near 5 percent), which is paid to the licensor in exchange for the rights to use the brand. In most contracts, the licensee agrees to pay the licensor a guaranteed minimum royalty payment plus a royalty on all sales that exceed the minimum payment amount.
Firms with vestigial or non-existent sales teams often delegate selling to their dealers and distributors' salespeople. While this appears to sidestep the immediate problem, it comes at a cost. The most obvious is lack of overall control. Outside sales forces have their own profile of contacts, which may or may not dovetail with yours. They also take time to influence, encourage, and assess.
There is a trend in many large successful companies to convert some regional or local sales forces into autonomous marketing staff under the strict guidance of the marketing department. Giving the sales force more autonomy is an attractive option for some companies. It means shifting from calling on distributors, retailers and other customers to spending more time meeting advertising agency creative directors and media buyers to create local advertising campaigns. More specifically, it allows for the possibility of better category management and more direct communication with large retail accounts, as discussed elsewhere in this book.
Let us consider the case of the launching of a new product. First of all, a marketing manager must plan advertising and direct marketing campaigns in order to establish product awareness. These campaigns are followed by invitations to seminars and the publishing of papers in professional journals as well as participation in trade shows to explain a new technology and its benefits. The sales force and distributors will be invited to reinforce customer beliefs by organizing product demonstrations where they will be allowed to test, touch, and see the new product.
Today's wholesalers face considerable challenges. The industry remains vulnerable to one of the most enduring trends of the last decade fierce resistance to price increases and the winnowing out of suppliers who are not adding value based on cost and quality. Progressive wholesalers constantly watch for better ways to meet the changing needs of their suppliers and target customers. They recognize that, in the long run, their only reason for existence comes from adding value by increasing the efficiency and effectiveness of the entire marketing channel. As with other types of marketers, the goal is to build value-adding customer relationships. For example, Grainger succeeds by making life easier and more efficient for the commercial and institutional buyers and sellers it serves Beyond making it easier for customers to find the products they need, Grainger also helps them streamline their acquisition processes. For most companies, acquiring MRO supplies is a very costly process. In...
In this success the careful selection and use of distributors has been a major factor. Tyrone has distributors acting for it in more than 20 countries across four continents. Hie distributors fall into two categories, those that operate independently and those that are sub-companies of the parent. Each distributor, indepen Where distributors are independent, Tyrone's products are usually fitted into the distributor's range as one of a number of products in the trading scope of that company. The company requires that the distributor has a good knowledge of and is actively working in, the biotech industry and has a trained sales force in this field. There is a distinct probability that they will also be delivering a range of other products to the same client base. The small market size of many of the products which form one of the bases of Tyrone's niche strategy, would make it uneconomical to try to train and maintain an 'own' sales force specifically for this product range as a wholly...
The origiriEil and oldest form Of direct marketing is the field sales call, Today most industrial companies rely heavily on a professional sales farce to locate prospects, develop them into customers, and grow the business or they hire manufacturers' representatives and agents to carry (jut the direct-selling task. In addition, many en nsutner companies use a direct-selling force insurance agents, stockbrokers., add distributors work for direct-sales organizations such as Avon, Antway, Mary Kay, anttTuppciware,
Consider the experience of Japan's Epson Corporation. A leading manufacturer of computer printers, Epson decided to add computers to its product line but chose to recruit new distributors rather than sell through its existing distributors. The firm hired a recruiting firm to find candidates who (1) had distribution experience with major appliances, (2) were willing and able to set up their own distributorships, (3) would accept Epson's financial arrangements, and (4) would handle only Epson equipment, although they could stock other companies' software. After the recruiting firm went to great effort to find qualified candidates, Epson terminated its existing distributors and began selling through the new channel members. Despite this time-consuming, detailed selection process, Epson never succeeded as a computer manufacturer.11
Changed from dependence on distributors to a company-managed sales force. These intensified manufacturing and marketing investments in Western Europe required a total investment of about U.S. 3 million. This investment represented about one-tenth of Fike's total investment in the company operations. The European operations mainly consisted of manufacturing and marketing of 12 different rupture discs and vents. The rupture disc is the major product line of Fike's European operations. The competitive standing of Fike for discs and vents in seven Western European markets, which account for a major part of the company's European operations, is provided in Exhibits 1 and 2. In order to strengthen its market position in the Western European markets, Fike Europe progressively eliminated the distributors in various European markets. In 1992, the company sales force marketed Fike's products and services in Belgium, France, Germany, Italy, and the U.K. However, Fike Europe still continues to...
This learning curve effect corresponds to the company's improved know-how as its production increases during the growth stage of the life cycle purchasing optimization, design simplification for manufacturing purposes, output increase for production facilities, improvement of sales force, selection of distributors, and increased performance of sales promotion campaigns. All these gains in productivity lead to a decrease in the average unit cost. This decrease in cost could be passed on to the price in order to react to a competitor's actions or to increase price-sensitive demand.
A concern for marketing channels of distribution refers to the institutional and logistical arrangements for delivering value to the customer. More precisely, marketing channels deal with the issue of the arrangements the organization makes to physically deliver its products to the customer. Marketing channels perform the function of accumulating products into assortments required by customers and ensuring that this assortment is delivered to the location desired at the time required and in the quantities demanded. Wholesalers and retailers play a key role in this process. In developing a marketing channel strategy the company decides the most appropriate way to reach its customers. This may be through intense, selective or exclusive distribution depending on objectives and the nature of the product, the service and the market. In managing the marketing channel the company must select, motivate and evaluate distributors. Because marketing channels comprise a set of interdependent...
Shipments to wholesalers and retailers are co-ordinated with SIA's other range of products. Concerning the remaining products, sold on the Swedish market under the name Del Monte, the potential for co-ordinating shipments is limited since the products (juice, canned products and ice-cream) demand different transport solu- Collaboration in advertising is done together with the wholesaler Arvid Nordq-vist and producer of fruit juices, JO-bolaget. Del Monte finances the promotion material as well as advertisements in different media. SIA, together with Arvid Nordqvist and JO-bolaget, pays for the price reductions of the products when there is a price promotion on. As the products under the Del Monte name in Sweden are sold through three sales forces, problems in terms of co-ordination of different promotional acti vities towards the stores might arise. Accordingly, it may sometimes be difficult to achieve good exposure of the Del Monte products in the stores.
Moving offices is not only a signal to distributors and customers that you are moving up, it is also an opportunity for you to remind them how efficient your firm is. The implication is that the major transformations you can reap for yourself, you can reap for them as well.
Independent customer goods and service review forums, these forums include well-known Web siies Such as Epinions. com. Rgteiialcom, Consurtierreview.ctim, and Bifcttrtt.wm, Bijrate.com combines consumer feedback from two sources ils 12 million memt rg who have volunleeiErl to provide ralirgs and feedback to assist other shoppers, arid survey resutls on service quality cottfitted from ajslomets ol stores lisicd in Bizrate. These sites tiave me advanlage of being independent from the goods and service providers, which may reduce bias. Distributor or sates agent feedback sites. These sites olfer belli positive and negative product or service reviews, b-jt the stores or distributors have bull Itie sites themselves. Amaron. com, for instance, offers an interaciive feedback opportunity through wbicti buyers, readers, editors, and others may rev ew all pi otitis listed ifl the site, pec l books. Elaiicewm is an online professional services provider that allows contractors to describe their...
More sophisticated companies go beyond merely gaining intermediaries' cooperation and instead try to forge a long-term partnership with distributors. The manufacturer communicates clearly what it wants from its distributors in the way of market coverage, inventory levels, marketing development, account solicitation, technical advice and services, and marketing information. The manufacturer then seeks distributor agreement with these policies and may introduce a compensation plan or other rewards for adhering to the policies. For example, Dayco Corporation, a maker of engineered plastics and rubber products, strengthens channel partnerships by running an annual week-long retreat with 20 distributors' executives and 20 Dayco executives. Still, too many manufacturers think of their distributors and dealers as customers rather than as working partners. Up to now, we have treated manufacturers and distributors as separate organizations. But many manufacturers are distributors of related...
A compromise, some way short of international marketing, is to use overseas agents and distributors. This is closer to a simple exporting strategy than international marketing, but it can be effective, and is definitely much cheaper. We recommend this option in Mexico and Chile. A possible problem is conflict of interest where an agent also handles a competitor's products. We suggest Apsa should try to obtain sole distribution agreements for these countries.
Manufacturers use a variety of trade promotion tools as inducements for wholesalers and retailers. Next we examine some of the most often used types of trade promotions and some factors marketers must consider in using them. These promotions include contests and incentives, trade allowances, displays and point-of-purchase materials, sales training programs, trade shows, and co-op advertising. Contests and Incentives Manufacturers may develop contests or special incentive programs to stimulate greater selling effort and support from reseller management or sales personnel. Contests or incentive programs can be directed toward managers who work for a wholesaler or distributor as well as toward store or department managers at the retail level. Manufacturers often sponsor contests for resellers and use prizes such as trips or valuable merchandise as rewards for meeting sales quotas or other goals. Exhibit 16-27 shows a contest Chicken of the Sea sponsored for food-service distributors who...
The Japanese market on its own, highly competitive terms. The key ingredients for success are not treating the Japanese market as any other market a high-L uality or latest technology product a high level of commitment to - invariably meaning a high level of investment in - the market an ability to respond efficiently to specific market segment needs and an understanding of the specific business culture. For most consumer products, tying up with a local distributor or partner is critical. Understanding the complex distribution system with its layers of wholesalers, and having the patience to handle it, are crucial in Japan because it is difficult to get products on the shelves by directly approaching the retailer. A strong marketing plan, encompassing intensive and aggressive advertising, and close co-operation with wholesalers and retailers, is also essential, not only to reach and impress the consumer, but also to convince the wholesaler and the retail buyers that the firm is...
Marketing concept and the stakeholder concept are strongly related with a common root or core. Clearly, one commonality is that the stakeholder concept recognizes the consumer as a public with concerns central to the organization's purpose. Perhaps a further element of this common core is a realization of the importance of cooperative exchange with the consumer. In fact, all publics of an organization can be viewed in a cooperative vs. adversarial perspective. Cooperative strategies with labor, marketing channel members, etc., may result in eventual but not mutual symbiosis. For example, if a manufacturer cooperates with wholesalers, then these wholesalers may be more likely to cooperate with retailers. Similarly, retailers may then be more likely to treat the customer well. Consequently, the customer will be more loyal to certain brands, and this catalyzes the manufacturer to continue to be cooperative with channel members. This eventual, but not necessarily mutual, symbiosis may...
Vertical conflict is even more common and refers to conflicts between different levels of the same channel. For example, in the pharmaceutical industry, concentration of the distribution systems in some countries results in enhanced negotiating power for channel intermediaries, particularly the big wholesalers. Drug companies have to work harder to manage their relationship with distributors and other vital channel partners and to minimize conflict (see Marketing Highlight 21.1).
Trade promotion can persuade retailers or wholesalers to cany a brand, give it shell' space, promote it in advertising and push it to consumers. Shelf space is so scarce these days that manufacturers often have to offer price discounts, allowances, buy-haek guarantees or free goods to retailers and wholesaler to get on the shelf and, once there, to stay on it.
We now look at several channel decisions facing manufacturers, in designing marketing channels, manufacturers struggle between what is ideal and what is practical. A new firm usually starts by selling in a limited market area - a few manufacturers' sales agents, a few wholesalers, some existing retailers, a few trucking companies and a few warehouses. Deciding on the best channels might not be a problem the problem might simply be how to convince one or a few good intermediaries to handle the line. Ii' the new firm is successful, it might branch out to new markets. Again, the manufacturer will tend to work through the existing intermediaries, although this strategy might mean using hybrid marketing channels. In smaller markets, the firm might sell directly to retailers in larger markets, it might sell through distributors. In one part of the country, it might grant exclusive franchises because that is the way merchants normally work in another, it might sell through all outlets...
Prospective distributors in Spain must believe that the product can be sold directly. In the future, the distributor will be expected to contribute funds to the group of Dansko distributors for the design of advertising leaflets and mailing costs. We are only prepared to collaborate with distributors who we believe really understand the product, have mastered direct sales techniques, able to contribute enough funds to the group, and can reach adequate sales figures in three years.
Like consumer-oriented promotions, sales promotion programs targeted to the trade should be based on well-defined objectives and measurable goals and a consideration of what the marketer wants to accomplish. Typical objectives for promotions targeted to marketing intermediaries such as wholesalers and retailers include obtaining distribution and support for new products, maintaining support for established brands, encouraging retailers to display established brands, and building retail inventories. While trade discounts or other special price deals are used to encourage retailers and wholesalers to stock a new brand, marketers may use other types of promotions to get them to push the brand. Merchandising allowances can get retailers to display a new product in high-traffic areas of stores, while incentive programs or contests can encourage wholesale or retail store personnel to push a new brand. Maintain Trade Support for Established Brands Trade promotions are often designed to...
There are thousands of seal types and sizes. Customers expect their distributors to keep stocks available of most of them. Seal makers like Economos also expect their distributors to buy large stocks. In this business, it is also apparent that the firm's own production technologies and the injection moulding process it uses encourages it to manufacture large batches of the product. The traditional production methods, however, mitigated against fast response to customers that ordered a small quantity of an item not in stock. Economos was considering how to overcome the inflexibility which, in a way, confined the company to the use of third-party distributors that are put under pressure to keep large inventories. Since production could be done in immediate response to orders, Eeonornos decided to set up as close to customers as possible. Its distributors would no longer need to carry large inventories, which meant lower prices and higher margins for their customers. Machinery makers...
International marketers face many additional complexities in designing their channels. Each country has its own unique distribution system that has evolved over time and changes very slowly. These channel systems can vary widely from country to country. The relative significance of different members or elements of a channel system - for example, the role of wholesalers versus retailers or shopkeepers - can vary significantly across countries. For instance, in food and drinks retailing, contract distributors play a far more important role hi the delivery of goods from producer to retailer in the United Kingdom than in other EU countries like Germany, France, Spain and Italy. Also, multiple retailer dominance of the The Japanese distribution system stems from the early seventeenth century when cottage industries and a quickly growing urban population spawned a merchant class Despite Japan's economic achievements, the distribution system has remained remarkably faithful to its antique...
The remaining channels in Figure 21.2A are indirect-marketing channels. Channel 2 contains one intermediary level. In consumer markets, this level is typically a retailer. For example, the makers of televisions, cameras, furniture, major appliances and many other products sell their goods directly to large retailers, which then sell the goods to final consumers. Channel ,1 contains two intermediary levels, a wholesaler and retailer. This channel is often used by manufacturers of food, drugs, hardware and other products. Channel 4 contains three intermediary levels. In the meat-packing industry, for example, jobbers usually come between wholesalers and retailers. The jobber buys from wholesalers and sells to smaller retailers, which generally are not served by larger wholesalers. Distribution channels with even more levels are sometimes found, but less often. From the producer's point of view, a greater number of levels means less eontrol and greater channel complexity. Figure 21.2R...
The Growing Power of Retailers One reason for the increase in sales promotion is the power shift in the marketplace from manufacturers to retailers. For many years, manufacturers of national brands had the power and influence retailers were just passive distributors of their products. Consumer-product manufacturers created consumer demand for their brands by using heavy advertising and some consumer-oriented promotions, such as samples, coupons, and premiums, and exerted pressure on retailers to carry the products. Retailers did
When these issues are translated to the international market, other factors can also come into play, not least the role of culture. Regardless, it is vital to communicate with international customers. Indeed often, at least in the short term, just communicating that the company is aware of areas which need addressing or changing is enough to alleviate dissatisfaction in the short term. Mitchell (1999) identifies three key issues in addressing customer satisfaction globally. First, regional market characteristics. Thus, if levels of customer service offered locally are generally deficient, then it will be easier to excel in the eyes of the consumers. Satisfaction will be higher than in markets where customer service is high in all sectors. The extent of local presence which is related back to the market entry decision can also be a factor. If there is no local presence then customers may experience delays in obtaining equipment, parts, or customs delays or problems of compatibility....
The Freixenet management team had two main responsibilities for the US market. These were the distribution system, and the development of strategies to market and advertise the brand. International wine and liquor producers that export to the American market typically choose one company, usually in New York, as a national importer. This distribution company buys the goods from the international supplier and then sells to a network of wholesalers located in each state or territory. The margin typically charged by these importers was 15 per cent of the US-landed price. Under this system, a brand manager employed by the import company usually heads the marketing of brands. He or she is responsible tor the annual advertising and promotional budget allocated by the brand owner and the supplier. The second phase of international expansion began during the early 1980s with the establishment of two commercial branches, one in the United States and the other in Germany. Freixenet's exports to...
In the mid-1960s, Fike started exploring overseas business opportunities. Contacts were established with a business firm in Philadelphia that was an importer into many European countries. Exclusive national distributorships were contracted with this Philadelphia firm. The Philadelphia firm bought the products from Fike and paid in U.S. dollars. Fike provided technical support and sales-oriented support activities in the form of technical seminars. By the late 1970s, European sales accounted for hundreds of thousands of U.S. dollars. With a Europe-wide network of specialized distributors knowledgeable in technical sales, we have been able to win customers in fields as demanding as both the nuclear and aerospace programs. We have also introduced the use of rupture discs as cost-effective, fail-safe devices into markets where they have been largely unknown in the past.
Distributors All these companies, and some even more specialized companies or industry experts, can do targeted research in a certain field, a selected market segment, or a particular competitor. These studies are completed with the help of interviews with specialists, clients, distributors, or even competitors. The results are then analyzed and synthesized. Distributors can provide information on the business policy and technological experience of competitors. These distributors are also centrally located so as to evaluate the general policy of different actors in the market. Not all distributors are able to do this, but time is never wasted in discussions with well-informed distributors.
Management must also consider the reactions of other parties to the contemplated price. How will distributors and dealers feel about it Will the sales force be willing to sell at that price How will competitors react Will suppliers raise their prices when they see the company's price Will the government intervene and prevent this price from being charged
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