Post on 20-Jan-2018
description
Distribution managementoverview
Analysis Framework
Market
Customer Analysis
Competitor Analysis
Company Analysis
Marketing Strategy
Product
Price
Promotion
Place
SegmentationPositioning
Consumer Behavior)
Consumer OrientationCompetitive Advantage
Branding and Product Strategy
Pricing Process
Promotional MixPricing Strategies
AdvertisingDistribution
Dell Computer
• Classic case in supply chain and distribution management.
• Established in 1984, Dell experienced supply problems in 1993 and thereupon completely redesigned its chain process along the lines of what its founder, Michael Dell, called the “direct” model.
• Between 1993 and 1998, Dell's earnings subsequently grew at 65 percent per year.
Dell Computer continued• Dell's supply chain redesign was based on the following
elements. • First, Dell sells directly to customers, eliminating the
wholesaler and retailer.• Second, Dell also takes advantage of new information
technologies in their communications with suppliers who can access Dell's component inventories, production plans, and forecasts in real time and thus keep their production precisely matched to Dell's needs.
• Third, Dell deliberately maintains absolute minimum inventory levels at every stage of production, averaging 4 days overall
The Concept of Flows in Distribution System Management
Physical PossessionOwnershipPromotion
NegotiationFinancingRisk Taking
OrderingPaymentResearch
All but physical possession and ownership could be e-flows.
All flows can be shifted up or down the channel.
All are subject to economy of scale efficiencies.
All must be performed.
If one flow fails, the entire channel can fail.
Performance of flows determines compensation.
(…functions that move)
What is a Distribution Channel? A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or
business user.
A channel of distribution comprises a set of
institutions which perform all of the activities utilised to
move a product and its title from production to
consumption
Negotiation
Promotion
Contact
Transporting and storing
Financing
Packaging
Money
Goods
Today’s system of exchangePr
oduc
ers U
sers
Why are Marketing Intermediaries Used?
• The use of intermediaries results from their greater efficiency in making goods available to target markets.
• Offer the firm more than it can achieve on it’s own through the intermediaries:– Contacts,– Experience,– Specialization,– Scale of operation.
• Purpose: match supply from producers to demand from consumers.
How Intermediaries Minimize How Intermediaries Minimize TransactionsTransactions
Anil
Arun
Nancy
Joanna
Compaq
IBM
Apple
Hewlett-Packard
Computer City
HP®
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Anil
Arun
Nancy
Apple
IBM
Compaq
Hewlett-Packard
Contacts with no intermediaries4 producer x 4 buyers=16 contacts
Contacts with one intermediaries4 producer + 4 buyers=8 contacts
Marketing Channel Functions Performed Marketing Channel Functions Performed by Intermediariesby Intermediaries
Transactional Function
Logistical Function
-Buying. Purchasing products for resale or as an agent for supply of a product-Selling. Contracting potential customers, promoting products, and soliciting orders-Risk Taking. Assuming business risks in the ownership of inventory that can become obsolete or deteriorate.
-Assorting. Creating product assortments from several sources to serve customers-Storing. Assembling and protecting products at aconvenient location to offer better customer service.-Sorting. Purchasing in large quantities and breaking into smaller amounts desired by customers. -Transporting. Physically moving a product tocustomers.
Marketing Channel Functions Performed by Intermediaries
Facilitating Function
-Financing. Extending credit to customers
-Grading. Inspecting, testing, or judging products, and assigning them quality grades
-Marketing information and research. Providing information to customers and suppliers, including competitive conditions and trends
Channel intermediaries - Wholesalers
• Break down ‘bulk’• buys from producers and sell small quantities to
retailers• Provides storage facilities• reduces contact cost between producer and
consumer• Wholesaler takes some of the marketing
responsibility e.g sales force, promotions
Channel intermediaries - Agents
• Mainly used in international markets• Commission agent - does not take title of
the goods. Secures orders.• Stockist agent - hold ‘consignment’ stock• Control is difficult due to cultural
differences• Training, motivation, etc are expensive
Channel intermediaries - Retailer
• Much stronger personal relationship with the consumer
• Hold a variety of products• Offer consumers credit• Promote and merchandise products• Price the final product• Build retailer ‘brand’ in the high street
Channel intermediaries - Internet
• Sell to a geographically disperse market• Able to target and focus on specific segments• Relatively low set-up costs• Use of e-commerce technology (for payment,
shopping software, etc)• Paradigm shift in commerce and consumption
Five Marketing Functions in an Automobile Channel
Physical FunctionSupplier
sCustom
erTransporter
s Warehouse
s
Manufacturer
Transporters
Warehouses
Dealers Transporters
Title FunctionCustomerSuppliers Manufacturer Dealers
CustomerSuppliers
Payment FunctionBanks Manufacturer Banks Dealers Banks
Information Function
CustomerSuppliersTransporte
rs Warehouse
s Banks
Manufacturer
Transporters
Warehouses Banks
Dealers
Transporters Banks
Promotion Function
CustomerAdvertising AgencySuppliers Manufactur
erAdvertising
Agency Dealers
Marketing Intermediaries Travel industry
Travel Agents Tour Wholesalers
Specialists: Brokers & Junket Reps
Internet
Hotel Representatives
Consortia & Reservations Systems
Global Distribution Systems
National, State, and Local Tour Agencies
Distribution Options• Move customers to the service
- Auto check in, Auto payment• Move service to delivery system to customers
– Catering cooked on location• Deliver tangible element of service to customers
– Pizza delivery• Pick-up things on which service is to be performed
– Valet service in hotels• Operate at arm’s length
– mail, telephone, computer, often use multiple approaches
The Distribution Channel:
BackwardIntegration
ForwardIntegration
Vertical Integration
Wholesaler Jobber Retailer Consumer
Consumer
Retailer Consumer
Producer0-level channel – Direct
Wholesaler Retailer Consumer Producer
2-level channel
Producer
3-level channel
1-level channelProducer
Number of Channel LevelsChannel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the
Final Buyer.
The Distribution Function• distribution is about getting the product or service to the
customer as conveniently as possible; it deals with access and availability
• intermediaries intermediaries perform many of the distribution functions on behalf of suppliers
• merchant intermediariesmerchant intermediaries actually take title to physical products that they distribute
• agentsagents do not ever own the products, but they arrange the transfer of title
Distribution Channels• The role of distribution entails:
– Arranging for its sale and transfer of title
– Promoting the product– Storing the product– Assuming some risk during
distribution.• Intermediaries often perform these activities
for producer or consumer.
• Provides market information• Interprets consumers’ wants• Promotes producers’ products• Creates assortments• Stores products• Negotiates with customers• Provides financing• Owns products• Shares risks
• Anticipates wants• Subdivides large quantities of a product• Stores products• Transports products• Creates assortments• Provides financing• Makes products readily available• Guarantees products• Shares risks
SALES SPECIALISTFOR PRODUCERS
PURCHASING AGENTFOR BUYERS I
NTERMEDIARY
The Distribution Functions
Designing the ChannelChannel design is a strategic marketing tool. Four
decisions can be help a firm design a distribution channel:
• what role distribution is to play in achieving objectives
• what type of channel is needed? with or without intermediaries?
• what level of intensity of distribution?• which specific intermediaries to use? which will be
best suited to achieve objectives?
Specifythe role ofdistributionwithin themarketingmix
Selecttype ofdistribu-tion channel
Determine appropriateintensityof distri-bution
Choosespecificchannelmembers
The Well-Designed Distribution Strategy
Major Distribution Channels
• For distribution of consumer goods, five different types of channels are widely used.
• Business goods are normally distributed through four major types of channels.
• There are only two common channels of distribution for services.
• Some producers are not content to use only a single distribution channel and use multiple multiple channels channels
• Multiple channels can aggravate middlemen and cause conflicts in the channels.
ULTIMATE CONSUMERS
PRODUCERS OF CONSUMER GOODS
Retailers Retailers Retailers Retailers
Merchantwholesalers
Merchantwholesalers
Agents Agents
Consumer Channels
BUSINESS USERS
PRODUCERS OF BUSINESS GOODS
Merchant wholesalers(industrial distributors)
Agents Agents
Merchant wholesalers(industrial distributors)
Business Channels
ULTIMATE CONSUMERS OR BUSINESS USERS
PRODUCERS OF SERVICES
Agents
Service Channels
Marketing Channels:• What is channel design?
Decisions associated with forming new or altering existing channels.
• Why are design decisions critical?•They directly influence all other marketing decisions.•Key external resource for many manufacturers.
• How do marketing functions factor into design decisions?Who performs what channel function more efficiently and effectively.
• When is it time for channel redesign?When a new firm is established, new product introduced, new market targeted, external environment change, or when there is a change or performance failure of channel members.
Internet • The Internet is quickly becoming an
effective distribution channel. – It never closes.– It allows companies to tangibilize their
products and services.– It reaches a broad geographic areas.– It allows interaction with the guests.– It saves labor.
The Changing Face of Distribution
• Internet (“click and mortar” vs. “brick and mortar”) a major factor-- where is it heading?
• Direct Response TV sales are growing in popularity, especially for time-starved shoppers
• “The world’s largest bookstore” is on the Internet! (Amazon.com)