Dstribution Channels

8/9/2019 Dstribution Channels

1/26


2/26

Distribution ChannelsDistribution Channels

A set of interdependent organizationsA set of interdependent organizations(intermediaries) involved in the process of(intermediaries) involved in the process ofmaking a product or service available formaking a product or service available for

use or consumption.use or consumption.

Channel decisionsChannel decisions

affect other marketing decisionsaffect other marketing decisions involve long-term commitmentsinvolve long-term commitments


3/26

The Role of Distribution ActivitiesThe Role of Distribution Activities

in Marketingin MarketingDistributionDistribution

Physically moving products and establishingPhysically moving products and establishingintermediary relationships to support suchintermediary relationships to support suchmovement.movement.

Physical Distribution (Logistics)Physical Distribution (Logistics) The activities of distribution involved in theThe activities of distribution involved in the

physical relocation of products.physical relocation of products.

Channel of DistributionChannel of Distribution The system of relationships established to guideThe system of relationships established to guidethe movement of a product.the movement of a product.


4/26

Distribution ChannelFunctions

Distribution ChannelFunctions

Ordering

Ordering

Payments

Payments

Communication

CommunicationTransfer

Transfer

Negotiation

Negotiation

Financing

FinancingRisk Taking

Risk Taking

Physical

Distribution

PhysicalDistribution

Information

Information


5/26

Consumer Marketing Channels

Add another level -> Mail order (telephone, internet), this will be also 1-level

Consumer Marketing Channels

Add another level -> Mail order (telephone, internet), this will be also 1-level

Wholesaler

Wholesaler Jobber

Jobber Retailer

Retailer Consumer

Consumer

Consumer

Consumer

Retailer

Retailer Consumer

Consumer

Manufacturer

Manufacturer

0-level channel

Wholesaler

Wholesaler Retailer

Retailer Consumer

ConsumerMfg

Mfg

2-level channel

Mfg

Mfg

3-level channel

1-level channel

Manufacturer

Manufacturer


6/26

Industrialdistributors

Ma

nu

fac

turer

C

ons

umer

Manufacturersrepresentative

Manufacturers

sales branch

Industrial Marketing ChannelsIndustrial Marketing ChannelsIndustrial Marketing ChannelsIndustrial Marketing Channels


7/26

Structuring a Distribution ChannelStructuring a Distribution Channel

Important Factors in Building a DistributionImportant Factors in Building a Distribution

ChannelChannel Costs associated with establishing a directCosts associated with establishing a direct

channel distributionchannel distribution

Coverage is increased through the use ofCoverage is increased through the use of

indirect channels of distribution.indirect channels of distribution.

Control is enhanced using a direct distributionControl is enhanced using a direct distributionchannel.channel.


8/26

Channel Behavior and ConflictChannel Behavior and Conflict

The channel will be most effective when:The channel will be most effective when:

each member is assigned tasks it can do besteach member is assigned tasks it can do best.. all members cooperate to attain overall channel goalsall members cooperate to attain overall channel goals

and satisfy the target market.and satisfy the target market.

Focus on individual goals leads to conflictFocus on individual goals leads to conflict Horizontal Conflict occurs among firms at the sameHorizontal Conflict occurs among firms at the same

level of the channel.level of the channel. Vertical Conflict occurs between different levels of theVertical Conflict occurs between different levels of the

same channel.same channel.


9/26

Vertical Marketing SystemVertical Marketing System

A distribution channel structure in whichA distribution channel structure in which

producers, wholesalers, and retailers actproducers, wholesalers, and retailers act

as a unified system.as a unified system.

One channel member owns the other, hasOne channel member owns the other, has

contracts with them, or has so muchcontracts with them, or has so muchpower that they all cooperate.power that they all cooperate.


10/26

Types of Vertical Marketing SystemTypes of Vertical Marketing Systems

CorporateCommon Ownership at DifferentLevels of the Channel

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members


11/26

Conventional Distribution Channel vs.Conventional Distribution Channel vs.

Vertical Marketing SystemsVertical Marketing Systems

VerticalVerticalmarketingmarketingchannelchannel

Manufacturer

Retailer

ConventionalConventionalmarketingmarketingchannelchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

W

ho

lesa

ler


12/26


13/26

Changing Channel OrganizationChanging Channel Organization

Disintermediation:Disintermediation: Occurs when product and service producersOccurs when product and service producers

cut out intermediaries and go directly to finalcut out intermediaries and go directly to final

buyers, or when radically new types ofbuyers, or when radically new types ofchannel intermediaries displace traditionalchannel intermediaries displace traditional

ones.ones.


14/26

Channel Design DecisionsChannel Design Decisions

Analyzing Consumer Service NeedsAnalyzing Consumer Service Needs

Setting Channel Objectives & ConstraintsSetting Channel Objectives & Constraints

ExclusiveDistribution

ExclusiveDistribution

SelectiveDistribution

SelectiveDistribution

IntensiveDistribution

IntensiveDistribution

Identifying Major AlternativesIdentifying Major Alternatives

Evaluatin the Ma or AlternativesEvaluatin the Ma or Alternatives


15/26

Analyzing Consumer NeedsAnalyzing Consumer Needs

Answering key questions helps to determineAnswering key questions helps to determine

customer needs:customer needs:

Do consumers want to buy from nearby locationsDo consumers want to buy from nearby locationsor are they willing to travel?or are they willing to travel?

Do they value breadth of assortment or do theyDo they value breadth of assortment or do they

prefer specialization?prefer specialization?

Do consumers want many add-on services?Do consumers want many add-on services?

Firm must balance needs against costs andFirm must balance needs against costs and

consumer price preferences.consumer price preferences.


16/26

Setting Channel ObjectivesSetting Channel Objectives

State objectives in terms of targeted levels ofState objectives in terms of targeted levels of

customer service.customer service.

Channel objectives are influenced by:Channel objectives are influenced by: CostCost

Nature of the companyNature of the company

The firms productsThe firms products

Marketing intermediariesMarketing intermediaries CompetitorsCompetitors

EnvironmentEnvironment


17/26

Identifying Major AlternativesIdentifying Major Alternatives

Types of IntermediariesTypes of Intermediaries Company sales forceCompany sales force

Manufacturers agencyManufacturers agency

Industrial distributorsIndustrial distributors

Number of intermediariesNumber of intermediaries Intensive distributionIntensive distribution

Exclusive distributionExclusive distribution Selective distributionSelective distribution

Responsibilities of intermediariesResponsibilities of intermediaries


18/26

Evaluating the MajorEvaluating the Major

AlternativesAlternatives

Economic Criteria:Economic Criteria: A company compares the likely sales, costs, andA company compares the likely sales, costs, and

profitability of different channel alternatives.profitability of different channel alternatives.

Control Issues:Control Issues: How and to whom should control be given?How and to whom should control be given?

Adaptive Criteria:Adaptive Criteria: Consider long-term commitment vs. flexibility.Consider long-term commitment vs. flexibility.


19/26

Channel ManagementChannel Management

DecisionsDecisions

Selecting channel membersSelecting channel members

Managing and motivating channelManaging and motivating channel

membersmembers Partner relationship managementPartner relationship management

Evaluating channel membersEvaluating channel members


20/26

Marketing LogisticsMarketing Logistics

Planning, implementing, and controlling thePlanning, implementing, and controlling the

physical flow of goods, services, andphysical flow of goods, services, and

related information from points of origin torelated information from points of origin topoints of consumption to meet customerpoints of consumption to meet customer

requirements at a profit.requirements at a profit.


21/26

Market logistics planningMarket logistics planning

Market logistics planning has four steps:Market logistics planning has four steps: Deciding on the companys value proposition to its customersDeciding on the companys value proposition to its customers

Deciding on the best channel design and network strategy forDeciding on the best channel design and network strategy for

reaching the customerreaching the customer

Developing operational excellence in sales forecasting,Developing operational excellence in sales forecasting,warehouse management, transportation management andwarehouse management, transportation management and

materials management.materials management.

Implementing the solution with the best information systems,Implementing the solution with the best information systems,

equipment, policies and procedures.equipment, policies and procedures.


22/26

Goals of the Logistics SystemGoals of the Logistics System

& Major Logistics Functions& Major Logistics Functions

Goals of the Logistics System:Goals of the Logistics System: Deliver a targeted level of customer service at the leastDeliver a targeted level of customer service at the least

cost.cost.

Major Logistics Functions:Major Logistics Functions: WarehousingWarehousing

Inventory managementInventory management

TransportationTransportation

Logistics information managementLogistics information management


23/26

WarehousingWarehousing

How many, what types, and where?How many, what types, and where?

Storage warehousesStorage warehouses

Distribution centersDistribution centers

Automated warehousesAutomated warehouses


24/26

Inventory ManagementInventory Management

Must balance between too much and tooMust balance between too much and too

little inventory.little inventory.

Just-in-time logistics systemsJust-in-time logistics systems RFID or Smart Tag technologyRFID or Smart Tag technology


25/26

TransportationTransportation

TrucksTrucks

RailroadsRailroads

Water carriersWater carriers

PipelinesPipelines

AirAir

InternetInternet


26/26

Integrated Logistics ManagementIntegrated Logistics Management

The logistics concept that emphasizesThe logistics concept that emphasizes

teamwork, both inside the company and amongteamwork, both inside the company and among

all the marketing channel organizations, toall the marketing channel organizations, to

maximize the performance of the entiremaximize the performance of the entire

distribution system.distribution system. Involves:Involves:

Cross-functional teamwork inside the companyCross-functional teamwork inside the company

Building logistics partnershipsBuilding logistics partnerships

Third-party logisticsThird-party logistics

Dstribution Channels

Documents

Transcript of Dstribution Channels