week 8- 11.08.04week 8- 11.08.04

Distribution and Retailing Distribution and Retailing IssuesIssues

Nature of Distribution Channels:Why use marketing intermediaries?

Definition : A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

Greater Efficiency: Specialization (contact, experience, scale

opera) Number of Contacts match Supply and Demand by

transforming assortments

Contact Efficiency

Overcoming Discrepancies

Discrepancyof

Quantity

Discrepancyof

Quantity

Discrepancyof

Assortment

Discrepancyof

Assortment

The difference between the amount of product produced and the amount an end user wants to buy.

The difference between the amount of product produced and the amount an end user wants to buy.

The lack of all the items a customer needs to receive full satisfaction from a product or products.

The lack of all the items a customer needs to receive full satisfaction from a product or products.

Overcoming Discrepancies

TemporalDiscrepancy

TemporalDiscrepancy

SpatialDiscrepancy

SpatialDiscrepancy

A situation that occurs when a product is produced but a

customer is not ready to buy it.

A situation that occurs when a product is produced but a

customer is not ready to buy it.

The difference between the location of a producer and the

location of widely scattered markets.

The difference between the location of a producer and the

location of widely scattered markets.

Number of Channel Levels

Producer and Final Consumer in channelFlows between channel levels

Product - Ownership -Payment Information – Promotion

Direct Marketing ChannelCompany sells directly to consumers

Indirect Marketing ChannelsCompany sells through one or more

intermediaries

More levels increase number of contacts, less control & more complex

Channels for Consumer Products

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerWholesalerChannelChannel

RetailerRetailerChannelChannel

DirectDirectChannelChannel

Agent/BrokerAgent/BrokerChannelChannel

Hybrid Marketing Channel

Consumersegment 1Consumersegment 1

Businesssegment 1Businesssegment 1

Consumersegment 2Consumersegment 2

Businesssegment 2Businesssegment 2

RetailersRetailers

DealersDealersDistributorsDistributors

ProducerProducer

Catalogues, telephoneCatalogues, telephone

Sales forceSales force

Channel Intermediaries

RetailersRetailersRetailersRetailers

Merchant Merchant WholesalersWholesalersMerchant Merchant

WholesalersWholesalers

Agents Agents andand

BrokersBrokers

Agents Agents andand

BrokersBrokers

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Do NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to Goods

Conventional versus Vertical & Horizontal Marketing Channel

Vertical marketingVertical marketingsystemsystem

Manufacturer

Wholesaler

Retailer

Consumer Consumer

Retailer

Conventional marketingConventional marketingchannelchannel

Manufacturer

Wh

ole

sale

r

HorizontalHorizontal marketing marketingsystemsystem

Man1

Wholesaler

Retailer

Consumer

Man2

Channel Behaviour

Channels are complex behavioural systems Interaction between people and companies Formal and informal All members interdependent Each member a specialist

Individual - Company - Channel goals

Channel Behaviour:types of channel conflict

Horizontal ConflictBetween members at same channel level

Vertical ConflictBetween different levels in same channel

Keys to Overall PerformanceEach member’s role clear and specifiedStrong conflict management

Channel Design Decisions

Analysing consumer service needs

Setting channel objectives

Identifying and Evaluating major alternatives Type of Intermediaries. Number of Intermediaries: Intensive, Exclusive and Selective

(mkt coverage, control, realationships…)

Responsibility of members: Price, conditions of sale, territ, services.

Levels of Distribution Intensity

Intensity LevelIntensity LevelIntensity LevelIntensity Level ObjectiveObjectiveObjectiveObjective Number of Number of IntermediariesIntermediaries

Number of Number of IntermediariesIntermediaries

IntensiveIntensive

SelectiveSelective

ExclusiveExclusive

Achieve mass marketselling.

Convenience goods.

Achieve mass marketselling.

Convenience goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with singleintermediary. Specialty

goods and industrial equipment.

Work with singleintermediary. Specialty

goods and industrial equipment.

ManyMany

SeveralSeveral

OneOne

Market Factors

Market FactorsMarket FactorsThat Affect That Affect

ChannelChannelChoicesChoices

Market FactorsMarket FactorsThat Affect That Affect

ChannelChannelChoicesChoices

Customer ProfilesCustomer Profiles

Consumer or IndustrialCustomer

Consumer or IndustrialCustomer

Size of MarketSize of Market

Geographic Location

Product Factors

Product FactorsProduct FactorsThat Affect That Affect

ChannelChannelChoicesChoices

Product FactorsProduct FactorsThat Affect That Affect

ChannelChannelChoicesChoices

Product Complexity Product Complexity

Product PriceProduct Price

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

Producer Factors

Producer FactorsProducer FactorsThat Affect That Affect

ChannelChannelChoicesChoices

Producer FactorsProducer FactorsThat Affect That Affect

ChannelChannelChoicesChoices

Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel ControlDesire for Channel Control

Channel Management:selecting channel members

What makes the best?Years in businessOther lines carriedGrowth and profitCooperation & reputationSales force size & qualityRetail customers, location

and growth potential

Physical Distribution & Logistics Management

Major impact on:Customer satisfactionOperating costs

Handle - store - move products and servicesRight productRight customerRight place and time

Electronic Data Interchange

Information technology that replaces paper

documents that accompany business

transactions.

On Linehttp://www.walmartstores.com

On Linehttp://www.walmartstores.com

Criteria for RankingModes of Transportation

Relative Cost

TransitTime

Reliability

Capability

Accessibility

Traceability

HighestHighest LowestLowest

Air WaterPipeRailTruck

Water Rail Pipe Truck Air

Pipe Truck Rail Air Water

Water

Truck

Rail Truck Air Pipe

Rail Air Water Pipe

Air Truck Rail Water Pipe

RETAILING

All activities in selling goods and services directly to final consumers for personal, non-business use.

Most via retail storesNon-store growing fast

Retailing

Amount of service Product lines Relative prices Organizational

approach

Self-service retailers Customers are willing to

self-serve to save money Discount stores

Limited-service retailers Most department stores

Full-service retailers Salespeople assist

customers in every aspect of shopping experience

High-end department stores

Specialty stores

Retailers Are Retailers Are Classified By: Classified By:

Retailing

Amount of service Product lines Relative prices Organizational

approach

Specialty stores Narrow product lines with

deep assortments Department stores (laundry,

household products). Wide variety of product lines

Supermarkets Convenience stores

Limited line Superstores

Food, nonfood, and services Category killers

Giant specialty stores

Retailers Are Retailers Are Classified By: Classified By:

Retailing

Amount of service Product lines Relative prices Organizational

approach

Discount stores Low margins are offset by

high volume Off-price retailers

Independent off-price retailers

TJ Maxx, Marshall’s Factory outlets

Levi Strauss, Reebok Warehouse clubs

Sam’s Club, Costco

Retailers Are Retailers Are Classified By: Classified By:

Retailing

Amount of service Product lines Relative prices Organizational approach

Corporate chain stores Commonly owned / controlled

Voluntary chains Wholesaler-sponsored groups

of independent retailers (IGA) Retailer cooperatives

Groups of independent retailers who buy in bulk (Associated Grocers)

Franchise organizations Based on something unique

Merchandising conglomerates Diversified retailing lines and

forms under central ownership(target)

Retailers Are Retailers Are Classified By: Classified By:

Target Market and Positioning

Define target markets and Select positioning

Variety?Depth of assortment?Convenience?Low prices?

Presentation of the Retail Store

Employee Type & DensityEmployee Type & Density

Merchandise Type & DensityMerchandise Type & Density

Fixture Type & DensityFixture Type & Density

SoundSound

OdorsOdors

Visual FactorsVisual Factors

Factors Factors inin

CreatingCreatingStore’sStore’s

Atmosphere Atmosphere

Factors Factors inin

CreatingCreatingStore’sStore’s

Atmosphere Atmosphere

Factors to Consider in Site Selection

Economic growth potential

Economic growth potential

Area competitionArea competition

GeographyGeography

Non-Store Retailing

Growing much faster than store retailing

a third of all sales by 2005Direct MarketingDirect SellingAutomatic Vending

The Future of Retailing

New forms and shorter lifecycles

Non-store types growing

Growth of mega-retailers

Rising role of technology

Global expansionStores as “hangouts”