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Foundations of Marketing, Mar/Apr 2007 Session 13 (Place) Foundations of Marketing Professor Myungwoo Nam Distribution Decisions THE BIG PICTURE execute Brand Equity PLC product Product Line Distinct STP Profitable Accessible segment brand price Attractiveness Goal Setting Focus Benchmarks Impediment Economic Value Customization Psychology Compatibility target evaluate C. Advantage positionDefine Differentiate Deepen place Channel Flows Channel Design promotion Professor Myungwoo Nam awareness preference behaviour 1 Foundations of Marketing, Mar/Apr 2007 Session 13 (Place) Objective of Channels • Distribution Channels aim at making available to the consumer: ¾The Right Product Added value: variety, selection ¾The Right Place Added value: convenience (locational) ¾The Right Time Added value: speed of delivery, service speed, hours open, sufficient inventory ¾The Right Service Outputs Added value: waiting time, service quality, customization Channel Flows Defined • A channel flow is a costly activity engaged in by one or more channel members that is designed to produce one or more service outputs Marketing Flow Physical possession Ownership Promotion Financing Risking Ordering Payment Professor Myungwoo Nam Cost Represented Storage and delivery costs Inventory carrying costs Personal selling, advertising, sales promotion, publicity, public relations costs Credit terms, terms and conditions of sale Price guarantees, warranties, insurance, repair, and after-sale service costs Order-processing costs Collections, bad debt costs 2 Foundations of Marketing, Mar/Apr 2007 Session 13 (Place) Channels – Channel Length direct # of intermediaries indirect Direct vs. Indirect Distribution • Benefits of Direct Channels More manufacturer control Closer customer contact Eliminate double margins • Benefits of Indirect More rapid penetration and broader coverage Benefit of specialization (core competencies) Variable rather than fixed cost structure Professor Myungwoo Nam 3 Foundations of Marketing, Mar/Apr 2007 Session 13 (Place) Channels – Channel Breadth exclusive # of outlets mass Selective vs. Intensive Distribution • Nature of Product & Buying Process ¾ Involvement ¾ Frequency of Purchase • Consistency with Position ¾ Premium vs. Mass Marketed Professor Myungwoo Nam 4 Foundations of Marketing, Mar/Apr 2007 Session 13 (Place) Designing Distribution Channels: Key Considerations • Channel decisions are strategic and long-term ¾They involve inter-organizational relationships and often, irrevocable (and expensive) investments • Channel design considerations ¾Fit of channel with Positioning ¾Potential for channel conflicts Professor Myungwoo Nam 5
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