Download Distribution - Chapter 14

What We Will Discuss Today
SHOPPER’S HEAVEN
 Distribution
channels
• What are their functions?
• How are they organized?
 Distribution
channel decisions
• Design decisions
• Management decisions
Why Use Distribution Channels?
Why Use Distribution Channels?
 To
make the product or service available to
consumers.
• risk
• cost
Why Use Distributors?
 Efficiency
 Information
 Contact
and promotion
 Matching
 Transportation
 Financing
and storage
and risk taking
 Negotiation
Direct Channels of Distribution
 Manufacturer’s
sales office
 Manufacturer’s
branch office
 Catalog
mail order
Indirect Channels of Distribution
 Direct
to retailer
 Through
wholesaler to retailer
 Through
wholesaler to jobber to retailer
 Through
exporter to freight forwarder to
shipper to importer.....
Channel Behavior
 Power
 Conflict
• Horizontal
• Vertical
 Trust
Trends in Marketing Channel
Systems
 Vertical
Marketing Systems
• Corporate
• Contractual
• Administered
 Horizontal
Marketing Systems
 Multi-channel
Marketing Systems
Channel Design Decisions
 Types
of distributors
 Number
of distributors
• Intensive distribution
• Exclusive distribution
• Selective distribution
Alternative Evaluation Criteria
 Economic
 Control
 Adaptive
Channel Management Decisions
 Selecting
channel members
 Motivating
channel members
 Evaluating
channel members
Wholesalers and Retailers
 Mostly
business customers
 Larger
trade areas, larger transactions
 Less
resources to promotion, atmosphere
and location
 Regulations
and taxes
Why Direct Marketing?

Less shopping time

Costs of driving and lines

Toll free telephone numbers

Use of credit cards

Growth of computer power

Reduces high costs of reaching customers through sales
people

Allows sellers greater selectivity
Forms of Direct Marketing
 Direct
Mail
 Catalog
Marketing
 Telemarketing
 TV
Marketing
A Theory!
Transaction Cost Analysis
 Should
an activity be performed within the
organization by employees or should
the organization contract with an
external agent to perform the activity?
Distribution
Transaction Cost Analsysis 2
 Examples:
• Make or buy
• Direct salesperson or manufacturer's
representative
• In-house advertising or advertising agency
Transaction Cost Analysis 3
 Assumptions
• Humans are subject to bounded rationality
• Agents are given to opportunism
Factors Underlying
Decision to Integrate
 Asset
Specificity
 External
Uncertainty
• Supply Uncertainty
• Demand Uncertainty
 Frequency
of Transactions
What We Discussed Today
 Distribution
channels
• What are their functions?
• How are they organized?
 Distribution
channel decisions
• Design decisions
• Management decisions