Download Distribution Strategy

Dr. Close
CHANNELS & DISTRIBUTION
Introduction to Channels (1)
 Channel: firms handling goods between
production and consumption (Wal-Mart)
 Importance:
 Toughest “P” to change: expense (Sears)
 Functions: producers & consumers are far apart
(geographically & desires)
Introduction to Channels (2)
 Adjusting Discrepancies (also customers
generally do not want to shop separately)
 Middlemen: Discrepancies of quantity
 Producers make a lot of each item (examples??)
 Consumers want just a few (P&G: toothpaste)
 Middlemen: Discrepancies of Assortment
 Consumers want many types of items (examples??)
 Producers make a few types (Ford; diversity)
Introduction to Channels (3)
 How we change quantity & assortment:
regrouping activities
 Middlemen: Adjusting quantity
 Accumulating: collect products from many small
producers (shipping firm; farmer market; what else??)
 Bulk breaking: reducing quantity as products move to
consumer (autos)
Introduction to Channels (4)
 Middlemen: Adjusting assortment
 Sorting: group by grade quality (mutual funds;
agricultural products; bonds; what else??)
 Assorting: put items together in attractive offering
(K-Mart)
 Many other types of intermediaries
Marketing Intermediaries
 Middleman – independent link between producers and
consumers
 Merchant middleman – actually buys goods and takes
title/ownership
 Agent – business unit that negotiates purchases and sales
but does not take ownership
 Wholesaler – a merchant who primarily stores and handles
goods in large quantities
 Retailer – merchant middleman who sells to final consumers
 Broker – middleman who serves as a go-between for the
buyer and seller
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Marketing Intermediaries
 Manufacturer’s agent – an agent who operates by contract
serving a geographic territory
 Distributor – wholesale middleman in lines with selective or
exclusive distribution
 Jobber – a middleman who buys from manufacturers and
sells to retailers
 Facilitating agent – a firm that performs distribution tasks
other than buying, selling and transferring
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Channels & the Customer (1)
 Traditional: no cooperation
 Vertical marketing system
 Entire channel focuses on customer
 Over 60% of consumer products
 Any examples?
Vertical Marketing System
Types of Vertical Marketing Systems
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Channels & the Customer (2)
 Variations on vertical marketing system
 Corporate channel: AKA vertical integration
 Buy/create own channel members (Wal-Mart, Motorola)
 Adv: greater control
 Dis: need great skill
 Administration channel
 Informal agreement to cooperate
 Grocery store
 Ordering: restock
 Promotion: displays
Channels & the Customer (3)
 Variations on vertical marketing system (cont…)
 Contractual Channel: formal, written agreement to
cooperate (joint venture)
 Short term agreements also
possible (movies, cereals, and
what else??)
Outcomes (1)
 Goal: ideal market exposure – product available
enough to meet (not exceed) needs.
 Alternatives:
 Intensive (Candy, gum)
 Good available at all
suitable outlets
 Not necessarily all
 Adv: exposure
 Seen in growth and market maturity
Outcomes (2)
 Alternatives:
 Selective (Levi’s and what else??)
 Only “better” outlets (those giving push)
 Gaining relative to intensive (80-20 rule)
 Exclusive (fast food; Rolex; autos)
 One intermediary/area
 Expansion? (buy first, McDonald’s)
Channels of Distribution
Conventional Channels of Distribution of Consumer Goods
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Some Benefits of Wholesalers for
Various Channel Members
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Major Functions Performed in
Channels of Distribution
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Selecting Channels of Distribution
 In either the presence or the absence of a traditional
channel, a primary constraint is that of the availability
of various types of middlemen
 Selecting a channel of distribution can hinge on one of
these factors
 Distribution coverage required
 Degree of control desired
 Total distribution cost
 Channel flexibility
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Selecting Channels of Distribution
 Distribution coverage – Channel selection may
depend upon the nature of market coverage desired
 Intensive distribution – Using as many wholesalers and
retailers as possible
 Selective distribution – Using only the best available per
geographic area
 Exclusive distribution – Selected intermediaries are
given exclusive rights within a particular territory
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Selecting Channels of Distribution
 Degree of control desired – Achieved by the seller is
proportionate to the directness of channel
 Total distribution cost – Channel should be viewed as
a total system composed of interdependent
subsystems
 Objective should be to optimize total system
performance
 Generally assumed that the total system should be
designed to minimize costs, other things being equal
 Channel flexibility – Ability of the manufacturer to
adapt to changing conditions
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Franchising: An Alternative to Conventional
Channels of Distribution
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Franchising: An Alternative to Conventional
Channels of Distribution
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Store Retailing
 Mass merchandisers – Carry broad assortments of
goods and compete based on selection and price
 Specialty stores – Handle deep assortments in a
limited number of product categories
 Limited-line stores
 Single-line stores
 Category killers
 Convenience stores – Retailers whose primary
advantages are location convenience, close-in
parking, and easy entry and exit
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Non-Store Retailing
 Catalogs and direct mail
 Vending machines
 Television home shopping
 Direct sales
 Electronic exchange
 E-cart abandonment
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Annual Nonstore Retail Sales
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Electronic Commerce: Advantages and
Disadvantages for Marketers
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