Download Channels of distribution

Marketing Strategy Planning Process
Narrowing down to focused strategy with quantitative and qualitative screening criteria
Customers
Needs and other
Segmenting
Dimensions
Company
Mission, Objectives,
& Resources
Targeting &
Segmentation
S.
W.
O.
T.
Positioning &
Differentiation
Competitors
Current &
Prospective
External Market Environment
Technology Political & Legal Social & Cultural
Economic
Strategy Planning for Distribution
Channels of
distribution
Any series of firms or
individuals who participate in
the flow of products from
producer to final user or
consumer
Two different
perspectives
Strategy Planning for Distribution
Any series of firms or
individuals who participate in
the flow of products from
producer to final user or
consumer
Channels of
distribution
Two different
perspectives
Transporting, storing, and
handling of goods to match target
customer needs and a firm’s
marketing mix--both within
individual firms and along a
channel of distribution
Logistics
(Physical distribution)
Major Strategy Planning Decisions for Place
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Distribution availability goals
Ideal market exposure level
Distribution customer service level
Channel type (direct, indirect)
Who manages the overall channel
How to manage transportation,
storage and materials handling
Kinds of middlemen
Market Exposure
Intensive
Market
Exposure
Strategies
= number of
outlets
Market Exposure
Intensive
Market
Exposure
Strategies
Exclusive
= number of
outlets
Market Exposure
Intensive
Market
Exposure
Strategies
Selective
Exclusive
= number of
outlets
Costs ($)
Customer Service and Costs Tradeoffs
Lost Sales
0
0
90%
Customer Service Level
Customer Service and Costs Tradeoffs
Costs ($)
Total Cost
of PD
Lost Sales
It is usually more expensive to
provide higher service levels...
0
0
90%
Customer Service Level
Customer Service and Physical Distribution
Examples of How Information Tech Helps Improve
Coordination in PD Channel Systems
Continuously
Updated
Information
Areas Where Systems
Computers
Help PD
Service
Examples of How Information Tech Helps Improve
Coordination in PD Channel Systems
Continuously
Updated
Information
Areas Where Systems
Computers
Help PD
Service
Electronic
Data
Interchange
Examples of How Information Tech Helps Improve
Coordination in PD Channel Systems
ContinJust-inuously
Time
Updated
Inventory
Information
Areas Where Systems
Computers
Help PD
Service
Electronic
Data
Interchange
Channel Structure Options
?
Channel
Choices
?
Direct
?
Dual
Indirect
?
Dual Distribution
Why a Firm May Want to Use Direct Channels
Greater Control
Lower Cost
Value Added Subsequent to
Production Process
Direct Contact with
Customer Needs
Some
Reasons
for Choosing
Direct Channels
Quicker Response or
Change in Marketing Mix
Suitable Middlemen Not
Available
Direct-to-Customer May Not Be Easy or Right
Manufacturers
Consumers
Make and ship
large quantities
Want small quantities
Have narrow assortments
Want wide assortments
Space
Time
Information
Ownership
Values
Regrouping Activities
Dealing with discrepancies of quantity and
assortment may require regrouping activities
Accumulating
Sorting
BulkBreaking
Assorting
General Types of Wholesalers
Does wholesaler own
the products?
Yes (merchant wholesaler)
No (agent middleman)
How many functions
does the wholesaler
provide?
Some
functions
All the functions
Service
merchant
wholesalers
Limited-function
merchant
Wholesalers
Agent middlemen
Types of Merchant Wholesalers
Rack Jobbers
Producers’
Cooperative
Mail-Order
General
Merchandise
Types
of
Merchant
Wholesalers
Truck
Single- or
General-Line
Specialty
Cash-and-Carry
Drop-Shippers
Types of Merchant Wholesalers
Rack Jobbers
Producers’
Cooperative
Mail-Order
General
Merchandise
Types
of
Merchant
Wholesalers
Truck
Single- or
General-Line
Specialty
Cash-and-Carry
Drop-Shippers
Agent Middlemen
Manufacturers’
Agent
Auction
Houses
Brokers
Types of
Agent
Middlemen
Commission
Merchants
Selling
Agents
Agent Middlemen
Manufacturers’
Agent
Auction
Houses
Brokers
Types of
Agent
Middlemen
Commission
Merchants
Selling
Agents
Types of Retailers
Conventional
Offerings
Singleand
Limitedline
Stores
Expanded
Assortment
and Service
Specialty Shops and
Department Stores
Expanded
Assortment
and/or Reduced
Margins/Service
Supermarkets, Discount
Houses, MassMerchandisers,
Catalog Showrooms,
Superstores
Added
Convenience
Higher Margins
Less Assortment
Telephone/Mail Order
Vending Machines
Door-to-Door
Convenience Stores
Electronic Shopping
Ways Retailers Try to Get Scale Economies
Corporate
Chains
Retailers
wanting economies
of scale
Ways Retailers Try to Get Scale Economies
Corporate
Chains
Franchise
Operations
Retailers
wanting economies
of scale
Ways Retailers Try to Get Scale Economies
Corporate
Chains
Franchise
Operations
Retailers
wanting economies
of scale
Voluntary
Chains
Cooperative
Chains
Characteristics of Traditional and Vertical Marketing Systems
Type of Channel
Characteristics
Traditional
Amount of
Cooperation
Little or
None
Control
Maintained By
“Market”
Characteristics of Traditional and Vertical Marketing Systems
Type of Channel
Vertical Marketing Systems
Characteristics
Amount of
Cooperation
Control
Maintained By
Traditional
Administered
Little or
None
Some to
Good
“Market”
Economic
Power and
Leadership
An Administered Channel System
Characteristics of Traditional and Vertical Marketing Systems
Type of Channel
Vertical Marketing Systems
Characteristics
Amount of
Cooperation
Control
Maintained By
Traditional
Administered
Contractual
Little or
None
Some to
Good
Fairly Good
to Good
“Market”
Economic
Power and
Leadership
Contracts
An Example of a Contractual System
Characteristics of Traditional and Vertical Marketing Systems
Type of Channel
Vertical Marketing Systems
Characteristics
Amount of
Cooperation
Control
Maintained By
Traditional
Administered
Contractual
Corporate
Little or
None
Some to
Good
Fairly Good
to Good
Complete
“Market”
Economic
Power and
Leadership
Contracts
Ownership
by One
Company
Vertical Marketing Systems May Require a “Channel Captain”
Channel captain
takes the lead
Managing channel
conflict
Focus on common
objectives
Choose channels
well
Common product-market
commitment
The Transporting Function
Rail
Truck
Modes
of
Transportation
Air
Pipeline
Water
The Storing Function (Goods, not Services)
Price Stability
Flexibility
Costs
Specialized Function
Marketing Strategy Planning Process
Narrowing down to focused strategy with quantitative and qualitative screening criteria
Customers
Needs and other
Segmenting
Dimensions
Company
Mission, Objectives,
& Resources
Targeting &
Segmentation
S.
W.
O.
T.
Positioning &
Differentiation
Competitors
Current &
Prospective
External Market Environment
Technology Political & Legal Social & Cultural
Economic