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week 8- 11.08.04 Distribution and Retailing Issues 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 Discrepancy of Quantity The difference between the amount of product produced and the amount an end user wants to buy. Discrepancy of Assortment The lack of all the items a customer needs to receive full satisfaction from a product or products. Overcoming Discrepancies Temporal Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. Spatial Discrepancy The difference between the location of a producer and the location of widely scattered markets. Number of Channel Levels Producer and Final Consumer in channel Flows between channel levels Product - Ownership -Payment Information – Promotion Direct Marketing Channel Company sells directly to consumers Indirect Marketing Channels Company sells through one or more intermediaries More levels increase number of contacts, less control & more complex Channels for Consumer Products Direct Channel Producer Retailer Channel Producer Wholesaler Agent/Broker Channel Channel Producer Producer Agents or Brokers Consumers Wholesalers Wholesalers Retailers Retailers Retailers Consumers Consumers Consumers Hybrid Marketing Channel Catalogues, telephone Consumer segment 1 Retailers Consumer segment 2 Dealers Business segment 1 Producer Distributors Sales force Business segment 2 Channel Intermediaries Retailers Take Title to Goods Merchant Wholesalers Take Title to Goods Agents and Brokers Do NOT Take Title to Goods Conventional versus Vertical & Horizontal Marketing Channel Conventional marketing channel Man1 Man2 Manufacturer Wholesaler Wholesaler Wholesaler Manufacturer Horizontal marketing Vertical marketing system system Retailer Retailer Retailer Consumer Consumer Consumer 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 Conflict Between members at same channel level Vertical Conflict Between different levels in same channel Keys to Overall Performance Each member’s role clear and specified Strong 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 Level Objective Number of Intermediaries Intensive Achieve mass market selling. Convenience goods. Many Selective Work with selected intermediaries. Shopping and some specialty goods. Several Exclusive Work with single intermediary. Specialty goods and industrial equipment. One Market Factors Customer Profiles Consumer or Industrial Customer Market Factors That Affect Channel Choices Size of Market Geographic Location Product Factors Product Complexity Product Price Product Factors That Affect Channel Choices Product Life Cycle Product Delicacy Producer Factors Producer Resources Number of Product Lines Producer Factors That Affect Channel Choices Desire for Channel Control Channel Management: selecting channel members What makes the best? Years in business Other lines carried Growth and profit Cooperation & reputation Sales force size & quality Retail customers, location and growth potential Physical Distribution & Logistics Management Major impact on: Customer satisfaction Operating costs Handle - store - move products and services Right product Right customer Right place and time On Line http://www.walmartstores.com Electronic Data Interchange Information technology that replaces paper documents that accompany business transactions. Criteria for Ranking Modes of Transportation Lowest Highest Relative Cost Transit Time Air Truck Rail Pipe Water Water Rail Pipe Truck Air Reliability Pipe Truck Rail Air Water Capability Water Rail Truck Air Pipe Accessibility Truck Rail Air Water Pipe Traceability Air Truck Rail Water Pipe RETAILING All activities in selling goods and services directly to final consumers for personal, nonbusiness use. Most via retail stores Non-store growing fast Retailing Retailers Are Classified By: Amount of service Product lines Relative prices Organizational approach Self-service retailers Customers are willing to selfserve 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 Retailing Retailers Are Classified By: 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 Retailing Retailers Are Classified By: 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 Retailing Retailers Are Classified By: 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) Target Market and Positioning Define target markets and Select positioning Variety? Depth of assortment? Convenience? Low prices? Presentation of the Retail Store Employee Type & Density Merchandise Type & Density Fixture Type & Density Factors in Creating Store’s Atmosphere Sound Odors Visual Factors Factors to Consider in Site Selection Economic growth potential Area competition Geography Non-Store Retailing Growing much faster than store retailing a third of all sales by 2005 Direct Marketing Direct Selling Automatic Vending The Future of Retailing New forms and shorter lifecycles Non-store types growing Growth of mega-retailers Rising role of technology Global expansion Stores as “hangouts”
