Download The Tourism Marketing Environment - Nelson Education

Chapter
7
DISTRIBUTION
Prepared by
Simon Hudson, Haskayne School of Business
University of Calgary
and
Marion Joppe, University of Guelph
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Topics
• two main types of distribution channels used in
tourism and hospitality
• key intermediaries involved in the tourism and
hospitality distribution system
• main forms of channel conflict and two main types of
channel organization
• the two major forms of vertically integrated
marketing system—alliances and franchises
• designing a distribution system and ensuring the
effective execution of the distribution strategy
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
The Distribution System
• Distribution system
– the “place” aspect of a company’s
marketing mix
– its purpose is to provide an adequate
framework for making a company’s
product or service available to the
consumer
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Needs and
Wants of
Channel
Members
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
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Nature and Types of Distribution
Channels
• Distribution channel
– a direct or indirect delivery arrangement
used by a supplier, carrier, or destination
marketing organization
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
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Direct and Indirect Distribution
Channels
• Direct distribution channel
– a channel through which a company
delivers its product to the consumer
without the outside assistance of any
independent intermediaries
• Indirect distribution channel
– a channel through which a company
distributes its product with the assistance
of independent intermediaries
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Types of
Distribution
Channels
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Distribution
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Functions of the Distribution
System
•
•
•
•
•
•
•
•
Acquiring information
Promotion
Contact
Matching
Negotiation
Physical distribution
Financing
Risk-taking
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Copyright © 2009 by Nelson, Education Limited.
Distribution
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Intermediaries
• Travel agents
– see profile on Jeannie Henke
– distribution and sales network
– reservations and ticketing
– information provision and travel
counselling
– design of individual itineraries
continued...
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Intermediaries
• Tour operators
• Convention/meeting planners and
corporate travel managers
• Travel specialists
• The Internet
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Distribution
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Intermediaries
Involved in
Online
Distribution of
Destination
Tourism
Products and
Services
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Channel Conflict and Organization
• Channel conflict
– conflict that occurs when one member of a
distribution channel perceives another to
be engaged in behaviour that prevents or
hinders the first member from achieving
its goals
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Forms of Channel Conflict
• Horizontal conflict
– conflict between organizations at the
same level of the distribution channel
• Example: two Tim Hortons franchises
• Vertical conflict
– occurs at different levels of the same
channel and is more common
• Example: argument between travel agents and
airlines over the cutting of base commissions
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Channel Organization
• Two main types:
– The conventional marketing system
– The vertically integrated marketing system
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Channel Organization
• Conventional Marketing System
– a distribution system that consists of a
loose collection of independent
organizations, each of which tries to
maximize its own success
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Conventional Marketing System
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Distribution
Chapter
7
Channel Organization
• Vertical marketing system
– a system in which all members of the
distribution channel work together as a
unified whole
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Distribution
Chapter
7
Vertically Integrated Marketing
System
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
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Advantages of VMS over CMS
• Allows economies of scale
– entire chain is able to produce goods or
services less expensively than
competitors due to economies of scale
• Makes managing conflict easier
– just one member dominates the channel
– leader has authority to punish channel
members that are creating conflict and to
resolve such situations
continued...
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Advantages of VMS over CMS
• Eliminates duplication
– allows all duplicated duties to be
eliminated
• Levers bargaining power
– gives the system and its members more
power to bargain than when channel
members work individually
• Creates shared goals
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Channel Organization
• Two main forms of VMS
– Alliance
– Franchise
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Channel Organization
• Alliance
– formed when two or more organizations
combine resources through a contractual
agreement
– allows them to overcome each other’s
weaknesses by benefiting from one
another’s strengths.
• Examples: Tourism Vancouver and Visa,
Conquest alliance with Skyservice
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Channel Organization
• Franchise
– businesses that are established when a
franchiser grants a franchisee the right to
engage in offering, selling, or distributing
its goods or services under its marketing
format
– franchisee will pay a fee to purchase a
full-service franchise, as well as paying an
annual percentage of sales
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Distribution
Chapter
7
Designing the Distribution System
• Three distribution strategies
– Intensive
– Exclusive
– Selective
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Designing the Distribution System
• Intensive
– strategy in which an organization
maximizes the exposure of its travel
services by distributing through all
available outlets or intermediaries
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Designing the Distribution System
• Exclusive
– strategy in which an organization
deliberately restricts the number of
channels that it uses to distribute its
product or service to its customers; an
effective method for marketing prestige
products
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Designing the Distribution System
• Selective
– strategy between intensive and exclusive
distribution, in which a company uses
more than one but less than all of the
possible distribution channels
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Designing the Distribution System
• Factors to Consider
– Market coverage
– Costs
– Positioning and image
– Motivation of intermediaries
– Characteristics of the tourism organization
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Copyright © 2009 by Nelson, Education Limited.
Distribution
Chapter
7
Distribution Channel Management
• Channel Management
– Involves:
• Selecting channel members
• Motivating channel members
• Evaluating channel members
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Copyright © 2009 by Nelson, Education Limited.