Download Product and Service Decisions Individual Product and Service

Distribution Channel
• Distribution role within a marketing mix is getting the product to
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Target Market
A middlemen is a business that renders services related directly to
sale/purchase of a product as it moves from producer to consumer.
Normally middlemen are classified on the basis of whether they own
/take title of products being distributed or not.
Merchant middlemen take title of product ( Wholesalers & retailers )
Agent middlemen never actually own the product but do arrange
the transfer of title. Real estate brokers, manufacturers agents
,travel agents.
Factors affecting choice of channel
Market Considerations
• Type of Market.
Reaching ultimate consumers & business users may be different
depending upon their individual characteristics. Wholesaler may be
for business & retailer for ultimate consumer.
Number of potential customers:
For few customers company sales might be used, may be for business
users. More middlemen to reach big number of customers.
Geographic concentration of Market:
Direct sale or lesser no. of middlemen for concentrated market
More channels for dispersed customer base.
Order Size:
Direct sales to super markets to serve big orders & wholesalers to sell
to grocery stores
Product considerations
Unit Value:
Company can afford to sell caterpillar or nuclear
reactor directly to customer than to reach household
to sell ball point.
Perishability:
Quicker pershability requires direct or minimum
distribution channel.
Technical nature of product:
Technically complexed product may require company
sales force to explain product features & use to
business users.
Middlemen Considerations
• Services provided by middlemen:
Each producer should select middlemen offering services which
producer either can’t provide or can’t economically perform. Like
promotion & explaining product features to customers.
Availability of desired middlemen:
Producer’s desired middlemen may not be available so may choose
middlemen having distributed focus among different competing
brands.
Producer & Middlemen Policies:
A middlemen may accept products of a brand only after assurance
that the same brand will not be given to other middlemen
Credit dealing may also be a matter of choice.
Company Considerations
• Desire for Channel control:
• Some producers use lesser channel levels to have more control
over product performance in the market.
• Ability of Management:
Some producers lacking marketing expertise may completely rely on
middlemen for distribution & promotion of their products.
Financial resources:
A company with adequate finances may afford direct distribution
channel.
Selecting type of Channel
Distribution of Consumer Goods
• Producer ______Consumer
Producer______Retailers_______Consumers
Producer___Distributor Wholesalers____Retailers_____Consumers
Distribution of Business Goods
• Producer_____User ( For very highly priced goods )
• Producer_________Industrial distributor _________User
For small accessory equipment Printer cartridges
Distribution of Services
• Producer_____Consumer ( Haircut, weight losing councelling ).
• Producer_______Agent_________Consumer
• (Advertising / Entertainment )
A producer may use multiple channels to reach
different market segments
Intensity of Distribution
• Intensive Distribution :
• For convenience goods, making available at every retail store
• Selective :
• Selling to Few Middle men:
• May be due to better control over middlemen
• Exclusive:
• Selling through one distributor
Channel Management Decisions
• Selecting Channel Members
Producers vary in their ability to attract qualified
marketing intermediaries.
• Motivating Channel Members.
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The company must not sell through the intermediaries,
but to them.
Positive motivators may include higher margins,
cooperative adv. Allowance e.t.c.
In case of-non-compliance, threat to reduce margins &
delay in delivery may be used.
Channel Management Decisions
• Evaluating Channel Members.
The producer should monitor performance of
intermediaries against sales quota, average inventory
level, customer delivery time, treatment of damaged &
lost goods, cooperation in company promotion e.t.c
Horizontal Conflict
• Wholesaler with Wholesaler or Retailer with Retailer
Vertical Conflict
• Producer with Wholesaler
• Producer with Retailer
Conventional Marketing System
• It consists of one or more independent producer, wholesalers and
retailers.
• Each is separate business seeking to maximize its own profits, even
at the expense of profit for the system as a whole.
• No channel member has much control over the other members.
Vertical Marketing System (VMS)
• In contrast to conventional distribution channel, it consists of
producers , wholesalers & retailers acting as a unified system.
• How?
• One channel member owns the other or has contracts with them or
has so much power that they all cooperate.
Types of VMS
• Corporate VMS
Coordination & conflict management are attained through common
ownership at different levels of channels.
• Example:Owned by company
• Contractual VMS:
it consists of independent organizations at different levels of production &
distribution, which join together through contracts to obtain economies or
sales impact than each would do individually.
Coordination & conflict management are attained through legal agreements
Example : Franchise ( three types )
Types of Franchise
• Manufactured sponsored retailer franchise
system. ( Automobile )
• Manufactured sponsored wholesaler
franchise system.. ( Pepsi / Coca Cola )
• Service firm sponsored franchise
(Mcdonald’s )
Types of VMS
• Administered VMS:
• It coordinates successive stages of production &
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distribution not through common ownership or
contractual ties, but through the size & power of the
parties.
Manufacturers of top brands can obtain such cooperation