Distribution
(Ch. 17)
Henriette Griemann, Matthias Gruber, Nils Möstl,
Stefan Schwaha
Outline
•
Introduction
•
Functions of channel intermediaries
•
Types of distribution channel
•
Channel strategy
•
Channel management
•
Physical distribution
2
Introduction
•
Distribution: The PLACE – element of the marketing mix.
•
Channel intermediaries: Organizations that facilitate the distribution of
products to customers.
•
Channel of distribution: means by which product is moved from producer
to ultimate consumer.
•
The choice of the most effective channel of distribution is essential for
creating competitive advantage.
3
Functions of channel intermediaries
• Reconceiling the needs of producers and consumers
• Improving efficiency
• Improving accessibility
• Providing specialist services
4
Reconceiling the needs of producers and
consumers
MANUFACTURER
CONSUMER
•
large quantity
•
limited quantity
•
limited range of goods
•
wide range of goods
CHANNEL INTERMEDIARY
5
Improving efficiency
•
Channel intermediaries improve efficiency by
– reducing the number of transactions
– creating bulk for transportation
Source: Jobber, 2004, p. 636
P
C
P
P
C
P
P
C
P
C
I
C
C
Direct distribution:
Distribution via channel intermediary:
9 transactions
6 transactions
6
Improving accessibility
•
Channel intermediaries bridge
– time gaps and
– location gaps
between producers and consumers
Providing specialist services
•
Channel intermediaries can perform specialist customer services that
manufacturers may feel ill-equipped to provide themselves (e.g. selling,
servicing, installation)
7
Types of distribution channel
•
Consumer channels: distribution of consumer goods
•
Industrial channels: industrial goods; channels tend to be short
•
Service channells: usually short
8
Consumer Channels
Producer direct to consumer:
Producer
Consumer
Producer to retailer to consumer:
Producer
Retailer
Consumer
Retailer
Consumer
Producer to wholesaler to retailer to consumer:
Producer
Wholesaler
Producer to agent to wholesaler to retailer to consumer:
Producer
Agent
Wholesaler
Retailer
Consumer
9
Source: Jobber, 2004, p. 638
Industrial Channels
Producer to industrial customer:
Industrial
customer
Producer
Producer to agent to industrial consumer:
Producer
Industrial
customer
Agent
Producer to distributor to industrial customer:
Producer
Distributor
Industrial
customer
Producer to agent to distributor to industrial customer:
Producer
Agent
Distributor
Industrial
customer
10
Source: Jobber, 2004, p. 640
Services Channels
Service provider to consumer or industrial customer:
Consumer or
industrial
customer
Service
provider
Service provider to agent to consumer or industrial customer:
Service
provider
Agent
Consumer or
industrial
customer
Source: Jobber, 2004, p. 641
11
Channel selection
Distribution intensity
Channel strategy
Channel integration
Source: Jobber, 2004, p. 642
Channel selection
Market factors:
buyer behavoir; installation and technical assistance;
willingness of partner to market a product; location of
buyers
Producer factors:
resources of partner; product mix; control of channel
operations
Product factors:
large, complex, perishable, difficult to handle
Competitive factors: control of traditional channels of distribution
Distribution intensity
Intensive distribution:
using all available outlets; mass market
products, heavy competition e.g. beer,
cigarettes, chewing gum...
Selective distribution:
limited number of outlets; select only the
best; e.g. cameras, hi-fi equipment, personal
computers...
Exclusive distribution:
only one outlet in a geographic area, reduces
competition e.g. cars
Channel integration
Conventional marketing channels:
Benefits of specialization against lack of control
Administered vertical marketing system
e.g. Procter & Gamble
Franchising:
Shared resources and access to local knowledge against areas of potential conflict
Contractual vertical marketing system
e.g. Mc Donald‘s, car industry, Benetton
Channel ownership:
purchasing outlets; total control over distributor against high costs;
Corporate vertical marketing system
e.g. Pepsi purchased Pizza Hut
Channel management
-Once the key strategies have been made, effective implementation is required.
- A number of channel management issues must be addressed
Channel management
Selection
Æ sources
Æ criteria
Motivation
Æ motivators
Training
Æ reasons
Evaluation
Æ criteria
Managing conflict
Æ sources
Æ avoidance
Managing Conflict
Conflict betwenn independent channel members can occur from time to time.
Sources of channel conflict
Avoiding and resolving conflict
-differences in goals
-developing a pertnership approach
-differences in desired product line
-training in conflict handling:staff
-multible distribution channels
-market partitioning
-inadequacies in performance
-improving performance
-channel ownership
-coersion
17
Physical distribution
-Channel and physical distribution desicions are related
-One of the main points of marketing management attention because of it‘s great
potential for cost saving
Variables
-inventory levels
-forms of transport
Two main segments
1) Low service needs / high price
sensitivity
-bulk size
-reliability
-speed
2) High service needs / low price
sensitivity
-lead times
18
The physical distribution system
•
•
•
•
•
•
Customer service
Order processing
Inventory control
Warehousing
Transportation
Materials handling
19
The physical distribution system
•
Customer service:
costs of fulfilling customer service standards vs. extra customer
satisfaction
•
Order processing:
reducing time between a customer placing an order and receiving
the goods
•
Inventory control:
inventory decisions
20
The physical distribution system
•
Warehousing:
storing of goods between producing and transporting them
•
Transportation:
Rail, Road, Air, Water, Pipeline
•
Materials handling:
moving of products in the producer’s plant, warehouses and
transportation depots
21
Ethical issues in distribution
•
Slotting allowances
•
Grey markets
•
Exclusive dealing
•
Restrictions in supply
•
Fair trading
22
Thank you for your attention
Source used: Jobber, 2004, Chapter 17
23