MARKETING CHANNELS / DISTRIBUTION MANAGEMENT

Work of a Marketing Channel

● The work of the marketing channel includes the performance of several marketing flows.
● Flows – emphasize that these processes often flow through the channel, being done at different
points in time by different channel members
ADVANTAGES OF USING INTERMEDIARIES

● Choosing the right distribution channel for your products is vital to the success of your business
● An intermediary acts as a link between the manufacturer and the consumer
● Provide Logistic support
● Provide Transactional Functions
● Burden Sharing, Cost and Time Saving
● Adversely Affect Revenue and Communication Control

DISADVANTAGES OF USING INTERMEDIARIES

● Revenue Loss
● Loss of Communication Control
● Loss of Product Importance
Logistics

Supply chain-physical distribution

LOGISTICS

● Is the planning, implementing and controlling the physical flows of materials and final goods
from origin to points of use to meet customers’ needs of a profit
● Make products available to customers
● Is the right amount of the right products to the right place at the right time

Most important person in the business are CUSTOMERS

GOALS OF THE LOGISTICS SYSTEM

● Increased efficiency
o Efficient transportation cost
o Improve warehouse solutions
● Improved customer service
o Delivery of goods is on time and in good condition
 o Established friendly policy on return of items
● Increased sales
o Cost-effective transport coast to encourage bulk orders
● Improved relationships
o Efficient collaboration between carrier and retailer

MAJOR LOGISTICS FUNCTIONS

o Order processing
⮚ Lies in relationship with order cycle time- the time between when an order is placed and
when it is received by the customer
o Inventory Control
⮚ Any firm’s attempt to hold the lowest level of inventory that will still enable to meet the
customer demand
⮚ Two conflicting objectives is to maintain low inventory but at the same time place
orders at a maximum level in order on ordering coast
Economic Order Quantity (EOQ)- occurs at the point at which total costs plus ordering costs are
lowest. A trade off has to be made between costs to find the optimum levels for both.
o Materials Handling
⮚ Encompasses the range of activities and equipment involved in the placement and
movement of products in storage areas
⮚ Issues that must be addressed when designing materials handling systems include how
to minimize the distances products are moved within warehouse during receiving,
storage and shipping.
o Warehousing
⮚ Storage component of a logistics system is concerned with holding of products until they
are ready to be sold
⮚ Warehousing can be one of the more complex components of a logistics system
MOST BASIC DECISION IN WAREHOUSING
● Location
● The size of units
● Number of warehouse units
● The design of units, including layout and internal systems
● Questions of ownership
MORE
● Product search
● Unloading and acceptance of goods
● Address storage
● Goods movement
● Goods inventory
o Transportation
Is the most fundamental and necessary component of any logistics system

INTEGRATED LOGISTICS

Process of anticipating customer needs and wants

Acquiring the capital, materials, people, technologies and information necessary to meet those needs
and wants

Optimizing the goods-or-services producing a network to fulfill customer requests

Utilizing the network to fulfill customer request in a timely way

MARKETING CHANNEL

Social system

● The system generated by any process of interaction on the sociocultural level between two or
more actors

Firms/agencies =interact as members of the marketing channel =interorganizational social system

Fundamental behavioral dimensions present: power, conflict, role and communication

CONFLICT IN THE MARKETING CHANNEL

● Exists when a member of the marketing channel perceives that another member’s action
impede the attainment of his/her goals
● A state of conflict may exist when two/more components of any given system of action e.g
channel of distribution

CONFLICT VS COMPETITION

COMPETITION CONFLICT

Behavior that is object-cented,indirect and Behavior that is direct, personal and opponent-
impersonal centered

CAUSES OF CHANNEL CONFLICT

CAUSES DESCRIPTION EXAMPLE

Role Incongruities If any players deviate from a Role of franchisor or franchisee

given role in pricing decisions

Resources Scarcities Stems from disagreement over Supply of manufacturer to

allocation of resources needed house accounts
to achieve their respective goals

Perceptual Differences Various channel members may Different points of view to point
perceive the same stimuli but of purchase display
attach different interpretations

Expectational Differences Forecasts of behavior may be Not clear on who does not
inaccurate

Decision Domain Decision domain are “are up for Who decides on retail prices
 Disagreements grabs” in loosely aligned manufacturer or retailer
channels comprised of different
firms(have different decisions
making)

Goal Incompatibilities When goals are incompatible One firm may be after of profit,
from the beginning, conflict while the other is more
happens (have different goals) concerned on market reach

Communication Difficulties Foul up or breakdown in Coordination of timing of

communication(communication) deliveries

EFFECTS OF CHANNEL CONFLICT

CHANNEL EFFICIENCY

● The greater the degree of optimization of inputs in carrying out a distribution objective, the
higher the efficiency and vice versa.

EFFECT DESCRIPTION EXAMPLE

Negative Effect-Reduces The higher the level of conflict, More problems to block the
Efficiency the lower the level of channel achievement of goals/objectives
efficiency can get

No Effect- Efficiency The effect of conflict on input

levels necessary to achieve
distribution objectives is
insignificant

This exist in channels that are

characterized by a high level of
dependency and commitment
among the channel members

Positive Effect-Efficiency Conflict causes increase in Conflict parties may improve

Increased channel efficiency methods and achieve objectives

MANAGING CHANNEL CONFLICT

DETECTING CHANNEL CONFLICT

Suggested Ways:

● Surveying other channel member perception of his/her performance

● Marketing channel audit
 o Uncover potential conflict between channel members
o Suggest a periodic and regular evaluation of key area
o Appraising various ways of relationship
● Distribution advisory councils/channel members committees
o Composed of key people of channel members
o Meets regularly on several matters which cover potential areas of conflict issues
that might otherwise go unnoticed

RESOLVING CONFLICT

Suggest Ways:

● Channel-Wide Committee
o Established for periodic evaluations problem related to conflict
● Joint Goal Setting
o The committee could help mitigate the effects of conflict
● Creation of Distribution Executive
o This individual would be responsible for exploring the firms distribution related
problems