Professional Documents
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Distribution PPT (Anil Bhat)
Distribution PPT (Anil Bhat)
1
A channel of distribution
comprises a set of institutions
which perform all of the
activities utilized to move a
product and its title from
production to consumption
2
Physical distribution is…
Organizing and moving products through
the channels
Place UTILITY
Location – having the product where customers can buy it
Time UTILITY
Having the product available when the customer
wants/needs it
4
Length of Channel
Channel length = number of levels in a distribution
channel.
Agent
Wholesaler Wholesaler
6
Adding Value through Distribution
7
CHANNEL FUNCTIONS
• Information
• Promotion
• Contact
• Matching
• Negotiation
• physical distribution
• Financing
• Risk taking
8
CHANNEL FUNCTIONS (cont.)
• Providing marketing information:
– Companies rely on market research to
determine their target markets’ needs and
wants
• Promoting products:
– Can be expensive
– Retailers often take a large portion of
promotion responsibilities
• Ex: local supermarkets/discount stores
9
CHANNEL FUNCTIONS (cont.)
• Contact
• Matching
• Negotiating with the customers:
– Different prices are paid by the wholesaler, retailer and
consumers based on negotiation
• Physical distribution
• Financing and risk taking:
– Moving products through a channel costs money
– When channel members work together to finance activities
and to assume financial risks, channels will be more effective
10
Today’s system of exchange
Promotion
Contact
Negotiation
Users
Financing
Packaging
Money
Goods
11
Explain key channel tasks
• Marketing
• Packaging
• Financing
• Storage
• Delivery
• Merchandising
• Personal selling
12
Explain key channel tasks (cont.)
• Providing marketing information
– Rely on market research to determine their target markets’
needs and wants
• Promoting products
– Costs and responsibilities can be shared
• Negotiating with customers
– Offering to deliver and install products
• Reducing discrepancies
– Selling large quantities of products to wholesalers and
retailers
• Financing and risk-taking
– Work together to finance activities to become more
effective
13
Tasks of Intermediaries -
Wholesalers
• Break down ‘bulk’
• Buys from producers and sell small quantities to
retailers
• Provides storage facilities
• Reduces contact cost between producer and
consumer
• Wholesaler takes some of the marketing
responsibility e.g sales force, promotions
14
Tasks of Intermediaries -
Retailer
• Much stronger personal relationship with
the consumer
• Hold a variety of products
• Offer consumers credit
• Promote and merchandise products
• Price the final product
• Build retailer ‘brand’ in the high street
15
Tasks of Intermediaries -
Internet
• Sell to a geographically disperse market
• Able to target and focus on specific segments
• Relatively low set-up costs
• Use of e-commerce technology (for payment,
shopping software, etc)
• Paradigm shift in commerce and consumption
16
Tasks of a Logistics Manager
• plans the flow of materials in a
manufacturing organization (beginning
with raw materials and ending with
delivery of finished products to channel
intermediaries or end customers) and
coordinates the work of departments
involved in the process, such as
procurement, transportation,
manufacturing, finance, legal, and
marketing.
17
Describe when a channel will be
most effective
The channel must be properly
managed
Recognize the importance of their task
and make informed decisions
Each member is assigned tasks it can
do best
18
Describe when a channel will be most
effective (cont.)
Channel members share a common
goal
Commitment to quality of the product
Satisfying the target market’s needs and
wants
All members cooperate to attain overall
channel goals
20
Distinguish between
horizontal and vertical conflict (cont.)
21
CHANNEL MANAGEMENT
DECISIONS
25
1. Selecting Channel Members (cont.)
Selecting intermediaries that are sales agents
involves evaluating
26
1. Selecting Channel Members (cont.)
• Market segment - must know the specific segment
and target customer
• Store locations
• Growth potential
27
2. Managing Channel Members
28
2. Managing Channel Members (cont.)
29
3. Motivating Channel Members
• Develop a cooperative/collaborative and balanced
relationship with the partner
• Understand the partner’s customers – their needs, wants, and
demands
• Understand the partner’s business – operationally and
financially and what’s really important to them
• Look at the partner’s needs in terms of customer support,
technical support, and training
• Establish clear and agreed upon expectations and goals
• Develop recognition programs focusing on the partner’s
contributions
• Build internal support systems and dedicate resources to the
partner
30
3. Motivating Channel Members (cont.)
31
4. Evaluating Channel Members
• What is working?
– Multiple channels
– Involvement in e-commerce
35
1. Multiple Channels
• Some products meet the needs of both
industrial and consumer markets.
• Eg. A Snack Company may sells its Namkeen,
drinks and cookies using multiple channels to:
– Supermarkets
– Movie Theaters
– Stadiums
– Schools
– Hospitals
36
2. Control vs. Costs
• All manufacturers and producers must
weigh the control they want to keep over
the distribution of their products against
the costs and profitability.
– Direct sales force – company employees are
expensive with payroll, benefits, expenses;
may set sales quotas and easily monitor
performance
– Agents – work independently, running their
own businesses; less expensive = less
control; agents sell product lines that make
them more money 37
Management’s Desire for
Control of Distribution
• In general, the shorter the channel structure, the
higher the degree of control, and vice versa.
38
3. Distribution Intensity
• = how widely a product will be distributed;
marketers want to achieve the ideal market
exposure; determining distribution patterns.
Achieve ideal market exposure (make
their product available without over
exposing and losing money)
To achieve market exposure, marketers
must determine distribution intensity
39
Distribution Intensity
– Exclusive Distribution
– Selective Distribution
– Intensive Distribution
– Integrated Distribution
40
Intensity of Channel Structure
• Channel intensity: the number of intermediaries at
each level of the marketing channel.
41
Intensive Distribution
• = the use of all suitable outlets to sell a product.
42
Selective Distribution
• = a limited number of outlets in a given geographical area
are used to sell the product.
44
Integrated Distribution
Manufacturer acts as wholesaler and retailer
for its own products.
45
Dual distribution
• A manufacturer may sell its products
through multiple outlets at the same time:
46
4. Involvement in E-commerce
• = means by which products are sold to
customers and industrial buyers through the
Internet.
• Consumers have also become accustomed to
buying products online.
• one-stop shopping and substantial savings for
industrial buyers.
• E-marketplaces provide smaller businesses with
the exposure that they could not get elsewhere
47
Channel Design Decisions
• Channel design/structure = form or shape
that a marketing channel takes to perform
the tasks necessary to make products
available to consumers.
48
Channel Design Decisions (cont.)
• Analyzing consumer needs
50
Length of Channel
• Channel length = number of levels in a distribution
channel.
Agent
Wholesaler Wholesaler
52
Determinants of Channel Structure
1. The distribution tasks that need to be performed
54
Discuss the relationship between
the product being distributed
and the pattern of distribution it
uses
• Consumer Good
• Consumer Service
• Industrial Good
• Industrial Service
55
OBJECTIVE TWO:
Explain the relationship between
customer service and channel
management
56
Explain how customer service
facilitates order processing
• Ensures timely delivery of products
• Effective communication is important
– Order processing
• Correct shipping information
• Correct products
• Handling complaints
• Reducing the probability of complaints
• Nice and friendly people
57
Identify actions that customer service
can take to facilitate order processing
58
Call Customer Online
Center Order
Warehouse
Actions to
Facilitate
Order
Processing Inventory
Check
60
Use of Technology in Distribution
Tracking of package
Bar coding on package
Package scanned at transition points in
distribution chain
Customer uses internet to follow package along
distribution chain; e-mail may be used
Global distribution: in some countries the postal
service is not reliable; package tracking
facilitates global trade
62
Use of Technology in Distribution (cont.)
Problems
Cost of technology
63
64