Distribution

1
Distribution

• Professor Charles D. Schewe

2
The Nature of Distribution

• Time and Place Utility

• A Broadened View of Distribution

3
Intermediaries

• Types and Roles

4
What is Retailing?

• All the activities involved in selling goods or
  services directly to final consumers for their
  personal, nonbusiness use.

• Retailers - businesses whose sales come
  primarily
• from retailing.

• Retailers can be classified as
• Store retailers such as Home Depot, Sears,
  Walmart.
• Nonstore retailers such as the mail,
  telephone, and Internet.

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What is Wholesaling?

• All the activities involved in selling goods and
  services to those buying for resale or business
  use.
• Wholesaler - those firms engaged primarily in
  wholesaling activity.

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Types of Wholesalers
Brokers/ Agents They Dont Take Title to the
Goods, and They Perform Only a Few Functions.
Merchant Wholesaler Independently Owned
Business that Takes Title to the Merchandise
it Handles.
Manufacturers Sales Branches and
Offices Wholesaling by Sellers or Buyers
Themselves Rather Than Through Independent Wholes
alers.
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Why are Marketing IntermediariesUsed?

• Greater efficiency in making goods available to
  target markets.

• Offer the firm more than it can achieve on its
  
• own through the intermediaries
• Contacts,
• Experience,
• Specialization,
• Scale of operation.

• Match supply and demand.

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Solving the Assortment Problem

• Reducing Transactions

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How a Distributor Reduces theNumber of Channel
Transactions
1
2
3
4
A. Number of contacts without a distributor M x
C 3 X 3 9
5
6
7
8
9
Manufacturer
Customer
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How a Distributor Reduces theNumber of Channel
Transactions
Distributor
Manufacturer
Customer
11
Solving the Assortment Problem

• Reducing Transactions
• Principle of Proximity
• Principle of Massed Reserves

12
The Channel of Distribution
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What is a Distribution Channel?

• A set of interdependent organizations
  (intermediaries) involved in the process of
  making a product or service available for use or
  consumption by the consumer or business user.

• Marketing Channel decisions are among the
• most important decisions that management
• faces and will directly affect every other
• marketing decision.

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Distribution Channel Functions
Information
Transfer
Communication
Payments
Negotiation
Physical Distribution
Ordering
Risk Taking
Financing
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The Channel of Distribution

• Long Versus Short Channels

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Consumer Marketing Channels
Manufacturer
0-level channel
Manufacturer
Retailer
Consumer
1-level channel
?
Mfg
2-level channel
Mfg
3-level channel
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Industrial Marketing Channels
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Designing a Distribution Strategy

• Strategic Criteria

• Market Coverage

• Channel Control

• Costs

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Intensity of Distribution

• Intensive

• Selective

• Exclusive

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Factors Affecting Channel Length

• Market Factors

• Number of Potential Exchanges

• Expected Size of the Exchange

• Geographic Concentration of the Market

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Factors Affecting Channel Length

• Marketing Mix Factors

• Unit Price

• Perishability

• Width of Product Line

• Technical, Specialized, or Customized Products

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Factors Affecting Channel Length

• Organizational Factors

• Number of Other Products or Lines

• Financial Resources

• Control Desired

• Management Skill

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Selecting
Channel Management Decisions
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Selecting Channel Members

• Location

• Provide Services and Management Skills

• Promotional Skills

• Competitive Product Lines

• Cooperative Attitude

• Length of Time in Business

• Image and Reputation

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Channel Management
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Channel Behavior Conflict

• The channel will be most effective when

• each member is assigned tasks it can do best.

• all members cooperate to attain overall channel
• goals and satisfy the target market.

• When this doesnt happen, conflict occurs

• Horizontal Conflict occurs among firms at the
  same
• level of the channel.

• Vertical Conflict occurs between different
• levels of the same channel.

• For the channel to perform well, conflict must
  be managed.

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Channel Conflict

• Vertical Conflict
• Horizontal Conflict

• The Nature of Expectations

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Sources of Potential Conflict

• Manufacturers Can Help Intermediaries by

• Providing a Desirable Assortment of Products

• Building Consumer Demand for These Products

• Furnishing Promotional Assistance

• Honoring Warranties

• Providing Repair and Installation Services

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Sources of Potential Conflict

• Intermediaries Are Expected to Increase Sales by

• Carrying Adequate Inventory Stocks

• Providing Effective Displays and Doing
  Advertising

• Providing Services to Customers
• Credit, Delivery, Installation

• Honoring Product Warranty Conditions

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Reducing Conflict

• Channel Captaincy

• Vertical Marketing Systems

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Corporate Common Ownership at Different Levels
of the Channel
Types of Vertical Marketing Systems
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Conventional Distribution Channel vs. Vertical
Marketing Systems
Vertical marketing channel
Conventional marketing channel
Manufacturer
Manufacturer
Wholesaler
Retailer
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Vertical Marketing Systems
Vertical Marketing Systems (VMS)
Administered VMS
Contractual VMS
Corporate VMS
Franchise Organizations
Wholesaler Sponsored Voluntary Chain
Retailer Cooperatives
Manufacturer- Sponsored Retailer Franchise System
Service-Firm- Sponsored Franchise System
Manufacturer- Sponsored Wholesaler Franchise
System
34
Reducing Conflict

• Vertical Marketing Systems
• Corporate - Ownership
• Administered Economic Power
• Contractual
• Wholesaler-Sponsored Chain
• Retailer Owned Cooperative
• Franchise Systems

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Nature and Importance of MarketingLogistics

• Involves getting the right product to the right
  customers in the right place at the right time.
• Companies today place greater emphasis on
  logistics because
• customer service and satisfaction have become the
  cornerstone of marketing strategy.
• logistics is a major cost element for most
  companies.
• the explosion in product variety has created a
  need for improved logistics management.
• information technology has created opportunities
  for major gains in distribution efficiency.

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Goals of the Logistics System

• Provide a Targeted Level of Customer Service at
  the Least Cost.
• Maximize Profits, Not Sales.

Higher Distribution Costs/ Higher Customer
Service Levels
Lower Distribution Costs/ Lower Customer Service
Levels
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Logistics Systems
Order Processing Submitted Processed Shipped
Costs Minimize Costs of Attaining
Logistics Objectives
Logistics Functions
Warehousing Storage Distribution
Inventory When to order How much to
order Just-in-time
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Transportation Modes
39
Checklist for Choosing
Transportation Modes
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Rating Transportation Modes
Speed Dependability Capability
Availability Cost
Rail 3 4 2 2 3 Water 4 5 1 4 1 T
ruck 2 2 3 1 4 Pipeline 5 1 5 5 2 Air 1
3 4 3 5
(Door-to- door delivery time)
(Meeting Schedules on Time)
(Ability to Handle Various Products)
(No. of Geographic Points Served)
(Per Ton- Mile)
Source See Carl M. Guelzo Introduction to
Logistics Management Englewood Cliffs,
NJ Prentice Hall, 1986), p. 46.