Distribution Channel Decisions

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Chapter 13

• Distribution Channel Decisions

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Supply Chain

• The value delivery system that begins at the
  point of supply and ends at the point of
  consumption
• Raw materials
• Component parts
• Finished product
• Middlemen wholesalers/distributors retailers
• Final consumer

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Supply Chain Management

• Supply chain management
• Viewing the supply chain as a single entity
• Managing the supply chain in a way that maximizes
  the total value delivered

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Channels of distribution

• The part of the supply chain that focuses on
  making the product available to the customer.

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Are channel decisions important? Consider what
consumers pay.

• Specialty store price food item 10.00
• Retailer gross margin (50) 5.00
• Price to retailer 5.00
• Wholesaler gross margin (25) 1.25
• Selling price to wholesaler (revenue
• to manufacturer) 3.75
• Note what the consumer pays for
• distribution 62.5 of price paid!

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Are costs different in lower cost channels like
supermarkets?

• Supermarket price similar item 5.00
• Retailer gross margin (25) 1.25
• Price to retailer 3.75
• Food broker commission (3-5) .19
• Revenue to manufacturer 3.56
• More efficient, lower price, but the consumer
  still pays 29 for distribution!

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Types of Channel members

• Merchant wholesalers
• Industrial products distributors
• Agent middlemen
• Manufacturers agents or manufacturers reps
• Sales agents
• Brokers
• E-Hubs

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Types of Channel Members (contd)

• Retailers
• Facilitating agencies
• Logistics companies
• Trucking companies
• Advertising agencies
• Custom marketing research firms
• Etc.

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Channel Design Options for a Consumer Product
Exhibit 13.5
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Exhibit 13.6Channel options for industrial
goods and services
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Major Channel Objectives

• Making the right product available to the right
  buyer at the right place and time
• Meeting the buyers customer service requirements
• Cost effectiveness

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Distribution Intensity

• Intensive distribution
• Exclusive distribution
• Selective distribution

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Exhibit 13. 8 Example of a Hybrid Marketing
Channel
Company Website Sales Force
Demand Generation
Physical Distribution
Wholesale Distributor
Supplier
Customer
Post-Sale Service
Company Help Line Outside Service Centers
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Push vs. Pull Strategies

• Push

Manufacturer
Wholesaler
Retailer
Consumer
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Push vs. Pull Strategies

• Pull

Manufacturer
Wholesaler
Retailer
Consumer