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LOGO Contents
LOGO
Definition and roles
Chapter 7 Distribution channel levels
DISTRIBUTION
Channel behavior and organization
STRATEGIES
Channel design decisions
Retailing
Wholesaling
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1.1. Definition
• A distribution channel is a set of interdependent
organizations that help make a product or service
available for use or consumption by the consumer or
business user.
• Distribution bidges the major time, place, and
possession gaps that separate goods and services
from users

1.2. Roles of distributors 1.2. Roles of distributors

• Information: gathering and distributing information • Negotiation: Reaching an agreement on price and other
about consumers, producers and other actors and terms of the offer so that ownership or possession can
forces in marketing environment needed for planning be transferred.
and aiding exchange.
• Physical distribution: Transporting and storing goods.
• Promotion: developing and spreading persuasive
• Financing: Acquiring and using funds to cover the costs
communications about an offer.
of the channel work.
• Contact: finding and engaging customers and
• Risk taking: Assuming the risks of carrying out the
prospective buyers
channel work
• Matching: shaping offers to the buyer’s needs,
including activities such as manufacturing, grading,
assembling, and packaging

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2. Distribution channel levels

• Channel level is a layer of intermediaries that

performs some work in bringing the product
and its ownership closer to the final buyer.
• Direct marketing channel is a marketing
channel that has no intermediary levels.
• Indirect marketing channel is a marketing
channel containing one or more intermediary
levels.

2. Distribution channel levels Consumer distribution channels

Manufacturer Manufacturer Manufacturer Manufacturer

• When a product goes through one level, its

Wholesales
price increases. agency
• One level channels are short channels, two
and above level channels are long channels. Wholesaler Wholesaler
• Longer channel → higher price → less
competitive Retailer Retailer Retailer

Consumer Consumer Consumer Consumer

Direct channel 1-level channel 2-level channel 3-level channel

Business distribution channels 2. Distribution channel levels

Manufacturer Manufacturer Manufacturer

Select channels based on population density:

• If customers scatter in a wide area, the firm
Manufacturer's
must use long channels (at least 3 levels),
representative applying for necessity goods
or sales branch
• If customers concentrate in a small area, use
short channels
Business Business
distributor distributor

Business Business Business

customer customer customer

Direct channel 1-level channel 2-level channel

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2. Distribution channel levels
Select channels based on product attributes: use
short channels when the product:
• is perishable
• is bulky
• has high value
• needs instructions
3.2. Conventional vs vertical
marketing system
• Conventional distribution systems consist of one or
more independent producers, wholesalers, and
retailers, each separate business seeking to
maximize its own profits, perhaps even at the
expense of profits for the system as a whole.
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2. Distribution channel levels
• If the intermediary is good, a long channel can
be used. If the intermediary can't preserve
goods well, use short channels to reduce
transportation risks.
• Small-sized companies should use short
channels to save money.
• Economic status: rich consumers often buy at
long channels for additional services
3.1. Channel conflict
Channel conflict refers to disagreement among
channel members over goals, roles, and
rewards.
• Horizontal conflict
• Vertical conflict
3.2. Conventional vs vertical
marketing system
• Vertical marketing systems (VMSs) provide channel
leadership and consist of producers, wholesalers,
and retailers acting as a unified system.
– Corporate marketing systems
– Contractual marketing systems
– Administered marketing systems
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3.2. Conventional vs vertical 3.2. Conventional vs vertical

marketing system marketing system
Vertical Marketing Systems
• Horizontal marketing system is a channel
• Corporate vertical marketing systems combine
arrangement in which two or more companies at one
successive stages of production and distribution under
level join together to follow a new marketing
single ownership.
opportunity.
• Contractual vertical marketing systems consist of
independent firms at different levels of production
and distribution who join together through contracts.
• An administered vertical marketing system is a VMS
that coordinates successive stages of production and
distribution through the size and power of one of the
parties.

3.2. Conventional vs vertical 3.2. Conventional vs vertical

marketing system marketing system

• Multichannel distribution systems are • Disintermediation is the cutting out of

systems in which a single firm sets up two or marketing channel intermediaries by
more marketing channels to reach one or producers or the displacement of traditional
more customer segments. resellers by new intermediaries.

4. Channel design decisions

Analyzing Setting
consumer channel
needs objectives

Identifying Evaluating
channel channel
alternatives alternatives

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4.1. Analyzing consumer needs
• Find out what target consumers want from
the channel
• Identify market segments
• Determine the best channels to use
• Minimize the cost of meeting customer
service requirements
4.3. Identifying major alternatives
• Types of intermediaries
• Number of marketing intermediaries
• Responsibilities of channel members
4.3.2. Number of marketing
intermediaries
• Intensive distribution: stocking the product in
as many outlets as possible.
• For example: soap, toothpaste, food, ballpens,
notebooks, chewing gums, etc.
• Manufacturers want to spread their products
as much as possible in the market in order to
increase their competitiveness.
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4.2. Setting channel objectives
• Determine targeted levels of customer service
• Balance consumer needs against costs and
customer price preferences
4.3.1. Types of intermediaries
• Types of intermediaries refers to channel
members available to carry out channel work.
Most companies face many channel member
choices.
4.3.2. Number of marketing
intermediaries
• Exclusive distribution: giving a limited number of
dealers the exclusive right to distribute the company’s
products in their territories.
• often found in the distribution of luxury brands
• apply when the manufacturer hasn't thought of or
doesn't have enough resources for entering a market
that knows nothing about their product.
• The distributor can raise the product to a higher level.
Example: Shiseido and Thủy Lộc
• The sucess depends a lot on the distributor's
competence.
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4.3.2. Number of marketing 4.3.3. Responsibilities of channel

intermediaries members
• Selective distribution: the use of more than
one but fewer than all the intermediaries who A producer and the intermediaries need to
are willing to carry the company’s products. agree on
• Examples: television, furniture, and home • Price policies
appliance brands • Conditions of sale
• develop good working relationships with • Territory rights
selected channel members and expect a
• Specific services
better-than-average selling effort.
• give manufacturers good market coverage with
more control and less cost than does intensive
distribution

4.4. Evaluating major alternatives

• Economic criteria
• Control issues
• Adaptability criteria

5.1. Definition 5.1. Definition

• Retailing includes all the activities in selling products
or services directly to final consumers for their
personal, non-business use.
• Retailers are businesses whose sales come primarily
from retailing.
• Shopper marketing focuses the entire marketing
process on turning shoppers into buyers as they
approach the point of sale, whether during in-store,
online, or mobile shopping.
• Omni-channel retailing creates a seamless cross-
channel buying experience that integrates in-store,
online, and mobile shopping, creating a single
shopping experience.

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5.2. Types of retailers 5.2. Types of retailers

By amount of service: By product lines

• Self-service • Specialty stores
• Limited service • Department stores
• Full service • Convenience stores
• Superstores
• Category killers

5.2. Types of retailers 5.2. Types of retailers

By Relative Price By organizational approach

• Discount stores • Corporate chains
• Off-price retailers • Voluntary chains
• Factory outlets • Retailer cooperatives
• Warehouse clubs • Franchise organizations

5.3. Retailer marketing decision 5.3. Retailer marketing decision

Price Decision
• Segmentation, targeting, differentiation, and
positioning involve the definition and profile of the • Price policy must fit the target market and positioning,
market so the other retail marketing decisions can product and service assortment, competition, and
be made economic factors.
• Major product variables: – High markup on lower volume
– Product assortment – Low markup on higher volume
– Services mix • Everyday low pricing (EDLP) involves charging constant,
everyday low prices and offering few sales or discounts.
– Store atmosphere
• High-low pricing involves charging higher prices on an
everyday basis, coupled with frequent sales and other
price promotions.

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5.3. Retailer marketing decision
Promotion Decision
• Advertising
• Personal selling
• Sales promotion
• Public relations
• Direct marketing
6.2. Functions
• Selling and promoting involves the wholesaler’s sales
force helping the manufacturer reach many small
customers at a low cost.
• Buying and assortment building involves the selection
of items and building of assortments needed by
customers, saving the customers work.
• Bulk breaking involves the wholesaler buying in large
quantities and breaking into smaller lots for customers.
• Warehousing involves the wholesaler holding inventory,
reducing its customers’ inventory cost and risk.
• Transportation involves the wholesaler providing quick
delivery due to its proximity to the buyer.
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5.3. Retailer marketing decision
Place Decision
• Central business districts are located in cities
and include department and specialty stores,
banks, and movie theaters.
• A shopping center is a group of retail
businesses planned, developed, owned, and
managed as a unit.
6.1. Definition
• Wholesaling includes all activities involved in
selling goods and services to those buying for
resale or business use.
6.2. Functions
• Financing involves the wholesaler providing credit and
financing suppliers by ordering early and paying on time.
• Risk bearing involves the wholesaler absorbing risk by
taking title and bearing the cost of theft, damage,
spoilage, and obsolescence.
• Market information involves the wholesaler providing
information to suppliers and customers about
competitors, new products, and price developments.
• Management services and advice involves wholesalers
helping retailers train their sales clerks, improve store
layouts, and set up accounting and inventory control
systems.
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6.3. Types of wholesalers 6.3. Types of wholesalers

Merchant wholesalers are the largest group of
wholesalers and include:
• Full-service wholesalers that provide a full set of
services
• Limited service wholesalers that provide few services
and specialized functions
Brokers and agents do not take title, perform a few
functions, and specialize by product line or customer
type.
• Brokers bring buyers and sellers together and assist
in negotiations.
• Agents represent buyers or sellers.

6.3. Types of wholesalers 6.4. Wholesaler marketing decisions

Manufacturers’ and retailers’ branches and offices • Segmentation, targeting, differentiation, positioning
decisions:
are a form of wholesaling by sellers or buyers
– Size of customer
themselves, rather than through independent
– Type of customer
wholesalers.
– Need for service
• Marketing mix decisions
– Product
– Price
– Promotion
– Place

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