Principles of Marketing

Management
Distribution Channels
 Distribution Channels

Distribution System
Distribution refers to the process of overseeing the movement of

goods from supplier or manufacturer to point of sale. It is an

overarching term that refers to numerous activities and

processes such as packaging, inventory, warehousing, supply

chain, and logistics.

 Distribution Channels

Distributor Profiles
 Distribution Channels

Channels of Distribution

Channels

Zero Level One Level Two Level Three Level

 Distribution Channels

Classification of Channels
 Distribution Channels

Factors Affecting the Choice of a Channel

1. Nature of Market:

 Number and location of buyers

 Size and frequency of purchase

 Consumer or industrial market

 Buying habits and preferences

 Distribution Channels

Factors Affecting the Choice of a Channel

2. Nature of Product:

 Size of product —bulk and weight

 Unit value

 Perishability

 Standardization

 Technical nature

 Age of product
 Distribution Channels

Factors Affecting the Choice of a Channel

3. Nature of Firm:

 Market standing

 Financial resources

 Volume of output

 Degree of control desired

 Managerial competence
 Distribution Channels

Factors Affecting the Choice of a Channel

4. Nature of Distribution:

 Availability of middlemen

 Attitude of middlemen

 Services provided by middlemen

 Sales potential

 Cost of the channel

 Legal considerations
Product Vertical
Integration
 Product Vertical Integration

Definition
A vertical integration is when a firm extends its operations

within its supply chain. It means that a vertically integrated

company will bring in previously outsourced operations in-

house. The direction of vertical integration can either be

upstream (backward) or downstream (forward).

Product Vertical Integration
Vertical Integration
 Product Vertical Integration

Advantages
Decreased transportation costs and reduced delivery turnaround
times.

Reduced supply disruptions from suppliers.

Increased competitiveness by getting products to consumers

directly .

Lower costs through economies of scale.

Improved sales and profitability by creating and selling a

company-owned brand
 Product Vertical Integration

Degree of Vertical Integration

1. Full Vertical Integration

Obtaining all the assets, resources, and expertise needed to

replicate the upstream or downstream member of the supply
chain.

2. Quasi Vertical Integration

Obtaining some stake in a supplier in the form of specialized

investments or an equity stake to obtain agency benefits by
increasing the ownership interest in the outcome.
 Product Vertical Integration

Degree of Vertical Integration

3. Long-term Contracts

A diluted form of vertical integration in which some elements of

procurement are held constant to reduce inconsistencies in
product delivery, while holding costs constant to a certain
extent.

4. Spot Contracts

The point at which a firm is not vertically integrated is when the

firm relies on spot contracts to receive the immediate input
necessary for its production.
Product Vertical Integration

Types of Vertical

 Backward Integration

 Forward Integration
Product Vertical Integration
 Product Vertical Integration

Backward Integration
Backward integration is when a company expands backward on the

production path into manufacturing, meaning a retailer buys the

manufacturer of their product. An example might be Amazon,

which expanded from an online retailer of books to become a

publisher with its Kindle platform.

 Product Vertical Integration

Forward Integration
Forward integration is when a company expands by purchasing

and controlling the direct distribution or supply of its products. A

clothing manufacturer that opens its own retail locations to sell

product is an example of forward integration. Forward integration

helps companies cut out the middleman.

Levels of Product
 Levels of Product

Definition
The Five Product Levels model was developed by Philip Kotler in

the 1960s. This model provides a way to show the different

levels of need customers have for a product. The model

considers that products are a means to an end to meet the

various needs of customers, and asserts that there are three

ways in which customers attach value to a product-

 Levels of Product

Definition
 Customer Need: The lack of a basic requirement.

 Customer Want: A specific requirement for a product to meet a need.

 Customer Demand: A set of wants plus the desire and ability to pay to

have them satisfied.

Levels of Product
 Levels of Product

1.Core benefit: The core benefit is the basic need or want that the

customer satisfies when they buy the product.

For example- A hotel provides a bed to sleep in when a person is away

from home.
 Levels of Product

2. Generic product: The generic product is a basic version of

the product made up of only those features necessary for it to
function.

Example- this could mean a bed, towels, a bathroom, a mirror,

and a wardrobe.
 Levels of Product

3. Expected Product: The expected product includes additional

features that the customer might expect.

Example- This would include clean sheets, some clean towels,

Wi-fi, and a clean bathroom.

 Levels of Product

4. The Augmented Product refers to any product variations,

extra features, or services that help differentiate the product
from its competitors.

Example- This could be the inclusion of a concierge service or a

free map of the town in every room.
 Levels of Product

5. The Potential Product includes all augmentations and

transformations the product might undergo in the future. In
simple language, this means that to continue to surprise and
delight customers the product must be augmented.

For example- it could be some chocolates on one occasion, and

some luxury water on another.
Thank You