16/03/2024

CHAPTER 9: DISTRIBUTION DECISIONS

1. Marketing
Principles of Marketing Channels
2. Channel behavior
and organizations
Assoc. Prof. Dr. Thu Huong Pham 3. Retailing and
Mobile: 0912522490 Wholesaling
Email: huongftu1@gmail.com

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1. Marketing Channels Importance of marketing channel

• Marketing channel (distribution • Producers use intermediaries because they create greater
channel) is a set of interdependent efficiency in making goods available to target markets
organizations that help make a product or
service available for use or consumption
by the consumer or business user.

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Information: Gather and distribute marketing research and intelligence

information about actors and forces in the marketing
Marketing channel functions environment
Promotion: Develop and spread communications about an offer
Contact: Find and communicate with prospective buyers
Matching: Shape and fit the offer to the buyer’s needs, including activities
such as manufacturing, assembling, and packaging.

Negotiation: Reach agreement on price and terms of the offer

Physical Transport and store goods.
distribution:
Financing: Acquire and use funds to cover the costs of the channel work.

Risk taking: Assume the risks of carrying out the channel work

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Channel level Consumer VS Business marketing channel

is a layer of intermediaries that
performs some work in bringing
the product and its ownership
closer to the final buyer.
•Direct marketing channel

•Indirect marketing channel

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Marketing Channel length and width Channel flows

Ø Length of a channel: The
number of intermediary levels
Ø Width of a channel: The
number of members within
each intermediary level
(especially in the final
intermediary level) in a specific
geographic area

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2. Channel behavior and organizations

Distribution strategies
Channel conflict Stocking the product in as many outlets as possible.
Disagreements among marketing channel members on goals, roles, and
rewards- who should do what and for what rewards.
Ø Horizontal conflict occurs among firms at the same Giving a limited number of dealers the exclusive right
level of the channel. to distribute products
• Ford dealers in Chicago complain that other dealers in
the city steal sales from them by pricing too low or
advertising outside their assigned territories The use of more than one but fewer than all the
intermediaries who are willing to carry the company’s
Ø Vertical conflict conflict between different levels of products.
the same channel, is even more common
• McDonald’s has recently faced growing conflict with
3,100 independent franchisee

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Vertical marketing system VS Conventional Three major types of VMS

marketing channel
• consists of
A channel producers, Channel leadership is established through common ownership (Zara)
consisting of one wholesalers, Corporate
or more and retailers
independent acting as a
producers, unified system.
The most common form is the franchise organization. (Burger King)
wholesalers, and One channel Contractual
member owns
retailers, each a the others, has
separate A vertical marketing system that coordinates successive stages of
contracts with production and distribution through the size and power of one of the
business seeking them, or wields Administered. parties. (P&G and Apple)
to maximize its so much power
own profits, even that they must
at the expense of all cooperate.
profits for the
system as a
whole.

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Horizontal marketing system Multichannel distribution system

• A distribution system in which a single firm sets up two or more marketing
channels to reach one or more customer segments.
• A channel arrangement in
which two or more
companies at one level join
together to follow a new
marketing opportunity.
• Walmart partners with
noncompetitor McDonald’s
to place “express” versions
of McDonald’s restaurants in
Walmart stores.

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3. Retailing and Wholesaling Type of Retailers

• Retailing Amount of Service Classifications
• Retailing includes all the activities
Self- service retailers serve customers who are willing to perform their
involved in selling products or
services directly to final own locate-compare-select process to save money
consumers for their personal, (convenience stores, fast-food restaurants)
nonbusiness use. Limited- service retailers provide more sales assistance because they carry
• Retailers are businesses whose more shopping goods about which customer need
sales come primarily from more information (Super market)
retailing. Full-service retailers assist customers in every phase of the shopping
process, resulting in higher costs that are passed
on to the customer as higher prices (Department
stores and specialty stores).

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Retailing Trends
• Types of Retailers and Developments
• Product Line Classifications
vNew Retail Forms, Shortening
Retail Life Cycles
üSpecialty stores vThe Rise of Mega-retailers
vGrowth of Non-store Retailing
üDepartment stores
vGrowing Importance of Retail
üSuperstores Technology
üSupermarket vGreen Retailing
üConvenience stores vGlobal Expansion of Major
Retailers

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5.2. Wholesaling
Wholesaling includes all the activities involved in
selling goods and services to those buying for
resale or business use.
Wholesaler is a firm engaged primarily in
wholesaling activities.
Wholesalers buy mostly from producers and sell
mostly to retailers, industrial consumers, and other
wholesalers. As a result, many of most important
wholesalers are largely unknown to final
consumers.
Types of Wholesalers
Merchant wholesaler: An independently business that takes title to the
merchandise it handles
Broker: A wholesaler who does not take title to goods and whose function is to
bring buyers and sellers together and assist in negotiation.
Agent: A wholesaler who represents buyers or sellers on a relatively permanent
basis, performs only a few functions, and does not take title to goods.
Manufacturers’ sales branches and offices: Wholesaling by sellers or buyers
themselves rather than through independent wholesalers.

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Trends in Wholesaling
The distinction between large retailers and large
wholesalers continues to blur.

Retailers now operate formats such as wholesale

clubs and supercenters that perform many
wholesale functions.

The increased use of computerized, automated, and

internet-based systems will help wholesalers contain
the distribution costs, thus boosting their productivity.

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