WEEK10

Place / Distribution

• The movement of goods and services from

place of origin to the final consumer
 Place / Distribution

Distribution channels?
• A set of interdependent organizations that
help make a product or service available for
use or consumption by the consumer or
business user.
• Intermediaries (middlemen) are specialists in
what they do and this makes them more
efficient than producers.
 Place / Distribution

Distribution channels?
• Intermediaries have greater efficiency through
their:
contacts, experience, specialization, scale of
operation
• Producers produce bulk or large quantities of a
product, yet consumers require small quantities.
• Transform assortment availed by producers to
assortments needed by customers
 Place / Distribution

How do channel members add value?

Functions?

Information Promotion Contact

Physical
Matching Negotiation
distribution

Financing Risk taking

 Place / Distribution

Distribution channel levels

• Co. design distribution channels to avail products and
services to customers in different ways

What are Channel levels?

• A layer of intermediaries that perform some work in
bringing the product and its ownership closer to the
final buyer
• Number of intermediary levels indicates the length
of channel
 Place / Distribution

Distribution channel levels

• 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.
 Place / Distribution

Distribution channel levels

 Place / Distribution

Distribution channel levels

 Place / Distribution
Distribution channel behaviour
•Marketing channels consist of firms that have
partnered for their common good with each member
playing a specialized role.
•Channel conflict arises- Disagreements among marketing
channel members on goals, roles and rewards
–Horizontal conflict - among firms of the same level of the
firm
–Vertical conflict- between different levels of the same
channel
 Place / Distribution

Channel design decision

 Place / Distribution
1. Analyzing Consumer Needs
•What do consumers want from the channel?
•Buy from a nearby shop or distant, in person, phone or online?
•Do they value assortment or specialization?
•Do consumers want many add on services(installation, repairs,
delivery)
•The extent to which a channel provides this will result in high service
delivery
•Co. must balance consumer needs against the feasibility and cost of
meeting those needs but most importantly against customer price
preferences.
 Place / Distribution

2. Setting channel objectives

•Co. should state their marketing channel objectives in terms of the
targeted levels of customer service(assortment, fast delivery,
installation, repairs)
•Different segments want different levels of customer service. Decide
which segment to serve and best channels to use
•Objectives also influenced by
 Nature of company
 Its products
 Marketing intermediaries
 Competitors
 Environment- economic conditions
 Place / Distribution

2. Setting channel objectives

• Producer and intermediary have to agree on terms
and responsibilities of each channel member
Price policies-list price, discounts
Sale conditions
Territory rights
Services performed by each party
 Place / Distribution
3. Identify channel options
•Identify in terms of types of intermediaries, number of intermediaries
and responsibilities of each
•Types of intermediaries: Direct, Retailers, Independent distributors
(wholesalers)?
•Number of intermediaries: determine the number
–Intensive distribution-Stocking products in in as many outlets as
possible(convenience)
–Exclusive distribution-product sold in a limited number of
dealers(luxury brands)
–Selective distribution-use of more than one but few willing
intermediaries e.g. electronics, furniture
.
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Identifying Major Alternatives – no of

intermediaries
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4. Evaluating major alternatives

• Evaluate identified channel alternatives against set
criteria
•Economic possibilities-compares likely sales, costs
and profitability of different channel alternatives
•Control issues-how much control does the firm give
away
•Adaptability criteria-Co must make room for
flexibility to allow for adaptation to
environmental changes.
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Channel Management

Channel Management

Selecting Motivating Evaluating

channel channel channel
members members members
 Place / Distribution

Channel Management

Selecting Motivating Evaluating

channel channel channel
members members members
 Place / Distribution

Selecting channel members

- Co should determine defining characteristics
of intermediaries such as:
years in business,
other lines carried,
location,
growth,
profit record,
cooperativeness and reputation
 Place / Distribution

Motivating channel members

- Provide incentives for channel members by
fostering working relationships with them.
- Companies should view its intermediaries at
first line customers and partners.
- Ideally a company strives to achieve a value
delivery system with any channel
- Egs of incentives could include discounts,
technical support, vendor managed stocks,
marketing support, training etc.
 Place / Distribution

Evaluating channel members

• Regularly check channel member performance against standards
such as:
– Sales quotas
– Average inventory levels
– Customer delivery time
– Treatment of lost and damaged goods
– Cooperation in company promotion and training programs
– Services to the customer
• Reward good performance
• Be responsive to the needs of channel partners