DISTRIBUTION MANAGEMENT AND THE MARKETING
MIX
Key Concepts
- Place/Distribution: Ensures products are available in the
right quantity, time, and location.
- Distribution Management: Covers the movement,
coordination, and storage of goods.
- Distribution Planning: Involves transportation, inventory
management, and customer transactions.
Basic Types of Distribution Channels:
- Direct: Manufacturer → Consumer
- Indirect: Manufacturer → Intermediaries → Consumer
Intensity of Channel Coverage:
- Exclusive: Limited middlemen (high-end goods)
- Selective: Moderate middlemen (electronics, furniture)
- Intensive: Many middlemen (FMCGs like soft drinks)
- Dual: Uses multiple channels to target different markets
Physical Distribution Components:
- Customer service, shipping, warehousing, inventory
control, packaging, material handling
Transportation Types:
- Railroads, motor carriers, waterways, pipelines, airways
Inventory Management:
- Just-in-Time (JIT): Orders smaller quantities frequently
- Electronic Data Interchange (EDI): Uses technology for
inventory tracking
Warehousing:
- Private: Owned by companies
- Public: Rented storage
- Bonded: Holds taxable/imported goods
- Field: Stores goods while in transit
Wholesaling & Retailing:
- Wholesalers sell in bulk to retailers.
- Retailers sell directly to consumers.
Store Location & Strategy Mix:
- Factors: Accessibility, safety, supplier convenience
- Types: Convenience stores, supermarkets, department
stores, specialty stores
Distribution Strategy:
- Direct sales, OEM sales, manufacturers’ reps,
wholesalers, brokers, retailers
EMERGENCE OF MARKETING CHANNELS
Key Concepts
- Marketing Channels: Paths through which goods move
from producer to consumer.
- Dual Distribution: Manufacturer sells through multiple
channels.
- Marketing Channel as a Social System: Functions based
on cooperation, power, conflict, and communication.
- Functions of Marketing Channels:
- Information gathering, promotional activities, negotiation,
financing, risk-taking, physical movement of goods.
- Evolution of Marketing Channels:
1. Trade Era: Handcrafted goods traded via exploration.
2. Production Orientation Era: Industrial age, focus on
mass production.
3. Sales Orientation Era: Increased competition, branding,
and marketing efforts.
4. Marketing Orientation Era: Strategic focus on customer
needs.
5. Relationship Marketing Era: Building long-term customer
relationships.
6. Social Marketing Era: Real-time engagement via digital
platforms.
- Functions of Channel Intermediaries:
- Contactual Efficiency: Optimizes buyer-seller
relationships.
- Sorting: Categorizing and breaking bulk for ease of sale.
- Managing Uncertainty:
- Need Uncertainty: Difficulty understanding customer
needs.
- Market Uncertainty: Fluctuations due to external factors.
- Transaction Uncertainty: Risks in supply chain
processes.
- Channel Structures:
- Two-Level: Manufacturer → Consumer
- Three-Level: Manufacturer → Retailer → Consumer
- Four-Level: Manufacturer → Wholesaler → Retailer →
Consumer
- Five-Level: Manufacturer → Agent → Wholesaler →
Retailer → Consumer
- Types of Marketing Channels:
- Direct: No intermediaries
- Retailer-based: Manufacturer → Retailer → Consumer
- Wholesaler-based: Manufacturer → Wholesaler →
Retailer → Consumer
- Distribution Systems:
- Conventional: Independent entities with minimal
cooperation.
- Vertical Marketing System (VMS): Unified control for
efficiency.
- Corporate: Manufacturer owns distribution.
- Administered: Cooperation through influence (e.g., major
brands).
- Contractual: Agreements between independent firms.
- Coordinated Channel Marketing: Aligns online/offline efforts
to increase sales.
FLASHCARD REVIEW
Basic Concepts
1.What are the 4Ps of the marketing mix?
Product, Price, Place, Promotion
2.What is distribution management?
The process of coordinating supply and demand to create
time and place utility for goods.
3.What is the difference between direct and indirect
distribution?
Direct: No intermediaries. Indirect: Uses middlemen
(wholesalers, retailers, etc.).
4.What are the three intensities of channel coverage?
Exclusive, Selective, Intensive
5.What is Just-in-Time (JIT) inventory management?
A system that minimizes inventory by ordering smaller
quantities more frequently.
Channel Structures
6.What is a three-level distribution channel?
Manufacturer → Wholesaler → Retailer → Consumer
7.What type of channel structure involves an agent
between the manufacturer and wholesaler?
Five-level
8.Which marketing era focuses on customer relationships?
Relationship Marketing Era
9.What type of VMS involves ownership over multiple
levels of distribution?
Corporate VMS
10. What is the main advantage of a vertical marketing
system (VMS)?
Greater efficiency through cooperation and unified
management.
Functions of Marketing Channels
11. What is the role of wholesalers?
They buy in bulk from manufacturers and sell to retailers.
12. What are the key functions of a marketing channel?
Information, promotion, negotiation, financing, risk-taking,
physical distribution.
13. What is sorting in marketing channels?
The process of categorizing and breaking bulk to meet
consumer needs.
14. What does “contactual efficiency” mean in marketing
channels?
Reducing the number of interactions needed between
buyers and sellers.
15. How does market uncertainty affect distribution?
It creates instability in supply and demand due to external
factors.
Types of Distribution
16. What is an example of intensive distribution?
Soft drinks available in almost every store.
17. Which distribution strategy is used for luxury items?
Exclusive distribution
18. What type of retailing involves a contract between
franchisor and franchisee?
Retail franchising
19. What is a convenience store?
A small store offering essential goods with long operating
hours.
20. What is an example of direct selling?
Avon representatives selling cosmetics door-to-door.
