Deliver the Goods:

Determine the
Distribution Strategy

PowerPoint Summary on CH11 Michael R. Solomon, Greg W. Marshall, Elnora

W. Stuart. “Marketing: Real People, Real Choices”-Pearson (2017)
 Objective Outline
1 2 3

Types of Distribution
Channels and Develop a Channel Logistics and the
Wholesale Strategy Supply Chain
Intermediaries
01
Types of Distribution Channels
and Wholesale Intermediaries
 Physical Direct Channel
Distribution Channel Intermediaries

The activities that move A channel of distribution Firms or individuals who

finished goods from in which a manufacturer help move a product from
manufacturers to final of a product or creator of the producer to the
customers a service distributes consumer or business
directly to the end user
customer
 Functions of Distribution Channels

Breaking Create Transportation and

bulk assortments storage

Facilitating Risk-taking Communication

functions functions and transaction
functions
 The Evolution of
Distribution Functions

● Disintermediation
● Knowledge management
● Intranet
● Online distribution piracy
Specific Types of Channel Intermediaries and Channel Structures

Manufacturer-owned
intermediaries

Wholesaling
intermediaries Independent
intermediaries
Types of Distribution
Channels
When marketers develop distribution strategies, they have to
consider different channel levels. This refers to the number of
distinct categories of intermediaries that make up a channel
distribution.
Types of Distribution Channels
 Reason why companies use direct

Consumer Channels channel:

● Allow producer to serve its
customers better and at a lower
price than if it included a retailer.
● Easier to control
Reasons why producer use indirect
channel:
● In many cases, customers are
familiar with certain retailers
 B2B Channels

● B2B channels parallel consumer

channels that they may be direct or
indirect.

● Direct channels are more common in

B2B markets than customers markets.
 Dual and Hybrid Distribution Systems

Dual or multiple distribution systems is a system where producers, dealers,

wholesalers, retailers, and customers participate in more than one type of channel.

Pharmaceutical industry is a good example of multiple-channel usage. The companies

distribute their products in at least three types of channels:
1. Sell to hospitals, clinics, and other organizational customers directly.
2. Rely on an indirect customer channel when they sell to large drugstore chains.
3. Sell directly to third-party players such as HMOs, PPOs, and insurance
companies.

Hybrid marketing system is a marketing system that uses a number of different

channels and communication methods to serve a target market. Company that use
hybrid marketing system is Xerox
 Distribution Channels and the Marketing Mix

Place decisions affect pricing.

Ex : Marketers that distribute products through low-priced retailers such as Wallmart and T.J. Maxx
will have different pricing strategies than those that sell through high-end brand like Dior, or Cartier.

Distribution channels may help to position a product in a unique way vis-a-vis the
competition.
Subscription boxes such as Tadabox (Indonesia) and Birchbox (US). It is one of the
new business model for distribution that supplies surprises by sending out a box each
month filled with items you never knew you wanted but you just have to have.
Ethics in the Distribution Channel

Companies’ decision about how to make their products available to customers through
distribution channels can create ethical dilemmas.
Example of ethical dilemmas:
● Force manufacturers to pay for a slotting allowance
● Product diversion
● Involves the sheer size of a particular channel intermediary

It is important for all channel intermediaries to behave and

treat each other in a professional, ethical manner-and to do
no harm consumers through their channel activities.
 02
Develop a Channel
Strategy
 Steps in Distribution Planning

Choose a
distribution
strategy
Develop
distribution 04
objectives 03
02
01 Develop
distribution tactics
Evaluate internal
and external
environmental
influences
 Step 1: Develop Distribution Objectives

● Develop objectives that support the organization’s overall

marketing goals
● More specific distribution depend on the characteristics
of the product and the market
 Step 2: Evaluate Internal and External Environmental
Influences

Marketers must consider their external and internal

environments to develop the best channel structure.

● The ability to handle distribution functions

● What channel intermediaries are available
● The ability of customer to access these
intermediaries
● How the competition distributes its products
 Step 3: Choose a Distribution Strategy

Decision 1: conventional, vertical, or horizontal marketing system

Conventional Vertical marketing Horizontal

marketing system system (VMS) marketing system

A channel distribution in which there is formal

A multiple-level distribution An arrangement within a channel
cooperation among members at the manufacturing ,
channel in which channel of distribution in which two or
wholesaling, and retailing levels.
members work independently of more firms at the same channel
Three types of vertical marketing systems:
one another. ● Administered VMS (channel members remain level work together for common
purpose.
independent but voluntarily work together)
● Corporate VMS (a single firm owns
manufacturing, wholesaling, retailing
operations)
● Contractual VMS (cooperation is enforced by
contracts)
Decision 2: intensive, exclusive, or selective distribution

Intensive Exclusive Selective

distribution distribution distribution

Maximize market coverage Limit distribution Seeks to strike a balance

by selling a product to a single outlet in between intensive and
through all wholesalers or a particular region. exclusive distribution.
retailers that will stock and
sell the product.
Characteristics that Favour Intensive Versus Exclusive
Distribution
Decision Factor Intensive Distribution Exclusive Distribution

Customers High customer density Low customer density

Price and convenience are priorities Service and cooperation are

priorities

Channels Overlapping market coverage Non overlapping market

coverage

Constraints Cost of serving individual customers is Cost of serving individual

low customers is high

Competition Based on a strong market presence, Based on individualized

often through advertising and attention to customers, often
promotion through relationship marketing
 Step 4: Develop Distribution Tactics

Decision 1 Decision 2

Select channel partners Manage the channel

The channel leader or channel captain is

the dominant firm that controls the
● Economic factor
channel.
● Competitive relationship
factor
Channel power comes from different
● Sustainability factor
potential sources:
● Economic power
● Legitimate power
● Reward or coercive power
03
Logistics and the
Supply Chain
 Logistics

Logistics Reverse Logistics

The process of designing. managing, Includes product return, recycling

and and material reuse, and waste
improving the movement of products disposal
through the supply chain. Logistics
includes purchasing, manufacturing.
stocage. and transport.
 The Lowdown on Logistics
Order Processing
The series of activities that occurs
between the time an order comes
into the organization and the time
a product goes out the door.
Now it is automated using the
Enterprise Resource Planning
(ERP) system.
Warehousing Materials Handling
Storing goods in anticipation
The moving of products into,
of sale or transfer to another
within, and out of warehouses
member of the channel of
distribution.
Distribution center: a
warehouse that stores goods for
short periods of time and that
provides other functions
 Transportation

The mode by which products

move among channel
members

Factors that affect the choice

of mode of transportation:

1. Dependability
2. Cost
3. Speed of delivery
4. Accessibility
5. Capability
6. Traceability
 Inventory Control

Activities to ensure that Stock outs: Zero-

goods are always inventory situations
available to meet resulting in lost sales
customers’ demands and customer
dissatisfaction

Radio frequency Just in time (JiT) Inventory

identification (RFID): management and purchasing
Product tags with tiny chip processes that manufacturers and
containing information resellers use to reduce inventory to
about the item's content, very low levels and ensure that
origin, and destination. deliveries from suppliers arrive only
when needed
Supply Chain
Supply chain
All the activities necessary to tum raw
materials into a goods or service and put it
in the hands of the consumer or business
customer.

● Part of 4P’s
● Deliver value proposition
Inventory Turnover
the number of times a firm's inventory Inventory turnover x annual cost of sales
completely cycles through during a = Average inventory level for the period
defined time frame (usually in one
year).
Inventory turnover x Rolling 12-Month cost of sales
Current Inventory
 Supply Chain Management
the coordination of flows among the firms in a supply
chain to maximize total profitability.

Insourcing
A practice in which a
company contracts with a
specialist firm to handle
all or part of its supply
chain operations.
Thank You
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