PLACE

What is a Distribution
Channel?
• A set of interdependent organizations
(intermediaries) involved in the process of
making a product or service available for use
or consumption by the consumer or business
user
• Marketing Channel decisions are among the
most important decisions that management
faces and will directly affect every other
marketing decision
 Flows in the B2B
channel for Forklift
trucks
 Why are Marketing
Intermediaries Used?
• The use of intermediaries results from their greater
efficiency in making goods available to target markets.
• Offer the firm more than it can achieve on it’s own
through the intermediary’s …
o Contacts,
o Experience,
o Specialization,
o Scale of operation.
• Purpose: match supply from producers to demand from
consumers.
How a Marketing Intermediary Reduces
the Number of Channel Transactions
 Distribution Channel
Functions
Risk
Risk Taking
Taking Information
Information

Financing
Financing Promotion
Promotion

Physical
Physical Contact
Contact
Distribution
Distribution

Negotiation
Negotiation Assortment
Assortment
 Number of Channel
Levels
Channel Level - Each Layer of Marketing Intermediaries that
Perform Some Work in Bringing the Product and its Ownership
Closer to the Final Buyer.
Channel 1
Direct Channel (Zero level)
MM CC

Channel 2 Indirect Channel

MM RR CC

Channel 3
MM W
W RR CC

Channel 4
MM AA W
W RR CC
 Value-adds Vs. Costs of
different channel alternatives
Direct distribution is
viable when …
• The scope for economic benefits for the
buyer
• The issue of trust/assurance for the
buyers
• The buyers prefer a customized product
than a off-the-shelf
• The value/volume of each transaction is
large
 Indirect distribution is
appropriate when …
• The value/volume of transactions or sales are
low (bulk-breaking)
• The manufacturer has limited resources
• When middlemen provide after-sales
support/service
• The buyers purchase many product items in
one transaction (assortment)
 Conventional Marketing Channel
Vs.
Vertical Marketing System
Conventional Vertical
Marketing Marketing
Channel System (VMS)
Manufacturer
Manufacturer
Manufacturer

Wholesaler
Wholesaler
Wholesaler

Retailer Retailer
Retailer

Consumer Consumer
 Types of Vertical
Marketing Systems
Corporate
Common Ownership at Different
Levels of the Channel i.e. Sears

Contractual
Degree of
Contractual Agreements Among
Direct Channel Members
Control

Administered
Leadership is Assumed by One or
a Few Dominant Members i.e. Kraft
 Innovations in
Marketing channels
Horizontal
HorizontalMarketing
Marketing HybridMarketing
Hybrid Marketing
System
System System
System
Two
Twoor
orMore
MoreCompanies
Companiesatat AASingle
SingleFirm
FirmSets
SetsUp
Up
One Twoor
Two orMore
MoreMarketing
Marketing
OneChannel
ChannelLevel
LevelJoin
Join
Together Channelsto
Channels toReach
ReachOne
Oneoror
Togetherto
toFollow
FollowaaNew
New
Marketing MoreCustomer
More Customer
MarketingOpportunity.
Opportunity.
Segments.
Segments.
Example:
Example:
Example:
Example:
Apollo
Apollopharmacy
pharmacyin
inaahospital
hospital
Retailers,Online
Retailers, Onlineand
and
SalesForce
Sales Force
 Channel Conflict
• The channel will be most effective when:
o each member is assigned tasks it can do best
o all members cooperate to attain overall channel goals
and satisfy the target market

• When this doesn’t happen, conflict occurs:

o Horizontal Conflict occurs among firms at the same
level of the channel, i.e retailer to retailer.
o Vertical Conflict occurs between different levels of the
same channel, i.e. wholesaler to retailer.

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Channel Design Decisions
Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

Identifying Major Alternatives

Intensive Selective Exclusive

Distribution Distribution Distribution

Evaluating the Major Alternatives

Designing International Distribution Channels

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Channel Management
Decisions
Selecting
Selecting Channel
Channel Members
Members

FEEDBACK
Motivating
Motivating Channel
Channel Members
Members

Evaluating
Evaluating Channel
Channel Members
Members

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Nature and Importance of
Marketing Logistics
Involves getting the right
product to the right
customers in the right
place at the right time.
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Goals of the Logistics
System
Higher Distribution Costs;
Higher Customer Service Levels

Goal:
To Provide a Targeted Level of Customer Service
at the Least Cost.

Lower Distribution Costs;

Lower Customer Service Levels
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 Major Logistics Functions
Costs
Costs Order
OrderProcessing
Processing
Minimize
MinimizeCosts
Costsofof Received
Received
Attaining
AttainingLogistics
Logistics Processed
Processed
Objectives
Objectives Shipped
Shipped

Logistics
Transportation Warehousing
Warehousing
Rail, Truck, Water, Functions Storage
Storage
Pipeline, Air, Distribution
Distribution
Intermodal Automated
Automated
Inventory
Inventory
When
Whento toorder
order
How
Howmuch
muchto toorder
order
Just-in-time
Just-in-time
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 Retailing
• … includes all the activities Involved in Selling Goods or
Services Directly to Final Consumers for Their Personal,
Nonbusiness Use.

• Retailing can be done in stores (store retailing) or out of a

store (nonstore retailing) such as:
o Direct mail,
o Catalogs,
o Telephone,
o Home shopping shows,
o Internet (e-com, m-com, s-com, f-com)
Classification of Retailing
Amount
Amount of
of Service
Service
Self-Service,
Self-Service, Limited-Service
Limited-Service and
and
Full-Service
Full-Service Retailer
Retailer
Product
Product Line
Line
Length
Length and
and Breadth
Breadth of
of the
the Product
Product
Assortment
Assortment

Relative
Relative Prices
Prices
Pricing
Pricing Structure
Structure that
that isis Used
Used
by
by the
the Retailer
Retailer
Retail Organizations
Independent, Corporate, or
Contractual
Ownership Organization
Classification of Retailing:
Amount of Service

Self-Service Limited-Service
Retailer Retailers
Provide Few or No Provide Only a Limited
Services to Number of Services
Shoppers to Shoppers
i.e. Best Buy Full-Service i.e. Sears
Retailers
Retailers that Provide a
Full Range of Services
to Shoppers
i.e. Neiman Marcus
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Classification of Retailing:
Product Line
Store Description
Narrow Product Line, Deep Assortment
Specialty Stores e.g.
Wide Variety of Product Lines
Department Stores e.g.
Wide Variety of Food, Laundry, &
Supermarkets Household Products e.g.
Limited Line of High-Turnover Convenience
Convenience Stores Goods e.g. 7-Eleven
Large Assortment of Routinely Purchased
Superstores Food & Nonfood Products e.g. Toys R Us
Standard Merchandise at Lower Prices
Discount Stores i.e. Wal-Mart
Changing Collection of Higher-Quality
Off-Price Retailers Goods at a Reduced Price e.g.
Limited Selection of Brand-Name Grocery
Warehouse Clubs Items, Appliances, etc. e.g. Sam’s Club 24
Classification of Retailing:
Relative Prices
Higher
Higher Prices
Prices and
and Offer
Offer Higher-Quality
Higher-Quality Goods
Goods
and
and Customer
Customer Service
Service

Regular
Regular Prices
Prices and
and Offer
Offer Normal-Quality
Normal-Quality Goods
Goods
and
and Customer
Customer Service
Service

Low
Low Prices
Prices and
and Offer
Offer Lower-Quality
Lower-Quality Goods
Goods
and
and Customer
Customer Service
Service

Discount
Discount “Off-Priced”
“Off-Priced” Catalog
Catalog
Stores
Stores Retailers
Retailers Showrooms
Showrooms 25
Classification of Retailing:
Retail Organization

Merchandising Corporate
Conglomerates Chain

Franchise Voluntary
Organizations Chain

Retailer
Cooperatives
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Retailer Marketing Decisions
Retailer
Retailer
Retailer Marketing
MarketingMix
Mix
Retailer
Strategy
Strategy Product
Productand
andservice
service
Target assortment
assortment
TargetMarket
Market

Retail Prices
Prices
RetailStore
Store
Positioning
Positioning Promotion
Promotion

Place
Place(location)
(location)

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Product Assortment and
Services Decisions
Product Assortment
• Width and Depth of Assortment
• Quality of Products
• Product Differentiation Strategies

Services Mix
Key Tool of Nonprice Competition
for Setting One Store Apart From
Another

Store’s Atmosphere
• Physical Layout
• “Feel” That Suits the Target Market
and Moves Customers to Buy
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