Chapter 10:

Place/ Distribution Concept

 The Nature of Distribution Channels
 Distribution Channel
 A set of interdependent organisations involved in the process
of
making a product or service available for use.

• Why are Marketing Intermediaries used?

 Greater efficiency
• thru contacts & experience, they can provide better coverage

 Match supply & demand

• Bulk buying, while sell according to customer needs

 Make service available to target population (Schools, hospitals,

fire-station..)
 Distribution Channel Functions:
• Information
 Gather & distribute mktg research for planning & aiding
exchange

• Promotion
 Develop & spread persuasive communications about an offer

• Contact
 Finding & communicating with prospective buyers

• Matching
 Fit the offer to the buyer’s needs (assembling & packaging)
 Distribution Channel Functions (cont):
• Negotiation
 Reaching an agreement on price (Property agent, 2nd hand
dealer)

• Physical distribution
 transporting & storing goods

• Financing
 Acquire & use funds to cover the costs of the channel work

• Risk taking
 Assuming the risks of carrying out the channel work
Trends Impacting Future of Retailing

 New retail forms, shortening retail life cycles,

and retail convergence
 The rise of megaretailers
 Growth of nonstore retailing
 Growing importance of retail technology
 Green retailing
 Global expansion of major retailers
 Number of Channel Levels:
• Perform work in bringing the product/ownership closer to buyer
• Channel 1
 Direct Marketing Channel (No intermediary levels) Amway, Avon..

• Channel 2
 One intermediary level (Retailer, eg. TV, camera, furniture…)

• Channel 3
 Two intermediary levels (Wholesaler, used by small manufacturer)

• Channel 4
 Jobbers (buy from wholesalers, sells to NOT served retailers)

• Greater number of levels means less control & greater complexity

• Connected by: Physical, ownership, payment, info, & promotion
flow
 Channel Design Decisions:
 Analyse Consumer Service Needs
 Find out what consumers want from the channel
 Eg. Delivery, price, service..
 Demonstration, LT warranties, flexible financing, training
 MUST balance consumer service needs against feasibility & cost
 Channel Design Decisions (cont):
Set the Channel Objectives & Constraints
• Product & company characteristics
 perishable products & company’s size...

• Characteristics of intermediaries
 Willingness & ability to perform

• Competitors’ channel
 locate next to competitor or competing brand (BK vs Mc)

• Environmental factors
 Legal & economic conditions
Identify Major Alternatives:
Number of Mktg Intermediaries
• Intensive distribution
 Stocking the product in as many outlets as possible
 Eg. Toothpaste, candy, Coke, chocolate...

• Exclusive distribution
 Giving a limited number of dealers the right to sell
 Eg. Rolls-Royce

• Selective distribution
 The use of more than one of the intermediaries
 who are willing to carry the company’s product
 Eg. TV, furniture, & appliances (good mkt coverage)
Responsibilities of Channel Members:
• Responsibilities of Channel Members
 Agree on price, conditions of sale, territorial rights, & specific
services

• Evaluate the Major Alternatives

• Economic Criteria - Profit vs Cost

• Control Issues - Less control? More control? Or equal control?

• Adaptive Criteria - LT commitment led to difficult adaptability

Channel Management Decisions:
 Select Channel Members
 Work hard to line up enough qualified intermediaries
 Evaluate
• years in business, other lines carried, growth & profit
record, image

 Sales agents
• number of lines carried, the size, service & quality of sales
force

 Retail stores
• store’s customers, location, & future growth potential
Channel Management Decisions (cont):
• Motivate Channel Members
 Positive Motivators
• higher margins, premiums, allowances, contests….

 Negative Motivators
• reduce margins, slow down delivery, end the relationship

 LT partnerships
• building a professionally managed & vertical mktg system
Channel Management Decisions (cont):
• Evaluate Channel Members
 Regularly check channel member’s performance

 Eg. Sales quotas, inventory levels, delivery time, cooperation,

services, feedback

 Should recognise & reward, or assist & replace intermediaries