Professional Documents
Culture Documents
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distribution is about getting the product or service to the customer as conveniently as possible; it deals with access and availability intermediaries perform many of the distribution functions on behalf of suppliers merchant intermediaries actually take title to physical products that they distribute agents do not ever own the products, but they arrange the transfer of title
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Distribution Channels
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I N T E R M E D I A R Y
PURCHASING AGENT FOR BUYERS Anticipates wants Subdivides large quantities of a product Stores products Transports products Creates assortments Provides financing Makes products readily available Guarantees products Shares risks
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For distribution of consumer goods, five different types of channels are widely used. Business goods are normally distributed through four major types of channels. There are only two common channels of distribution for services. Some producers are not content to use only a single distribution channel and use multiple channels (a.k.a dual distribution distribution) Multiple channels can aggravate middlemen and cause conflicts in the channels.
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Consumer Channels
PRODUCERS OF CONSUMER GOODS
Retailers
Retailers
Retailers
Retailers
ULTIMATE CONSUMERS
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Business Channels
PRODUCERS OF BUSINESS GOODS
Agents
Agents
BUSINESS USERS
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Service Channels
PRODUCERS OF SERVICES
Agents
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a tightly coordinated distribution channel designed to improve operating efficiency and marketing effectiveness. Corporate VMS: One firm owns other firms in channel or the entire channel-- Goodyear, Roots. Contractual VMS: Independents work together for much greater effectiveness: IGA, IDA. Administered VMS: Relies on economic power of one channel member-- Rolex, Kraft General Foods..
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Intensity of Distribution
SELECTIVE Distribution through multiple, but not all, reasonable outlets in a market
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Market Considerations: Type of market, concentration, potential customers, order size. Product Considerations: Consider unit value, perishability, technical nature of product. Intermediaries Considerations: Services offered, availability, attitude, dominance. Company Considerations: Desire for channel control, management, money and services seller can provide to support sales.
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Channel conflict exists when channel members interfere with each others objectives. Horizontal conflict involves firms on same level-grocery store vs. drug store. Vertical conflict involves firms at different levels producer versus wholesaler producer versus retailer Channel Power is the ability to influence or determine behaviour of others in channel. Based on expertise, rewards and sanctions.
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Producer/Retailer Conflict
Small suppliers complaints about large department stores:
Onerous logistical demands. Pressure to cut prices. Demands to give the stores exclusivity. Forcing suppliers to contribute advertising and promotional dollars to the stores. Requiring suppliers to invest in elaborate computerized inventory systems.
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More Complaints
Small suppliers complaints about discounters: Being asked to supply their goods on consignment. Being asked to deal directly with the retailers headquarters and to give to the retailer an amount equal to the commission that would have gone to manufacturers agents. Responses from smaller suppliers: Quit doing business with big retailers whose demands are too strict and outlandish. Become a retailer. Merge with another manufacturer.
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Legal Considerations
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Dealer Selection: Refusing to sell to some Selection: firms. Can be done carefully. Exclusive Dealing involves shutting out competitors, giving most business to one firm. Tying Contracts involves providing one item on condition other lines be carried as well. Exclusive Territories can create monopolies.
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Direct investment, including: Joint venture or partnership with a foreign company. Strategic alliance alliance. WhollyWholly-owned subsidiaries. Multinational corporation, in which the corporation, foreign and domestic operations are integrated and are not separately identified.
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