Weekly Discussion

Jump to Figure 10.4: Conventional Channels of Distribution for Organizational Goods, Appendix

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8

Selecting Channels of Distribution, 1

General considerations

Customer characteristics

Product characteristics

Intermediary characteristics

Competitor characteristics

Company characteristics

Environmental characteristics

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Selecting Channels of Distribution, 2

Specific considerations

Distribution coverage required

Degree of control desired

Total distribution cost

Channel flexibility

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Distribution Coverage Required

Intensive distribution: Manufacturer attempts to gain exposure through as many wholesalers and retailers as possible

Selective distribution: Manufacturer limits the use of intermediaries to the ones believed to be the best available in a geographic area

Exclusive distribution: Manufacturer limits distribution, and intermediaries are provided exclusive rights within a particular territory

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Degree of Control Desired

Seller must make decisions concerning the degree of control desired over the marketing of the firm’s products

Degree of control achieved by the seller is proportionate to the directness of the channel

When more indirect channels are used, the manufacturer must surrender some control over the marketing of the firm’s product

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Total Distribution Cost and Channel Flexibility, 1

Channel of distribution should be viewed as a total system composed of interdependent subsystems

Objective of the system manager should be to optimize total system performance

Major distribution costs to be minimized are:

Transportation

Order processing

Cost of lost business

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Total Distribution Cost and Channel Flexibility, 2

Inventory carrying costs

Storage-space charges, cost of capital invested, taxes, insurance, obsolescence, and deterioration

Packaging

Materials handling

Channel flexibility: Ability of the manufacturer to adapt to changing conditions

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Managing a Channel of Distribution

Relationship marketing

Marketing with the conscious aim to develop and manage long-term and slash or trusting relationships with customers, distributors, suppliers, or other parties in the marketing environment

Long-term relationships throughout the channel lead to higher-quality products with lower costs and can account for the increased use of vertical marketing systems

Vertical marketing systems: Channels in which members are more dependent on one another and develop long-term working relationships to improve efficiency and effectiveness

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Types of Vertical Marketing Systems, 1

Administered systems: Have higher degree of interorganizational planning and management than in a conventional channel

Contractual systems: Involve independent production and distribution companies entering into formal contracts to perform designated marketing functions

Types

Retail cooperative organization

Wholesaler-sponsored voluntary chain

Various franchising programs

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Types of Vertical Marketing Systems, 2

Corporate systems: Single ownership of two or more levels of a channel

Forward integration: Manufacturer’s purchase of wholesalers or retailers who distribute its products

Backward integration: Wholesalers or retailers purchase channel members above them

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Wholesaling

Wholesalers are merchants engaged in buying, taking title to, storing and physically handling goods, and reselling the goods to retailers or to industrial or business risers

Also called distributors in some industries

Create value for suppliers, retailers, and users of goods by performing distribution functions efficiently and effectively

Try to attract producers to use their services

Need to attract retailers and organizational customers to buy from them

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Store Retailing, 1

Retailers vary in the:

Types of merchandise they carry

Breadth and depth of their product assortments

Amount of service they provide

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Store Retailing, 2

Types of retailers

Mass merchandisers: Carry broad product assortments and compete on two bases

Specialty stores: Handle deep assortments in a limited number of product categories

Limited-line stores

Single-line stores

Category killers

Convenience stores: Retailers whose primary advantages are location convenience, close-in parking, and easy entry and exit

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Methods of Nonstore Retailing

Catalogs and direct mail

Vending machines

Television home shopping

Direct sales or telemarketing

Online retailing

Mobile retailing

Multichannel marketing: Offering products and services in stores, in catalogs, and online

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Online Retailing: Advantages for Marketers, 1

Reduces the need for stores, paper catalogs, and salespeople

Allows good visual presentation and full description of product features and benefits

Allows vast assortments of products to be offered efficiently

Allows strategic elements, such as product offerings, prices, and promotion appeals, to be changed quickly

Allows products to be offered globally in an efficient manner

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Online Retailing: Advantages for Marketers, 2

Allows products to be offered 24 hours a day, 365 days a year

Fosters the development of one-on-one, interactive relationships with customers

Provides an efficient means for developing a customer database and doing online marketing research

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Online Retailing: Disadvantages for Marketers, 1

Strong price competition online often squeezes profit margins

Low entry barriers lead some e-marketers to overemphasize order-taking and not develop sufficient infrastructure for order fulfillment

Customers must go to the website rather than having marketers seek them out via salespeople and advertising

Limits the market to customers who are willing and able to purchase electronically

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Online Retailing: Disadvantages for Marketers, 2

Not as good for selling touch-and-feel products as opposed to look-and-buy products unless there is strong brand, store, or site equity or the products are homogeneous

Often less effective and efficient in business-to-consumer markets than in business-to-business markets

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APPENDICES

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Figure 10.3: Conventional Channels of Distribution of Consumer Goods, Appendix

The first channel presents two rectangular boxes. It begins with a rectangular box labeled manufacturer. An arrow from this box points to a rectangular box labeled consumers. The second channel presents three rectangular boxes. It begins with a rectangular box labeled manufacturer. An arrow from this box points to a second rectangular box labeled retailers. Another arrow from the second box leads to a third box labeled consumers. The third channel presents four rectangular boxes. It begins with a rectangular box labeled manufacturer. An arrow from this box points to a second rectangular box labeled wholesaler. An arrow from the second box points to the third box labeled retailers. An arrow from the third box points to the fourth box labeled consumers. The fourth channel presents four rectangular boxes. It begins with a box labeled manufacturer. An arrow from the first box points to a second rectangular box labeled agent. An arrow from the second box points to the third box labeled retailers. An arrow from the third box points to the fourth box labeled consumers. The fifth channel presents five rectangular boxes. It begins with a box labeled manufacturer. An arrow from this box points to the second box labeled agent. An arrow from the second box points to the third box labeled wholesaler. An arrow from the third box points to the fourth box labeled retailers. An arrow from the fourth box points to the fifth box labeled consumers.

Jump back to Figure 10.3: Conventional Channels of Distribution of Consumer Goods

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Figure 10.4: Conventional Channels of Distribution for Organizational Goods, Appendix

The first channel contains two rectangular boxes. It begins with a rectangular box labeled manufacturer. An arrow from this box points to a rectangular box labeled organizational users. The second channel contains three rectangular boxes. It begins with a rectangular box labeled manufacturer. An arrow from this box points to the second rectangular box labeled organizational distributors. An arrow from the second box points to the third box labeled organizational users. The third channel contains three rectangular boxes. It begins with a rectangular box labeled manufacturer. An arrow from this box points to the second rectangular box labeled agents. An arrow from the second rectangular box points to the third rectangular box labeled organizational users. The fourth channel contains four rectangular boxes. It begins with a box labeled manufacturer. An arrow from this box points to the second box labeled agent. An arrow points from the second box to the third box labeled organizational distributors. An arrow from the third box points to the fourth box labeled organizational users.

Jump back to: Figure 10.4: Conventional Channels of Distribution for Organizational Goods

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