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PeterPreface14e_PPT_Ch10.pptxChapter 10 Distribution Strategy
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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Channel of Distribution
Combination of institutions through which a seller markets products to the user or ultimate consumer
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Classification of Marketing Intermediaries
Middlemen
Merchant middlemen
Wholesaler
Retailer
Broker
Manufacturer’s agent
Distributor
Jobber
Facilitating agent
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Figure 10.2 - Major Functions Performed in Channels of Distribution
Source: Roger A. Kerin, Steven W. Hartley, and William Rudelius, Marketing, 11th ed. (Burr Ridge, IL:McGraw-Hill Education, 2013), p. 379.
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Channels of Distribution
Direct channels: Selling directly to the market
Direct marketing: Using direct mail, telemarketing, direct-action advertising, catalog selling, cable selling, online selling, and direct selling through demonstrations
Indirect channels: Channels with one or more intermediaries
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Figure 10.3 - Conventional Channels of Distribution of Consumer Goods
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Figure 10.4 - Conventional Channels of Distribution for Organizational Goods
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Selecting Channels of Distribution
General considerations
Specific considerations
Distribution coverage required
Degree of control desired
Total distribution cost
Channel flexibility
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Figure 10.5 - General Considerations in Channel Planning
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Distribution Coverage Required
Manufacturer attempts to gain exposure through as many wholesalers and retailers as possible
Intensive distribution
Manufacturer limits the use of intermediaries to the ones believed to be the best available in a geographic area
Selective distribution
Manufacturer limits distribution, and intermediaries are provided exclusive rights within a particular territory
Exclusive distribution
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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
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Total Distribution Cost and Channel Flexibility
Major distribution costs to be minimized are:
Transportation, packaging and materials handling
Cost of lost business and order processing
Inventory carrying costs
Storage-space charges and cost of capital invested
Taxes and Insurance
Obsolescence and deterioration
Channel flexibility - Ability of the manufacturer to adapt to changing conditions
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Managing a Channel of Distribution
Marketing with conscious aim to develop and manage long-term and/or trusting relationships with customers, distributors, suppliers, or other parties in the marketing environment
Relationship marketing
Members are more dependent on one another and develop long-term relationships to improve efficiency and effectiveness
Vertical marketing system
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Figure 10.6 - Major Types of Vertical Marketing Systems
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Types of Vertical Marketing Systems
Administered systems: Higher degree of interorganizational planning and management than in a conventional channel
Contractual systems: Independent production and distribution companies enter into formal contracts
Retail cooperative organization
Wholesaler-sponsored voluntary chain
Various franchising programs
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Types of Vertical Marketing Systems
Corporate systems: Single ownership of two or more levels of a channel
Forward integration: Manufacturer’s purchasing wholesalers or retailers
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
Called distributors in some industries
Create value for suppliers, retailers, and users of goods by handling their functions
Wholesalers need to attract retailers and organizational customers to buy from them
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Store Retailing
Retailers vary in the:
Types of merchandise they carry
Breadth and depth of their product assortments
Amount of service they provide
Mass merchandisers: Carry broad assortments of goods and compete based on selection and price
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Store Retailing
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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Nonstore Retailing
Catalogs and direct mail
Vending machines
Television home shopping
Direct sales
Online retailing: Marketing of products and services directly to consumers via the Internet
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Nonstore Retailing
Mobile retailing: Marketing of products and services directly to consumers via smartphones and tablets
Multichannel marketing: Offering products and services in multiple channels
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Online Retailing: Advantages and Disadvantages for Marketers
Advantages
Reduces the need for stores, paper catalogs, and salespeople
Can be cost efficient
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 24/7
Fosters the development of one-on-one, interactive relationships with customers
Disadvantages
Strong price competition squeezes profit margins
Less effective and efficient in business-to-consumer markets than in business-to-business markets
Limits the market to customers who are willing and able to purchase electronically
Low entry barriers overemphasize order taking than fulfilling
Advertising is expensive
Not good for selling touch-and-feel products
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