1 MarketingChannels of Distribution 2 Channels of Distribution
Systems of interdependent organizations that direct the flow of product (title/possession) from producers to buyers.
Producers Intermediaries Customer 3 Channels of Distribution
create time, place, possession and information utilities.
PLACE TIME POSSESSION Information Utility Box 2 37 57 1 1 9 24 Creating utilities for customers. 4 Channel FunctionsProducer Intermediaries Customer (Facilitate exchange) Accumulating breaking bulk Creating Assortments (sort to quantity Materials handling Transporting Inventory storage Reducing transactions 5 Distribution Channels Facilitate Specialization
Intermediaries provide Exchange efficiencies
Intermediaries Producer Customer Connectivity is King for product delivery when and where 6 Channel Functions Promotion Producer Collaborators Customer (Facilitate exchange)
- Cooperative advertising
- In Store Sales promotion
Advertising Agencies Sales Promotion Personal Selling Merchant sales reps sell only, no title transfer 7 Promotional Pull Strategy ... Producers promote to the target audience to stimulate demand and Pull the product through the distribution channel to customers. Promotes to Producer Wholesaler Retailer Customer Orders Orders Request 8 Promotional Push Strategy
Producers promote to marketing intermediaries to Push the product through the distribution channel to consumers.
Company Resources Objectives - adaptability/control - performance quality level
Ease of Doing Business
Order Processing Quality
17 Changes in PC Buying Behavior affect Dell (Direct sales)
PC companies are refocusing on the consumer market (15 of
Dells sales of 56 bil/yr vs the business market) where consumers like
to hold test models in a store. Consumers prefer laptops due
to new wireless technology on the go convenience.
WSJ, Consumer Demand and Growth in Laptops Leave Dell Behind, 30Aug06 18 Changes in PC Buying Behavior affect Dell (Direct sales)
PC companies are focusing on the consumer market
(15 of Dells sales of 56 bil/yr vs the business market) where
consumers like to hold test models in a store.
Consumers prefer laptops due to new wireless
technology on the go convenience.
WSJ, Consumer Demand and Growth in Laptops Leave Dell Behind, 30Aug06 19 Channel Design Criteria To Select Collaborators
Technical service support
On time delivery/reliability
Total costs, a systems view, Examples of compensation Trade, quantity, promotion cash discounts.
20 Channel Design1 Target Market Coverage Intensive distribution Exclusive distribution Selective distribution 21 Market Coverage Legal Issues Strategic Alliances..the products of one organization are distributed through the marketing channels of another Dual Distribution A producer can use two different channels to reach the same target market if it is not trying to engage in unfair competition put its independent distributors out of business
Restricted Sales Territories - Granting exclusive sales territory rights to distributors is permissible if the rights do not restrain trade
22 Direct Marketing Channels
Toll free phone
23 Direct Marketing can eliminate the middleman but not the functions 24 (No Transcript) 25 Liquor Wholesaler A Mandated Middleman Direct Sales of Alcohol Applied Marketing
Issue Florida wine aficionados desire vintages direct from California.
Ecommerce simplifies the P to C relationship by passing wholesalers their 18-25 price cut
Current Legislation direct shipment to consumers is a misdemeanor (1st time ), a felony (2nd time violation )
Rationale (a) to prevent underage drinking and (b) to collect state taxes
UpdateJuly06,.5 -3mil (teens) buy on line 26 Channel Integration Manufacturer Forward integration member acquires a downstream member Backward integration member acquires an upstream member Wholesaler Retailer Franchise member licenses property to independent business Consumer 27 Vertical Channel Integrationseeks to control 2 or more levels Oil field, Oil rig, Pipeline transport, Refinery, transport, Station storage,
Consumer Consumer Consumer
28 (No Transcript) 29 Horizontal Channel Integration seeks economies of scale via advertising, purchasing,etc (Contractual Systems)
Wholesaler Sponsored (Ace Hardware)
Retailer Sponsored (IGA)
Franchise Systems (McDonaldss)
30 Channel Systems(Examples)
Corporate 1 channel member owns
. other channel members
Contractual channel members operate under contractual agreements (franchises)
Administered channel members operate based on agreed upon plans (Channel Captains)
31 Peoples Bank Applied Marketing
Founded in 1842,it is the largest state-chartered bank in Connecticut.
Is part of multiple horizontal vertical distribution systems with Travelers, Hartford, Kemper, and Chubb to offer auto, home business insurance.
uses a zero-level or direct marketing channel to distribute its financial services
or vertical system for collaborators (Brokerage services).
hhh 32 Other Distribution Issues
33 MAJOR RECALL Applied Marketing
Mitsubishi Motors Corp. presents a public image of economic value purity but in reality
it was forced to recall vehicles to fix a potentially defective ball joint in the front suspension
Affects models made between 1992 and 2001
960,000 vehicles recalled in U.S.
400,000 vehicles recalled in Japan
156,000 vehicles in other countries
Source The Wall Street Journal February 16, 2001,Page A3 34 Distribution Channel Legal Issues
Tying Contracts - Requiring a channel member to buy additional products from the supplier in order to purchase a particular product from the supplier
Full-Line Forcing - Requiring a channel member to carry a suppliers entire product line to obtain any of the suppliers products
35 Channel Legal Issues
Resale Price maintenance ,
Refusal to Deal - Suppliers can choose their distributors and refuse to deal with others if their decisions are not based on anticompetitive motives or are not part of an organized refusal-to-deal with certain channel members.
Exclusive Dealing-Forbidding an intermediary to carry products of a competing manufacturer
Is anticompetitive if
it blocks competitors from 10 of the market
sales revenues are sizable
the manufacturer is larger than the dealer
36 Channel Captain The dominant member (producer, wholesaler, or retailer) establishes channel policies coordinates the marketing mix Channel Relationships Supply Chain Management
Leadership by example
Power to enforce
37 Types of Channel Power (The ability of one channel member to influence another members goal achievement)
Power Control Performance 38 Supply Chain ManagementChannel Conflict
Sources of Channel Conflict
Disagreements on responsibilities
Communication difficulties reduce coordination
Increased use of multiple distribution channels by manufacturers creating conflicts with distributors and retailers
Intermediaries diversifying into and offering competing products
Producers try to circumvent intermediaries and deal directly with retailers
39 CHANNEL CONFLICT Large retailer threatens to stop buying a product unless the suppler grants unreasonably low prices and/or high supports services Coercive power? Ethical Decision? Survival Decision? 40 Marketing Channels Form a Supply Chain
Supply Chain Management
Long-term partnerships among channel members that reduce inefficiencies, costs, and redundancies and develop innovative approaches to satisfy customers
Optimizes costs throughout the whole channel for efficiency and service
Includes all entities that facilitate product distribution and benefit from cooperative efforts
Arises from the need to achieve a more competitive position