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Distribution strategy

Distribution strategy. Module 9. Lecture Overview. The role of placement in the marketing mix What is a marketing channel? Three reasons for using intermediaries. The role of placement in the marketing mix. Also known as ‘distribution’ The way that the product gets from the

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Distribution strategy

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  1. Distribution strategy Module 9

  2. Lecture Overview • The role of placement in the marketing mix • What is a marketing channel? • Three reasons for using intermediaries

  3. The role of placement in the marketing mix • Also known as ‘distribution’ • The way that the product gets from the • manufacturer to the end user • Involves all the activities that make the product available to target markets

  4. What is a marketing channel? • Set of interdependent organisations that facilitate the transfer of ownership as products move from producer to business user or consumer

  5. Three reasons for using intermediaries • Specialisation and division of labour • Overcome discrepancies • Contact efficiency

  6. Specialisation and the division of labour • Focusing on what channel members do best • each channel member has an area of specialisation • Manufacturer’s usually lack of distribution facilities and expertise • high cost of acquiring distribution capability • Specialisation leads to efficient performance and greater economies of scale • Results in lower prices

  7. Overcome discrepancies • Discrepancy of quantity and assortment • manufacturers produce large quantities of a narrow range of products • consumers want small quantities of a wide range of products • Time and place discrepancies

  8. Contact efficiency LG SONY TOSHIBA PHILLIPS Consumer Consumer Consumer Consumer LG SONY TOSHIBA PHILLIPS WUXING Consumer Consumer Consumer Consumer

  9. Session overview • Types of channel intermediaries • Marketing channel functions

  10. Retailers • Sell mainly to consumers for personal and household consumption • Various types of retailers • department stores, discount stores, supermarkets, convenience stores, specialty stores, category killers etc.

  11. Wholesalers • Merchant wholesalers • take title • full versus limited function • Agents and brokers • do not take title • limited function • Which type should be used? • Exhibit 8.2, p.252

  12. Marketing channel functions Transactional *contacting and promotion *negotiating *risk taking Logistical *transporting *sorting *storing Channel functions Facilitating *researching *financing

  13. Lecture Overview • Channel structure • Factors influencing channel structure • Distribution intensity

  14. Traditional channel structures Direct channel Retailer channel Wholesaler channel Agent/broker channel Producer Producer Producer Producer Agents or brokers Wholesalers Wholesalers Retailers Retailers Retailers Consumers Consumers Consumers Consumers

  15. Alternative channel structures • Multiple channels • two or more channels are used • i.e. traditional and direct marketing or Internet marketing • Non-traditional channels • Internet, mail order, ATM’s, vending machines • Adaptive channels • used when critical but rare customer requirements cannot be fulfilled by the current channel • Strategic alliances • cooperative agreement with other manufacturer to use their established channel

  16. Factors influencing channel structure • Market factors • buying behaviour of target markets • who, what, where, when, why, and how? • market size, location, density • Product factors • complexity, price, degree of customisation, lifecycle stage, bulk, perishability etc. • Producer factors • financial situation, size, expertise, desire for control etc.

  17. Distribution intensity Intensive (many) Selective (few) Distribution Intensity Exclusive (one)

  18. Distribution intensity

  19. Learning activity • Using the table below, identify one product that is distributed via each of the various channel structures discussed above. Provide a brief rationale for why that marketing organisation may have elected to use that channel structure.

  20. Session overview • Managing channel relationships • Channel power • Channel conflict • Channel partnering

  21. Channel power

  22. Channel conflict • One channel member impedes or seeks to impede the goal attainment of another channel member • Causes of conflict • different goals • role ambiguity • rewards • horizontal conflict (same level) • vertical conflict (different level)

  23. Channel partnering • Channel members are highly interdependent for goal attainment • Channel cooperation • joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage • collaborative efforts to improve channel efficiency and effectiveness • Exhibit 8.7, p 265 compares transaction based versus partnership-based firms

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