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Marketing Distribution and Logistics. Chapter 12. The Nature of Distribution Channels. Distribution channel: a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user .
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Marketing Distribution and Logistics Chapter 12
The Nature of Distribution Channels • Distribution channel:a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user • The objective is to create place utility, the value of having the products where the customer wants them, when they want them • Distribution has two aspects: • Logistics: physical movement of goods • Strategy: who participates and what they do
Why use marketing intermediaries? Contractual efficiency Specialization of labour Economies of scale in operations Match supply with demand Distribution Channel Functions*For specific functions of Retailers and Wholesalers see your text Functions performed: • Gathering and distributing market information • Promotion of products • Contact with customers • Matching the offer with customer needs • Negotiation with customers and producers • Physical distribution of products • Financing to cover costs of channel functions • Risk taking from performing channel functions
What’s Happening? • http://www.youtube.com/watch?v=I_jIj4UWuRg
ANUFACTURER ONSUMER GENT ETAILER HOLESALER Typical Channels of Distribution For B2B & B2C Examples visit Exhibit 12-5 on page 335.
Hybrid Marketing Channel Producer Distributors Catalogue telephone Internet Sales force Dealers Retailers Business segment 1 Business segment 2 Consumer segment 2 Consumer segment 1
Conventional distribution channel: Channel members are independently owned Pursue their own corporate objectives Conflict may occur when goals differ Vertical marketing system: Channel members act as a unified system May have common ownership May contract for this arrangement Franchise systems are the most popular Horizontal marketing systems Two or more companies on the same level join together for mutual gain Airline alliances http://www.staralliance.com/en/travellers/index.html Types of Marketing Distribution Systems
Channel Behaviour Channel conflict:disagreement between channel members over goals and roles, who should do what and for what rewards • Horizontal conflict:conflict between firms on the same level • Vertical conflict:conflict between firms on different levels Disintermediation:displacement of a traditional member from the marketing channel • Selling direct via the Internet has caused much conflict between producers and their intermediaries
Distribution Alternatives • Intensive distribution:stocking the product in as many outlets as possible (per given market area) • Used for convenience goods • Exclusive distribution:giving a limited number of dealers the exclusive right to distribute the company’s products in their territories • Used for specialty or luxury goods • Selective distribution:the use of more than one, but fewer than all, of the intermediaries who are willing to carry the company’s products • Used for shopping goods
