Distribution

1. Distribution

2. Distribution channel A distribution channel is the set of independent entities involved in the process of rendering a product or service available for use or consumption

3. Marketing channel decisions Are among the most critical decisions facing management Intimately affect all other marketing, and overall strategic decisions Involve relatively long-term commitments Create a key external resource Powerful inertial tendencies

4. Why distribution channels? Matching supply and demand The right quantities at the right time in the right place Location, location, location!

5. Three basic functions Adjusting the discrepancy of assortments Routinization of transactions Facilitate searching

6. Adjusting the discrepancy of assortments Producers make large quantities Customers want small quantities Sorting Arranging products or services according to class, kind, or size Sorting out Grading products or output Accumulation Aggregation of stocks from different suppliers Allocation Distribution according to a plan (e.g., breaking bulk) Assorting Putting together an appropriate package

7. Routinization of transactions Reducing the cost of distribution Standard transactions minimize cost of bargaining Automation of reordering, payment

8. Facilitate searching Aid producers and customers by structuring the information essential to both parties Intermediaries provide a place for buyers and sellers to find each other and exchange information Searching occurs because of uncertainty Intermediaries reduce uncertainty for both parties

9. What does technology do? Kills distance The distance between buyer and seller disappears Homogenizes time The Web site is open all hours and seasons Location is irrelevant, irrelevant, irrelevant! Move from marketplace to marketspace

10. Internet distribution matrix

11. The death of distance & re-assortment/sorting Customers can�t always get exactly the mix they want Music Maker Create your own CDs Postal delivery now In the future: Via the Web Press your own CD (or just store it on disk)

13. Death of distance & reassortment/sorting Pros Lowers costs Free global distribution One-to-one marketing Cons Rampant piracy? Record stores are bypassed Cyberpayments?

14. Death of distance & routinization The difficulty of routinely updating large industrial catalogs frequency complexity large numbers of customers RS Components Customized search pages 100,000 components � 6,000 new components per month Expect $65 ($59) million in 2 years GE Plastics DuPont Lubricants

16. Death of distance & searching Lufthansa�s global reservation system lets travelers book from anywhere to anywhere wherever you might be Pick up the tickets at the airport Access the timetables, fares, and routes of competitors Lufthansa can directly interact with customers all over the world.

17. Homogenization of time & reassortment/sorting Education is time and place bound Duke�s GEMBA allows its students to take elective courses anywhere, anytime over the Internet Students can self-assort the MBA program they want

18. Homogenization of time & routinization British Airways executive club info Millions by mail Every month Out-of-date on arrival Now On-line Up-to-the minute

20. Homogenization of time & searching Buyers and sellers often operate in different time spheres The Recruitment Business Monster Board 200,000 jobs Customized email updates for job seekers Who got it wrong? Times Higher Education Supplement Who got it right? jobs.ac.uk

22. Irrelevance of location & reassortment/sorting Dell Computers Web sales > $6 (%5.5) million/day Dell stock turn 30 times/year Compaq stock turn 12 times/year CEO fired in Spring 1999

24. Irrelevance of location & routinization Major business-to-business Web-based purchasing Caterpillar Attains an average saving of 6 percent through its Web supplier bidding system General Electric Bidding process has been cut from 21 to 10 days Cost of goods has declined 5 and 20 percent Priceline

26. Irrelevance of location & searching No discussion of marketing on the Internet is complete, regardless of how many times you�ve heard about it, talked about it �

27. From channels to media In the past, the channel was just that a conduit Now, it is for far more than just moving products A distribution medium rather than a channel

28. Commoditization The complex and the difficult becomes simple and easy So simple that anyone can do them, and does A natural outcome of competition and technological advance Prices plunge and essential differences vanish The new economy puts Commoditization into overdrive Speeds information flows Only antidotes A niche market too small to be attractive to others Innovation sufficiently rapid to stay ahead of the pack Or � a monopoly

29. Disintermediation As networks connect everybody to everybody, more opportunities for shortcuts When you can connect straight from the computer on your desk to the computer of your broker, stockbrokers look like overpriced terminal devices Supported by cheap, convenient and increasingly universal distribution networks (e.g., FedEx and UPS) As networks turn increasingly mass market, there is a continuous game of disintermediation and reintermediation To the winners go the customer relationships

30. Mass model of distribution and communication

31. Network model of distribution and communication

32. Conclusion The Web offers opportunities to perform the existing distribution functions of reassortment/sorting, routinization, and searching more efficiently and effectively Distribution will transform