handle, how many channels it can use, which transportation can be used…
characteristics of intermediaries , intermediaries differ in their abilities to handle promotions, customer contact, storage and credit e.g. the company’s own sales force is more intense in selling.
competitors’ channel , some companies may prefer to compete in or near the same outlets that carry competitors’ products, some may not e.g. Burger King wants to locate near McDonald’s
environmental factors , economic conditions and legal constraints affect channel design decisions e.g. in a depressed economy, producers want to distribute their goods in the most economical way, using shorter channels.
The advent of print media, the telephone, radio, television, and the Internet have all provided new ways for marketers to get their message to their intended audience. As various technologies advance, these information channels offer more precise delivery of a message. Can you identify an emerging information distribution channel? Discussion Question
Intensive distribution- strategy in which companies stock their products in as many outlets as possible. Convenience products and common raw materials must be available where and when consumers want them e.g. toothpaste, candy… Procter & Gamble, Coca-Cola .
It consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone.
three types of contractual VMSs;
wholesaler-sponsored voluntary chains ; are contractual marketing systems in which wholesalers organize voluntary chains of independent retailers to help them compete with large corporate chain organizations. E.g-vegetables n food market
retailer cooperatives ; are contractual marketing systems in which retailers organize a new, jointly owned business to carry on wholesaling and possibly production.e.g vishal, amartex
franchise organizations ; are contractual marketing systems in which a channel member, called a franchiser, links several stages in the production-distribution process.
Parle brands: thums up, gold spot, limca, mazza
NIIT, Aptech, SSI
three forms of franchisees;
manufacturer-sponsored retailer franchise system e.g. Ford licenses dealers to sell its cars. The dealers are independent businesspeople who agree to meet various conditions of sales and service.
manufacturer-sponsored wholesaler franchise system e.g. Coca-Cola licenses bottlers (wholesalers) in various markets who buy Coca-Cola syrup concentrate and then carbonate, bottle and sell the finished product to retailers in local markets.
service-firm-sponsored retailer franchise system in which a service firm e.g. McDonald’s, Burger King, Holiday Inn licenses a system of retailers to bring its service to consumers.
E.g. Coca-Cola and Nestle formed a joint venture to market ready-to-drink coffee and tea worldwide. Coke provided worldwide experince in marketing and distribution beverages and Nestle contributed two established brand names - Nescafe and Nestea .
Channel systems can vary from country to country. Each country may have its own unique distribution system. International marketers have to adapt their channel strategies to the existing structures within each country.
Physical Distribution and Logistics Management
Companies must decide on the best way to store, handle and move their products and services so that they are available to customers in the right amount, at the right time, and in the right place.
Logistics effectiveness has a major impact on (1) customer satisfaction and (2) company costs (15% of the product’s price).
Marketing logistics includes planning, implementation, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.
Logistics deal with
outbound distribution - moving products from the factory to customers,
inbound distribution - moving products and materials from suppliers to the factory.
manage the whole-channel activities of suppliers, purchasing agents, marketers, channel members and customers.
storage warehouse s store goods for moderate to long periods
distribution centers are designed to move goods rather than just store them. They are large and automated warehouses designed to receive goods from suppliers, take orders and deliver goods to customers.
Automated warehouses with advanced materials handling systems under control of a central computer
Order (reorder) point-stock level to place a new order
how much to order.
Balance order processing costs & inventory carrying costs
Order processing cost-setup costs + running costs
Just-in-time logistic systems are used by some companies in which the producers carry only small inventories only enough for a few days of operations. Such systems result in savings in inventory carrying and handling costs.
the need to transfer goods from truck to rail and back again. They are efficient for short hauls of high-value products. They can offer faster service.
Water ; the cost is very low for shipping bulky, low-value, nonperishable products e.g. coal, oil, metallic ores. It is the slowest mode and affected by the weather.
Pipeline ; are specialized means of shipping petroleum, natural gas and chemicals from sources to markets. It costs less than rail but more than water.
Air ; costs higher than rail and truck but ideal when speed is needed and distant markets have to be reached. Products are perishables (fresh fish, cut flowers), high-value, low-bulk items (technical instruments, jewellery).