PLACE/ CHANNEL OF DISTIBUTION Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual store on internet. The distribution channel is the movements of goods and services between the point of production and the point of consumption through organization that perform variety of marketing activities. The major participants in the distribution channels are producer, intermediaries and consumers.
Definitions of Marketing Channels/Channelof DistributionAccording to American Marketing Association, “ A channel of distribution, or marketing channel, is the structure of intra-company organization units and extra company agents and dealers, wholesale and retail through which a commodity, product or service is marketed.” According to Philip kotler, “ Every producer seeks to links together the set of Marketing intermediaries that best fulfill the firm’s objectives. This set of marketing intermediaries is called the Marketing Channels. (Also called Trades channel or Channel of Distribution.)”
Definitions of Marketing Channels According To William J Stanton, “ A Channel of distribution for product is the rout taken by the title to the goods as they move from the producer to the ultimate consumer or industrial user.”
Importance of Marketing Channels Time and Place utility. Convenience to Consumers. Relive from Marketing Problems. Information to the producer. Stability in Prices. Promotional Activities. Storage of finished goods. Finance the producer.
Functions of Marketing Channels Information Provider. Price Stability. Promotion. Financing. Title. Help in Production Function. Matching Demand and Supply. Matching Buyer And Seller.
Intensive Distribution. Intensive distribution is a form of distribution in which the manufacturer distributes its products through as many outlets as possible. This type of distribution is used for those products that are characterized by low involvement of customer and where customers look for location convenience. Product like chocolates, biscuits, shaving blades, soaps and detergents are distributed in the manner, so that they are easily available to the customer at the nearest location.
Selective Distribution This alternative is middle path approach to distribution. Here, the firm selects some outlets to distributes its product. This alternative helps focus the selling efforts of manufacturing firms on a few outlets rather than dissipating it over countless marginal ones. It also enables the firm to establish a good working relationship with the channel members. Selective distribution can help the manufacturer gain optimum market coverage and more control but at lesser cost than intensive distribution. Selective distribution is appropriate for consumer shopping goods, such as various types of clothing and appliances and for business accessory equipments.
Exclusive Distribution When the firm distributes its brand through just one or two major outlets in the market, who exclusively deals in it and not all competing brands, we say that the firm is using an exclusive distribution strategy. This is common form of distribution in products and brands that seeks high prestige image. Typical example are designer ware, major domestic appliances and even automobiles.
Objectives of Distribution Management Provides convenience to the customers in getting the product at the right time and the right place. Achieve the optimum distribution cost. Ensures the best possible coverage of the target market. Give the choice of selection of goods to consumers. Reduce the chances of damage or breakage of goods during the transport and sorting. Effective display and storage of goods. Motivate channel members for effective promotion and selling of products. Resolve the channel conflicts successfully.
Channel Design Steps involved in Designing a Channel System.2.Formulating Channel Objectives.3.Identifying Channel functions.4.Linking design to Product Characteristics.5.Evaluation of the distribution Environment.6.Evaluation of competitors Channels Design.7.Matching Channel Design to Company Resources.8.Evaluating the Alternatives and Selecting the Best.
Consumer and Business Channels
Definition of Wholesaling According to Philip Kotler, “ Wholesaling consist of the sale and all activities in selling goods or services to those who buy for resale or business use.” According to American Marketing Association “Wholesalers sell to retailer or other merchants and or industrial, institutional and commercial users, but do not sell in significant to ultimate consumers.”
IMPORTANCE OF WHOLESALERS1. Services to the Manufacturers.ii. Stocking.iii. Market Information.iv. Expertise Knowledge.v. Assist in Production.vi. Financingvii. Risk Reduction.
IMPORTANCE OF WHOLESALERS2. Services to Retailers.ii. Convenient Buying.iii.Stocking.iv.Expertise Knowledge.v. Financing.vi.Market information.vii.Risk Reduction.3. Services to the Society.
FUNCTIONS OF WHOLESALERS. Selling and Promoting. Buying and Assortment Building. Bulk Breaking. Warehousing. Transportation. Financing. Risk Bearing. Market Information. Management Services and Counseling.
MAJORS WHOLESALERS TYPES1. Merchant Wholesalers.ii. Full Services Wholesalers. a. Wholesale Merchants. b. Industrial Distributors.4. Limited service Wholesalers.v. Cash and carry Wholesalers.vi. Truck Wholesalers.vii. Drop Shippers.viii. Rack Jobbers.ix. Mail order Wholesalers.
MAJORS WHOLESALERS TYPES3. Merchandising Brokers and Agents.ii. Brokers.iii.Agents. a) Manufacturer Agents. b) Selling Agents. c) Purchasing Agents. d) Commission Agents. 4. Manufacturer and Retailers Branches Offices. 5.Miscellineous Wholesalers.
Definitions of Retailing According to William J Stantons, “ A Retailer or Retail store is a business enterprise which sells primarily to the ultimate consumers for non business use.” According to Cundiff and Still, “Retailing consist of those activities involved in the selling directly to ultimate consumers. ” According to Mc. Carthy. “ Retailing is selling to final consumer products to households.”
Importance of Retailing Services to Wholesalers and Producers.b) Advertisement of new products.c) Arrangement to sell the goods.d) Information about consumer habits, tastes and needs.e) Sharing of Risks. Services to consumers.g) Selection.h) Variety of goods.i) Demand creation.j) Distribution.k) Credit Facility.
Functions of Retailing. Sorting. Breaking Bulk. Holding Stock. Additional Services. Channel of Communication. Transport and Advertising Functions
Types of store Retailers Retail Store-it is a merchant or business establishment that sells mainly to the end consumers. The retailer specializes in a particular line or category of a product. It offers a logical outlet with similar or associated goods or services to serve a particular needs of the target market. Independent Retail Store- it is a retail store controlled by its individual ownership referred to as proprietors firm. Franchisee- it is an independent establishment that has a contractual arrangement with a manufacturer to sell its entire product line, usually with exclusive rights to sell within an assigned territory.
Departmental store- it is an independent establishment that displays and offers a great variety of products for sale, where appropriate departments or categories of use or need offer separate merchandise. It is a one stop shopping store, which caters to all shopping needs of the consumers in its luxurious settings. The departmental store offers readiness to serve complete needs of the consumers. It presents a wide variety and choice of products to attract customers and uses well developed merchandising techniques. Discount store- It is a retail outlet engaged in selling merchandise at prices below those that are changed. The discounter provides emphasis on a high volume of sales and rapid inventory turnover. Aggressive merchandising techniques are employed.
Super markets- they are large, low margin, high volume, low cost, self service stores that carry a wide variety of ready to eat snacks, grocery and households products. Hypermarkets- it is a place where consumers can buy groceries, foods, garments, home appliance, durables, toys, cosmetics, books and music at a price that is always lower than the market price by 5 percent and onwards. Convenience store- it is a small located near a residential area that is open long hours seven days a week and carries a limited line of high turnover convenience goods. Superstore- it is a store almost twice the size of a regular supermarket that carries a assortment of routinely purchased products. The factory outlets store is an off price retailing operation that is owned an operated by a manufacturer surplus, discounted or irregular goods at marked down price.
Difference between Wholesaler and Retailer.Criteria Wholesaler RetailerBuyers Business customers, i.e. Retailers Final Customers, i.e. End usersBuying Motive of For reselling/trading. Wholesaler or producer in case largeBuyers retailers.Business Volume High. Low.Risk Involved High. Less.Investment High. Moderate.requirementPromotional Less Important. Very important.ActivitiesStore Atmosphere, Less attention. Very Important Hence maximumLayout & Location attention.Area covered Large area covered many areas Relatively small- mostly retailers operate territories can be handle by in small area. single wholesaler.Upper link Producer Wholesaler or producer in case of large retailers.
Direct Marketing Direct marketing is defined as an interactive system of marketing, which uses non personal media of communication to make a sale at any location or to secure a measurable response. Direct marketing is a method wherein the manufacturer or producer sells directly to retailer, user or ultimate consumers without intervening intermediaries. This offers flexibility with maximum controls of sales efforts and marketing information feedback. Various forms of Direct Marketing-telemarketing, Direct mail marketing, television ,marketing,
Franchising Concept of Franchising. Franchise in French means privilege or freedom. Franchising refers to the methods of practicing and using another persons philosophy of business. The franchisor grants the independent operators the right to distributes its products, techniques and trademarks for a percentage of gross monthly sales and royalty fee. Various tangibles and intangibles such as national or international advertising , training and other support services are commonly made available by the franchisor. Agreements typically last five to twenty years, with premature cancelation or termination of most contracts bearing serious consequences for franchisees.
Advantages and Disadvantages offranchising Advantages to the Franchiser2. Low capital and low risks.3. Speedier expansion.4. Extended Market penetration.5. Motivation of the Franchisee. Disadvantages to the Franchiser7. Business control8. Expenses involved.9. Lower profit potential
Advantages to the Franchisee2. Reduce Business Risk.3. Operational Advantage.4. Easy Financing of the firm.5. Quick Start. Disadvantages to the Franchisee7. Limited freedom8. Fee payment9. Non performance of Franchiser.