DISTRIBUTION CHANNEL DECISION Distribution channel decisionDISTRIBUTION CHANNEL DECISIONIs a set of interdependent intermediaries are firms organizations that help or individuals such asmake a product available wholesalers, agents, selection of for use or consumption brokers, or retailers who by the consumer or help move a product from best alternative business user the producer to the consumer or business user.
TYPES OF INTERMEDIARIES1. RETAILER2. WHOLESALER
RETAILING Retailing includes all the activities in selling goods and services directly to final consumer for non business use.TYPE OF RETAILER1. Specialty store- narrow product line, Athelete’s foot ,reebok2. Department store- several products line, Nordstrom A-Z departmental store3. Super market- large, low cost, low margin, high volume, self service. Food emporium, Safeway ,bigbazar ,easyday, Subhiksha4. Convenience store- small store in residential area, often open 24*7. 7-eleven, circle-k, Reliance Fresh
Conti……5. Off- price retailing- leftover goods, irregular merchandise sold at less than retail, factory outlets. Tj max, Costco, samsonite ,6. Superstores- huge selling space, routinely purchased food and household item plus services (laundry, shoe repair, dry cleaning, deep assortment in one category). Pet smart, Star India Bazaar , Reliance Retail7. Catalog showroom- broad selection of high markup fast moving brand name goods sold by catalog at discount. Bike , New digital world(sony)
WHOLESALING Wholesaling includes all the activities in selling goods or services to those buy for resale or business use, it includes manufacturers and farmers. Because they are engaged primarily in production.TYPES OF WHOLESEALER1. Merchant wholesaler- independently owned businesses that take title to merchandise they handle they are full service and limited service jobbers distributer.
Conti..2. Full service wholesaler- carry stock maintain a sale force offer credit, make deliveries, provide management assistant.3. Limited service wholesaler- cash and carry wholesaler sale a limited line of fast moving goods to small retailer for cash, truck wholesaler, hospitals, restaurants.4. Broker and agent- facilities buying and selling on commission. Brokers bring buyer and seller together and assist in negotiation, insurance broker, real state broker.
Conti…5. Manufacturers and retailers branches and offices- wholesaling operation conducted by seller or buyer themselves rather than through independent wholesaler.6. Specialized wholesaler- agricultural assemblers (buy the agricultural output of many firms), petroleum bulk plants (consolidate the output of many wells)
FUNCTION OF INTERMEDIARIES1 Assorting2 Buying3 Contact4 Distribution5 Financing6 Market information
FUNCCTION OF INTERMEDIARIES7. New Products8. Product Planning9. Promotion10. Pricing11. Price negotiation14. Risk Taking
Types of Marketing Channels 1.Direct Channels 2.Indirect Channels 3.Single Marketing Channels 4.Multiple Marketing Channels 5.Vertical Marketing Systems
Companies Using Direct MarketingChannels Producer: Eureka forbes Personal Business buyer: Cummins Engine Co. selling Truck manufacturers (International market) Diesel engine Producer: Telebrand Telemarketing, Munder Capital Man- direct response Consumer agement (International advertising market) Mutual Fund Producer: Dell Computer Corp. Toll-free (International market) phone/fax ordering, Consumer Personal computers internet
Companies Using Indirect Marketing Channels A B Producer: Producer: Thousands of manufacturers Beecham ProductsExamples: Black & Decker, Stanley Tools, 3M, Weedeater Examples: Aqua-Fresh toothpaste, Mennen aftershave, Sucrets lozenges Wholesaler: Orgill Brothers, one of the world’s largest hardware Wholesalers, located in Memphis, Tennessee Retailers: Retailers: Thousands of drug, grocery & discount stores Thousands of hardware stores Examples: Wal-mart, Kroger, Eckerd Drugs, Walgreens Ultimate consumers: Ultimate consumers: Millions of people in the United Stated, Mexico, Millions of people around the world South & Central America
Companies Using Vertical Marketing Systems Corporate Forward integration: raymond ,Polo, Laura Ashley, Gulf States Paper Corp. Backward integration: Winn-Dixie grocery chain Description, One channel member owns one or more other channel members Contractual Wholesaler-sponsored voluntary groups: Ace Hardware, Western Auto Retailer-sponsored cooperative groups: Affiliated Grocers, Cotter & Company (True Value Hardware) Franchise system: McDonald’s, NIIT, APOLLO HOSPITAL Description Channel members operate according to contractual agreement Administered Abbott Labs, General Electric, Rolex Description Channel members operate according to agreed-upon plan
FACTORS AFFECTING CHOICE OF DISTRIBUTION CHANNELMarket Factors: Nature of Market Number of Potential Customers Geographic Concentration Order SizeProduct Factors: Unit value Perishable Goods Technical Nature of Products Sizes & weight of the productCompany Factors: Financial Resources Managerial Capability Desire for Channel Control Service provided by the seller
How a Marketing IntermediaryReduces the Number of ChannelTransactions
CHANNEL DESIGN DECISIONS Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Identifying Major Alternatives Intensive Selective Exclusive Distribution Distribution Distribution Evaluating the Major Alternatives Designing International Distribution Channels
Logistics Involves entire supply chain Increasing importance of logistics effective logistics is becoming a key to winning and keeping customers. logistics is a major cost element for most companies. the explosion in product variety has created a need for improved logistics management. information technology has created opportunities for major gains in distribution efficiency.
Market Logistics Involves the planning, implementing and controlling the physical flows of materials and final goods from point of origin to points of use to meet customer requirements at a profit. It involves materials management, distribution systems and IT systems interlinked with one another
Logistics objective Getting the right goods at the right place at the right time for the least cost ‘the last frontier for cost economies’.
Goals of Logistics system• Provide a Targeted Level of CustomerService at the Least Cost.• Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels Levels
Integrated Logistics ManagementConcept Recognizes that Providing Better Customer Service and Trimming Distribution Costs RequiresTeamwork, Both Inside the Company and Among All the Marketing Channel Organizations. Cross-Functional Teamwork inside the Company Building Channel Partnerships Third-Party Logistics
Logistics Functions• Order Processing• Warehousing• Inventory Management• Transportation Design system to minimize costs of attaining objectives
Inventory vs Service levels 100% Reorder point should balance the risks of stockouts against costs of overstocking Company needs to balance ordering costs vs inventory carrying costs inventory
Transportation Modes Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items
Top 10 Logistics Companiesin India: TNT Express AFL DHL Blue Dart Gati Safeexpress Ashok Leyland Packers & Movers DTDC First Flight