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    9fms Pp15 9fms Pp15 Presentation Transcript

    • Chapter 15 Channels of Distribution: Conflict, Cooperation, and Management Sommers  Barnes Ninth Canadian Edition Presentation by Karen A. Blotnicky Mount Saint Vincent University, Halifax, NS Copyright © 200 1 by McGraw-Hill Ryerson Limited
    • Chapter Goals
      • To gain an understanding of:
      • The nature and importance of intermediaries
      • What a distribution channel is and does
      • The decisions involved in designing a channel of distribution
      • Major channels used to distribute consumer goods, business goods, and services
      • Vertical marketing systems
      • Intensity of distribution
      • Choice of intermediaries and conflict management
      • Legal considerations and channel arrangements
    • The Distribution Function
      • distribution is about getting the product or service to the customer as conveniently as possible; it deals with access and availability
      • intermediaries perform many of the distribution functions on behalf of suppliers
      • merchant intermediaries actually take title to physical products that they distribute
      • agents do not ever own the products, but they arrange the transfer of title
    • Distribution Channels
      • The role of distribution entails:
        • Arranging for its sale and transfer of title
        • Promoting the product
        • Storing the product
        • Assuming some risk during distribution.
      • Intermediaries often perform these activities for producer or consumer.
      • Provides market
      • information
      • Interprets consumers’
      • wants
      • Promotes producers’
      • products
      • Creates assortments
      • Stores products
      • Negotiates with
      • customers
      • Provides financing
      • Owns products
      • Shares risks
      • Anticipates wants
      • Subdivides large
      • quantities of a product
      • Stores products
      • Transports products
      • Creates assortments
      • Provides financing
      • Makes products
      • readily available
      • Guarantees products
      • Shares risks
      SALES SPECIALIST FOR PRODUCERS PURCHASING AGENT FOR BUYERS I N T E R M E D I A R Y The Distribution Functions
    • Designing the Channel
      • Channel design is a strategic marketing tool. Four decisions can be help a firm design a distribution channel:
      • what role distribution is to play in achieving objectives
      • what type of channel is needed? with or without intermediaries?
      • what level of intensity of distribution?
      • which specific intermediaries to use? which will be best suited to achieve objectives?
    • Specify the role of distribution within the marketing mix Select type of distribu- tion channel Determine appropriate intensity of distri- bution Choose specific channel members The Well-Designed Distribution Strategy
    • Selecting the Type of Channel
      • some firms will distribute directly; others will use a number of intermediaries:
        • producer  consumer (direct)
        • producer  retailer  consumer
        • producer  wholesaler  retailer  consumer
        • producer  agent  retailer  consumer
        • producer  agent  wholesale  retailer  consumer
      • when would each of these be considered?
    • Major Distribution Channels
      • For distribution of consumer goods, five different types of channels are widely used.
      • Business goods are normally distributed through four major types of channels.
      • There are only two common channels of distribution for services.
      • Some producers are not content to use only a single distribution channel and use multiple channels (a.k.a dual distribution )
      • Multiple channels can aggravate middlemen and cause conflicts in the channels.
    • ULTIMATE CONSUMERS PRODUCERS OF CONSUMER GOODS Retailers Retailers Retailers Retailers Merchant wholesalers Merchant wholesalers Agents Agents Consumer Channels
    • BUSINESS USERS PRODUCERS OF BUSINESS GOODS Merchant wholesalers (industrial distributors) Agents Agents Merchant wholesalers (industrial distributors) Business Channels
    • ULTIMATE CONSUMERS OR BUSINESS USERS PRODUCERS OF SERVICES Agents Service Channels
    • Multiple Distribution Channels
      • some firms will use several distribution channels to reach specific markets or segments
      • dual distribution is used, for example, to reach business and consumer markets, or to carry different groups of products
      • or may be used to reach different segments of the seller’s market; different sizes of buyers or different regions of the country
      • some companies operate their own stores
    • Vertical Marketing Systems (VMS)
      • a tightly coordinated distribution channel designed to improve operating efficiency and marketing effectiveness.
      • Corporate VMS: One firm owns other firms in channel or the entire channel-- Goodyear, Roots.
      • Contractual VMS: Independents work together for much greater effectiveness: IGA, IDA.
      • Administered VMS: Relies on economic power of one channel member-- Rolex, Kraft General Foods. .
    • INTENSIVE SELECTIVE EXCLUSIVE Distribution through every reasonable outlet in a market Distribution through multiple, but not all, reasonable outlets in a market Distribution through a single wholesaling middleman and/or retailer in a market Intensity of Distribution
    • Considerations in Channel Choice
      • Market Considerations : Type of market, concentration, potential customers, order size.
      • Product Considerations : Consider unit value, perishability, technical nature of product.
      • Intermediaries Considerations : Services offered, availability, attitude, dominance.
      • Company Considerations : Desire for channel control, management, money and services seller can provide to support sales.
    • Conflict and Control in Channels
      • Channel conflict exists when channel members interfere with each others’ objectives.
      • Horizontal conflict involves firms on same level-- grocery store vs. drug store.
      • Vertical conflict involves firms at different levels
        • producer versus wholesaler
        • producer versus retailer
      • Channel Power is the ability to influence or determine behaviour of others in channel.
        • Based on expertise, rewards and sanctions.
    • Producer/Retailer Conflict
      • Small suppliers’ complaints about large department stores:
      • Onerous logistical demands.
      • Pressure to cut prices.
      • Demands to give the stores exclusivity.
      • Forcing suppliers to contribute advertising and promotional dollars to the stores.
      • Requiring suppliers to invest in elaborate computerized inventory systems.
      • Small suppliers’ complaints about discounters :
        • Being asked to supply their goods on consignment.
        • Being asked to deal directly with the retailers’ headquarters and to give to the retailer an amount equal to the commission that would have gone to manufacturers’ agents.
      • Responses from smaller suppliers:
        • Quit doing business with big retailers whose demands are too strict and outlandish .
        • Become a retailer.
        • Merge with another manufacturer.
      More Complaints
    • Legal Considerations
      • Dealer Selection : Refusing to sell to some firms. Can be done carefully.
      • Exclusive Dealing involves shutting out competitors, giving most business to one firm.
      • Tying Contracts involves providing one item on condition other lines be carried as well.
      • Exclusive Territories can create monopolies.
    • Channels for Entering Foreign Markets
      • Exporting, through:
        • An export merchant in the manufacturer's country that buys goods and exports them.
        • An export agent located in either the manufacturer's or the destination country.
        • A company’s sales branches.
      • Contracting, via:
        • Licensing: Right to use production process, patents, trademarks, or other assets.
        • Franchising.
        • Contract manufacturing : having a foreign-based manufacturer produce the product
    • More Foreign Market Entry Channel Options
      • Direct investment, including:
        • Joint venture or partnership with a foreign company.
        • Strategic alliance .
        • Wholly-owned subsidiaries.
      • Multinational corporation , in which the foreign and domestic operations are integrated and are not separately identified.
    • The Changing Face of Distribution
      • Internet (“click and mortar” vs. “brick and mortar”) a major factor-- where is it heading?
      • Direct Response TV sales are growing in popularity, especially for time-starved shoppers
      • “ The world’s largest bookstore” is on the Internet! (Amazon.com)