An introductory workshop to channels of distribution

1. Introduction to Channels of
Distribution
Workshop

2. Learning Objectives
Why study marketing Channels
What a marketing Channel is
Why manufacturers choose to use
intermediaries between themselves and end-
users
What marketing flows define the work of the
channel
Who the members of marketing channels are
and the flows in which they can specialise

3. Why Marketing Channels are
important?
1. The channel is the gatekeeper
2. The channel is an important asset in the company’s
overall marketing and positioning strategy.
3. Channel experience impacts end-user’s perception of a
brand image.
4. Channel key strategic marketing asset
5. Useful to develop a framework for managing a channel to
operate more effectively.

4. What is a Marketing Channel?
A marketing channel is a set of interdependent
organisations involved in the process of making a
product or service available for use or
consumption.

5. Primary Functions of Channel Members
to be a stockist of your product
to represent your brand in the market place
to gather marketing intelligence
to assume risk
to deliver product and offer post sales
support
to add value to the sale

6. How Channel Members Add Value

7. What recent channel issues have
Starbuck experienced with their
outlets?

8. Distribution is Global
http://video.google.com.au/videosearch?q=starbucks+distribution&hl=en&emb=1&aq=-
1&oq=#q=starbucks+store+closures&hl=en&emb=1

9. What challenges and opportunities
does Wrigley’s face in distributing
chewing gum in China?

10. Wrigley’ s Chews
through China
•Distribution in China expanded
from 20 stores to 1.6 million
outlets (Shanghai accounts for
30,000)
•Outlets (Mum and Pop Shops)
• A single pack of gum sold for
only 18 cents, its twenty
percent profit margin led to
hundreds, then thousands, then
tens of thousands of loyal
dealers.
•"I make 0.3 yuan [about 4
cents] from each pack," a
Chinese newspaper quoted one
satisfied storekeeper. "I don't
sell other brands anymore."

11. How does Google earn it’s
revenue?

12. Power of the Internet is Changing
Distribution

13. Harley Davidson
1300 Harley Dealerships in 60
countries worldwide.
Programs customised for individual
dealers
Treat customers as individuals
“We’re a motorcycle company, and
our distribution partners don’t like
to see our brand on sale”.
“Harley-Davidson licensees meet
twice a year at semi-annual dealer
shows where dealers have exclusive
access to preview and order licensed
products.”
The Harley Owners Group (H.O.G.),
established in 1983, and the Buell
Riders Adventure Group (BRAG) are
home to more than 900,000 members
Worldwide

14. Primary Questions
1. Which distributor, or distributor
combination, is best suited for to
take a new product or service to
market?
2. How should the distributor
network be managed once it is up
and running?

15. Why do distribution channels
exist?

16. Two Main Reasons
1. Demand Side Factors
a. Facilitation of search
b. Adjustment of Assortment discrepancy
1. Sorting (Alderson, 1957) - breaking down in separate stocks
2. Accumulation – bring similar stocks together
3. Allocation - smaller lots
4. Assorting - building assortment
2. Supply- Side Factors
a. Routinisation of Transactions
b. Reduction in number of contacts

17. FIGURE 1.2: MARKETING FLOWS IN CHANNELS
Physical Physical Physical
Possession Possession Possession
Ownership Ownership Ownership
Promotion Promotion Promotion
Negotiation Negotiation Negotiation Consumers
Producers Wholesalers Retailers Industrial
Financing Financing Financing and
Household
Risking Risking Risking
Ordering Ordering Ordering
Payment Payment Payment
Commercial Channel Subsystem

18. Key Members?
Manufacturers
Intermediaries
End-users

19. Consumer Marketing Channels

20. Multi Channel Distribution System

21. Table 1 The Need for a Multi-Channel Strategy Will Intensify
Increasing need for
multi-channel
strategy
High
Strategic
choice
Channel substitutability
Retail
Strategic banking
opportunity Retailing
PC’s
P&C Insurance
Autos
Airlines
Low High
Frequency of customer interactions

22. Summary
• We defined concept of a marketing channel
• We looked at how channels work and what
functions and activities are performed inside
the channel
• Develop an analytical framework for channel
design, modification and implementation
• Framework for analyzing channel flows
covered in Figure 1.2

23. You are welcome to contact Nigel Bairstow at B2B
Whiteboard your source of B2B Asia / Pacific
marketing advice
http://www.linkedin.com/pub/nigel-bairstow/6/41b/726
http://twitter.com/#!/b2bwhiteboard