2. CHANNEL OF DISTRIBUTION
A distribution
channel (marketing channel) is a
set of independent organizations involved in the
process of making a product or service available
to the consumer or business user
Used
to move the customer towards the product
7. Why are there Marketing
Intermediaries?
Marketing intermediaries allow for the smooth flow of
products and product information from the manufacturer to
the consumer.
Intermediaries help manufactures distribute their products,
and help consumers easily find and obtain the products that
they need to buy.
Intermediaries reduce the number of contacts necessary in
order to make a sale thereby facilitating the marketing
process.
9. Channels reduce number of transactions
Producers
Intermediaries
Supermarket
Consumers
Importance of Marketing Channels
With intermediaries
8 transactions
10. DISTRIBUTION CHANNEL
FUNCTIONS
Information: gathering and distributing marketing
research and intelligence information about the
marketing environment
Promotion: developing and spreading persuasive
communications about an offer
Contact: finding and communicating with prospective
buyers
11. Matching: shaping and fitting the offer to the buyer’s needs,
including such activities as manufacturing, grading,
assembling, and packaging
Negotiation: agreeing on price and other terms of the offer so
that ownership or possession can be transferred
Physical distribution: transporting and storing goods
Financing: acquiring and using funds to cover the costs of
channel work
Risk taking: assuming financial risks such as the inability to
sell inventory at full margin
12. Direct Channels vs. Indirect
Channels
Marketing channel where there is no intermediary
levels between manufacturer and consumer-- These
are known as Direct Channels
Some marketing channels are relatively long with
many intermediaries -- These are known as Indirect
Channels
15. RETAILING
Retailing includes all the activities in selling products or
services directly to final consumers for their personal,
non-business use
Retailers are businesses whose sales come primarily from
retailing
*Retailing can be done in stores (store retailing) or out of a
store (non-store)
16. Non-store retailing includes selling to final consumers
through:
Direct mail
Catalogs
Telephone
Internet
TV shopping
Home and office parties
Door-to-door sales
Vending machines
21. Types of Retailers
Organizational Approach
Corporate chains are two or more outlets that are commonly
owned and controlled
Size allows them to buy in large quantities at lower prices
and gain promotional economies
Voluntary chains are wholesale-sponsored groups of
independent retailers that engage in group buying and
common merchandising
22. Types of Retailers
Organizational Approach
Retailer cooperatives is a group of independent retailers that band
together to set up a joint-owned, central wholesale operation and
conduct joint merchandising and promotion effort
Ace Hardware
Franchise organizations are based on some unique product or
service; on a method of doing business; or on the trade name,
good will, or patent that the franchisor has developed
23. Types of Retailers
Organizational Approach
Merchandising conglomerates are corporations that
combine several retailing forms under central ownership
24. Retailer Marketing Decisions
Segmentation, targeting, differentiation, and
positioning involves the definition and profile of
the market so the other retail marketing
decisions can be made
25. Retailer Marketing Decisions
Product Assortment and Service
Product assortment and service decisions
include:
Product assortment
Services mix
Store atmosphere
26. Retailer Marketing Decisions
Price Decision
Price policy must fit the target market and
positioning, product and service assortment,
and competition
High markup on lower volume
Low markup on higher volume
27. Retailer Marketing Decisions
Price Decision
High-low pricing involves charging higher prices on an everyday
basis, coupled with frequent sales and other price promotions
Everyday low price (EDLP) involves charging constant, everyday
low prices with few sales or discounts
29. Retailer Marketing Decisions
Place Decision
Central business districts are located in cities and
include department and specialty stores, banks,
and movie theaters
Shopping center is a group of retail businesses
planned, developed, owned, and managed as a
unit
Regional shopping centers
Community shopping centers
Neighborhood shopping centers
Power center
Lifestyle centers
31. Wholesalers are used because they are often better at
performing the following channel functions than other
channel:
32. Wholesaling
Selling and promoting involves the wholesaler’s sales
force helping the manufacturer reach many smaller
customers at lower cost
Buying assortment building involves the selection of items
and building of assortments needed by their customers,
saving the customers work
33. Wholesaling
Bulk breaking involves the wholesaler buying in larger
quantity and breaking into smaller lots for its customers
Warehousing involves the wholesaler holding inventory,
reducing its customers’ inventory cost and risk
34. Wholesaling
Transportation involves the wholesaler providing quick
delivery due to its proximity to the buyer
Financing involves the wholesaler providing credit and
financing suppliers by ordering earlier and paying on
time
35. Wholesaling
Risk bearing involves the wholesaler absorbing risk by
taking title and bearing the cost of theft, damage,
spoilage, and obsolescence
Market information involves the wholesaler providing
information to suppliers and customers about
competitors, new products, and price developments
36. Wholesaling
Management services and advice involves
wholesalers helping retailers train their sales
clerks, improve store layouts, and set up
accounting and inventory control systems
38. Types of
Wholesalers largest group of
Merchant wholesalers is the
wholesalers and include:
Full-service wholesalers who provide a full set of
services
Limited service wholesalers who provide few
services and specialized functions
39. Types of Wholesalers
Brokers and agents do not take title, perform a few
functions, and specialize by product line or customer
type
Brokers bring buyers and sellers together and assist in
negotiations
Agents represent buyers or sellers
Manufacturers’ sales branches and offices is a form of
wholesaling by sellers or buyers themselves rather than
through independent wholesalers
Distribution channel enhances a company’s operations by dealing with customers more efficiently. The channel is not only a market supplier but also a partner of the company that works as a team to achieve higher quality performances.
-Network of organizations that create time, place, and possession utilities for consumers.
Transaction functions – these functions involve the buying of products from manufacturers/ producers; the risk taken on by the intermediary in buying on speculation that some consumer will want to eventually buy these products from the intermediary; and eventual selling of products to consumers.
Logistical function – involve mixing up the various products from diff manufacturers (assorting) ; moving and keeping the product safe from loss (shipping and storing)
Facilitating – involve making it easy for the retailers/consumers to buy the products.
The use of intermediaries results from their greater efficiency in making goods available to target markets.
Through their contacts, experience, specialization and scale of operation, intermediaries usually offer the firm more than It can achieve on its own.
Classic picture of the value of intermediaries: If four of you want to go to the store and make pizza and need dough, canned tomatoes, cheese, and anchovies. . .
Works even better with 16 consumers, etc. bc geometric.
Same model applies to 16 pharmaceutical firms and 16 drugstore: Wholesalers make the “pick” (assortment) and break bulk.
When you hear: “We cut out the middleman,” don’t think it’s necessarily a good idea. Most intermediaries add value
Consider shopping for T-shirts and jeans without The Gap. = Soviet Union under communism.
Indirect channel- numerous and a variety of intermediaries involved in bringing the good or service from manufacturer to the consumer or business customer.
Exclusive – when a manufacturer restricts product distribution to a single retailer in particular market or just a relatively few reatilers.
Selective - selectively distributed bands are available in multiple markets. For example sony TVs can be purchased at a number of outlets.
Intensive – used when convenience products are available retail outlet in a particular market. Ex. Softdrinks, candy, newspaper, gum, cigarettes.
*manufacturer and the wholesaler may, at times, also perform retailing activities, like sell directly to the final user.
