Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Channels of distribution ppt @ bec doms bagalkot mba marketing

3,866 views

Published on

Channels of distribution ppt @ bec doms bagalkot mba marketing

Published in: Business, Technology
  • Be the first to comment

Channels of distribution ppt @ bec doms bagalkot mba marketing

  1. 1. Channels of Distribution
  2. 2. Marketing Framework
  3. 3. Distribution Sellers prefer to produce large quantities of a limited number of goods Buyers prefer smaller quantities of a wider variety of goods Distribution deals with realigning the discrepancies between quantities and selections  Breaking bulk: making goods available in smaller batches
  4. 4. What are Distribution Channels? Distribution channel  A network of inter-connected firms that provide sellers a means of infusing the marketplace with their goods, and buyers a means of purchasing those goods, as efficiently and profitably as possible
  5. 5. Actors in Distribution Channels Manufacturing firms Distributors or wholesalers Retailers Consumers
  6. 6. Activities in Distribution Channels Customer oriented: ordering, handling, shipping, etc. Product-oriented: storage & display, etc. Marketing-centric: promotion, etc. Financial-oriented Logistics
  7. 7. Tension in Distribution Channels Tension in channels can be created by the contribution of each channel member  Do they provide more benefit than they cost?  Should we do this activity ourselves or have a channel member do it for us?
  8. 8. Discussion Question View the next two slides. Assuming all else is equal, which is the most efficient channel? Why?
  9. 9. Manufacturer to Consumer
  10. 10. Manufacturer through Channel
  11. 11. Forms of Distribution Channels
  12. 12. Discussion Questions Given the 3 channels below, which is “best”? What are the tradeoffs between implementing the left channel compared to the right channel?
  13. 13. Channels and Supply Chains Suppliers: upstream actors  Supply chain management Channel members: downstream actors that help a company reach consumers
  14. 14. Channels and Supply Chains
  15. 15. Discussion Questions Who are Dell’s suppliers? Who are Amazon’s suppliers? Who are DreamWorks’ channel members?
  16. 16. Designing Distribution Channels Determine distribution intensity  How many intermediaries will be used? Determine push or pull strategy Determine how to deal with conflict
  17. 17. Intensive Distribution Intensive: widely distributed  Drugstores, supermarkets, discount stores, convenience stores, etc. Usually for simple, inexpensive, easily transported products  Snack food, shampoo, newspapers, etc. Pull strategy: promote directly to end consumers to pull through channel
  18. 18. Selective Distribution Selective: less widely distributed Usually for complex and/or expensive products that require assistance  Cars, computers, appliances, etc. Push strategy: promote to distribution partners to push goods to consumer Manufacturer has more control due to fewer relationships to manage
  19. 19. Exclusive Distribution Exclusive: extreme case of selectivity Manufacturers have the most control May become monopolistic
  20. 20. Intensity Strategies Intensive distribution usually goes with heavy promotion, lower prices and average or lower quality products Exclusive distribution usually goes with exclusive promotional efforts, higher prices and higher quality products
  21. 21. Discussion Question Assume you are a marketer for Coach handbags. How intensively would you distribute this product? Why?
  22. 22. Pull Strategy Incentives offered to consumers to pull products through the channel  Advertise to consumers  Distribute widely  Offer price and/or quantity discounts  Offer inexpensive trials or free samples  Offer coupons and/or rebates  Offer financing  Offer loyalty programs/points
  23. 23. Push Strategy Incentives offered to distribution partners to push products through the channel  Advertise to partners (and consumers)  Distribute more selectively  Employ a sales force  Offer incentives to sales force  Offer price and/or quantity discounts  Offer financing  Offer allowances for marketing activities
  24. 24. Channel Conflict Conflict can arise when channel partners differ in their opinions on how to please customers and maximize profit Conflict may motivate parties to find alternative solutions
  25. 25. Types of Power Coercive power: Ability to take away benefits or inflict punishment on other party Information power: Having information other party seeks Legitimate power: Using size or expertise to encourage other party
  26. 26. Types of Power Referent power: One party seeks an affiliation with other Reward power: Ability to provide good outcomes for other party
  27. 27. Channel Power and Conflict Power is usually defined by size and effectiveness In the long term, power isn’t a great way to resolve conflict because the less powerful player may feel resentful and act accordingly
  28. 28. Dealing with Conflict Develop effective communication to enhance trust and satisfaction Make sure that parties feel that they’re being heard and their needs are understood and being met Remind channel members of mutual goal of customer satisfaction
  29. 29. Building Channel Relationships If conflict cannot be resolved, two other possible actions:  Mediation  Negotiate through a third party that determines the two parties’ utility functions  Arbitration  The third party makes a binding decision for the two
  30. 30. Discussion Questions Which type of power do you think would be more likely to create cooperative channel partnerships? Which type of power do you think would be least likely to create cooperative channel partnerships?
  31. 31. Transaction Cost Analysis Transaction cost analysis (TCA)  A model that considers channel members’ production costs and governance costs, both of which are ideally minimized
  32. 32. Transaction Cost Analysis Production Costs  Costs of producing/bringing product to market Governance Costs  Costs involved with relational issues incurred coordinating the enterprise and controlling one’s partners
  33. 33. Revenue Sharing Channel conflict often comes down to revenue sharing Double Marginalization  The manufacturer wants a mark-up when it sells to a retailer  The retailer wants a second markup when it sells to the consumer
  34. 34. Double Marginalization Problem
  35. 35. Double Marginalization Solutions
  36. 36. Channel Integration If a company is currently using a partner to do something, it might wish to bring that function back in-house  Forward Integration  e.g., manufacturer controls its retail stores  Backward integration  e.g., manufacturer controls raw material
  37. 37. Private Labels Many retailers are integrating backward into private label products Advantages  May give retailers negotiating power with the manufacturer  May offer significant margin opportunities  May allow retailer to distinguish itself as the only place that offers that brand
  38. 38. Discussion Questions How could Barnes & Noble engage in backward integration? How could Maytag engage in forward integration?
  39. 39. Retailing Retailers have been gaining power and momentum over the past 10-20 years Powerful retailers can make or break a new product
  40. 40. Types of Retailing Categorize retailers according to extent of manager’s ownership  Independent retailers  Local florist  Branded store chains  Old Navy  Franchises  Jiffy Lube
  41. 41. Types of Retailing Categorize retailers according to their level of service which tends to be positively related to their price points  Full service  Nordstrom’s  Limited service  K-mart
  42. 42. Types of Retailers Categorize retailers according to product assortment  Specialty: carry depth not much breadth  Toy stores  General merchandise: carry breadth but not much depth  Department stores
  43. 43. Discussion Questions Can you categorize Wal-mart in terms of ownership, level of service and product assortment? Why do you think Wal-mart has been successful?
  44. 44. Importance of Retail Employees If retailers are not selective in hiring and if employees are not trained or paid well, service will be suboptimal and lead to customer dissatisfaction Retailers benefit from selecting good people, training them, paying them, rewarding them well, and empowering them
  45. 45. Importance of Operations Flowcharting operations  Front-stage: elements customers see  Back-stage: elements customers do not see  Must be run efficiently to support front-stage What parts of the process flow smoothly? What parts do not? What parts of the process might be streamlined or eliminated altogether?
  46. 46. Importance of Location Consider factors needed to be successful  Environmental data  population densities  income and social class distributions  median ages  household composition, etc.
  47. 47. Retailer Growth Strategies Provide additional services Reach out to attract additional segments Open additional stores Expand internationally  Exporting, joint ventures, direct foreign investment, license agreements, etc.  Depends upon: talent, costs, labor pool, infrastructure, government’s stance on foreign investment, real estate costs, travel costs, local ethics, etc.
  48. 48. Franchising Company can retain some control without complete ownership or capital expenditure  Franchisor: the company  Franchisee: local owner  Pays fee and royalties Product franchising  Ford dealer, Coca-Cola bottlers Business format franchising  McDonalds, Holiday Inn
  49. 49. E-commerce Retail sales online are about $30 billion  Only about 3% of total retail sales  Much potential for growth What sells well  Computer hardware, software, books, music, DVDs, and travel arrangements Many business drive their customers online to reduce labor costs  e.g., Retail banks raise fees to those who want to interact with a teller
  50. 50. Internet Penetration
  51. 51. Catalog Sales E-commerce and catalogs are complementary  Many companies use both successfully  83 of the top 100 catalogers saw growth Catalogs are preferred for browsing Catalogs trigger web visits Customer databases are utilized for customized catalogs, promotions, etc.
  52. 52. Top Catalogers
  53. 53. Sales Force Utilized extensively by companies utilizing a push strategy For more undifferentiated products, a company’s sales force is its most important driver of its performance
  54. 54. Sales Force Size Estimate Workload  100,000 stores  12 visits each per year for 30 minutes  50 weeks per year x 40 hours a week = 2000 hours  500 of these hours will be spent on travel and administrative duties  (100,000 accounts x 12 visits per year x 0.5 hour) / 1,500 hours = 400 salespeople
  55. 55. Sales Force Compensation Sales compensation is usually salary plus bonuses  Bonuses can be cash, trips, etc. The question is how much is fixed and how much is variable
  56. 56. Sales Performance Evaluation factors  Sales  by segment, product, improvement, etc.  Time spent with clients  Expertise  Knowledge  Attitudes  Days worked  Selling expenses, etc.
  57. 57. Complaints by B2B Customers Top 3 complaints of salespeople 1. The salesperson isn’t following my company’s buying process 2. The salesperson didn’t listen to my needs 3. The salesperson didn’t bother to follow up
  58. 58. Discussion Questions How could a company reduce some of these customer complaints? Why would a company use bonuses for its sales force?
  59. 59. Integrated Marketing Channels When designing marketing channels  Understand your customers’ behavior Ask these questions  What are your target market segments?  What benefits do they seek?  How can we match customer needs to our corporate growth strategies?  What mix of channels will facilitate our meeting these goals?
  60. 60. Discussion Questions Why would it be important to understand your customer in designing your distribution channel? What might you want to know about your customer prior to designing the channel?

×