C hapter 13: Distribution Channels All roads lead to Rome
Chapter Objectives <ul><li>Describe the nature of distribution channels </li></ul><ul><li>Understand the different marketi...
Distribution Channel <ul><li>What is a Distribution Channel?  </li></ul><ul><li>A set of organizations (intermediaries) in...
Distribution Channel Functions <ul><li>Information:   gathering and distributing marketing research and intelligence infor...
Information Promotion Contact Matching Negotiation Physical Gathering and distributing marketing research about the enviro...
Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Cl...
Travel Agents Tour Wholesalers Concierges Specialists:  Brokers & Junket Reps Internet Hotel Representatives Consortia & R...
<ul><li>Travel Agents (TA’s) </li></ul><ul><ul><li>31,000 TA in the U.S.A. (1999) </li></ul></ul><ul><ul><li>Decreasing du...
Supplier Wholesaler Travel agent Tour Packages Usually   Air travel + lodging   may include   [ meals + entertainment + gr...
<ul><li>Tour Wholesalers </li></ul><ul><ul><li>Usually targeted at the leisure market </li></ul></ul><ul><ul><li>Retail TA...
<ul><li>Specialists: Tour Brokers, Motivational Houses and Junket Reps. </li></ul><ul><ul><li>Tour brokers  sell  motor co...
<ul><li>Hotel Representatives </li></ul><ul><ul><li>HR sell hotel rooms and services in a distant market area and receive ...
<ul><li>Consortia and Reservation Systems </li></ul><ul><ul><li>A consortium  is a group of hospitality organizations that...
<ul><li>Global Distribution Systems </li></ul><ul><ul><li>GDSs were originally developed by the airlines in 1960s </li></u...
<ul><li>Internet </li></ul><ul><ul><li>Became an effective distribution channel. </li></ul></ul><ul><ul><li>In 2003, Inter...
Channel Behavior & Organization <ul><li>A channel will be most effective when all members cooperate to attain overall chan...
Vertical marketing channel Manufacturer Retailer Conventional marketing channel Manufacturer Wholesaler Conventional Distr...
Corporate Common Ownership at Different  Levels of the Channel Contractual Contractual Agreements Among Channel Members Ad...
<ul><li>The franchisor permits the franchise to use its trademark, name and advertising. </li></ul><ul><li>In U.S.A.  700,...
Advantages  Disadvantages  Franchisor 1. Capital for growth 2. Faster growth 3. Additional management 4. Additional income...
<ul><li>Another form of contractual agreement </li></ul><ul><li>Allow two or more organizations to benefit from each other...
c Vertical Marketing System  Alliances Trade for preferred relationship with global networks Gain preferred access to each...
<ul><li>Horizontal Marketing Systems:  Two or more companies at one level who join to follow a new marketing opportunity. ...
<ul><li>Customer needs </li></ul><ul><ul><li>Victoria House in Belize </li></ul></ul><ul><li>Attracting channel members </...
<ul><li>E-mail  [email_address]   </li></ul><ul><li>For reservations use the e-mail  Reservation Form   </li></ul><ul><li>...
<ul><li>Three secrets of successful retailing:  </li></ul><ul><li>“ Location!  Location!  Location!”  </li></ul><ul><li>Lo...
<ul><li>3.  Choosing the area within the region:   Demographic, psychographic characteristics and competition are factors ...
<ul><li>C h a p t e r  1 9 </li></ul>
Upcoming SlideShare
Loading in …5
×

Marketing my slides 13 (1)

1,721 views

Published on

Published in: Travel, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,721
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
29
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Marketing my slides 13 (1)

  1. 1. C hapter 13: Distribution Channels All roads lead to Rome
  2. 2. Chapter Objectives <ul><li>Describe the nature of distribution channels </li></ul><ul><li>Understand the different marketing intermediaries and the benefits they offers. </li></ul><ul><li>Know how to use the Internet as a distribution channel </li></ul><ul><li>Discuss channel behavior and organization </li></ul><ul><li>Illustrate the channel management decisions of selecting, motivating and evaluating channel members. </li></ul><ul><li>Identify factors to consider when choosing a business location. </li></ul>
  3. 3. Distribution Channel <ul><li>What is a Distribution Channel? </li></ul><ul><li>A set of organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. </li></ul><ul><li>Used to move the customer towards the product </li></ul><ul><li>Selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales. </li></ul>
  4. 4. Distribution Channel Functions <ul><li>Information: gathering and distributing marketing research and intelligence information about the marketing environment. </li></ul><ul><li>Promotion: developing and spreading persuasive communications about an offer </li></ul><ul><li>Contact: finding and communicating with prospective buyers </li></ul><ul><li>Matching: s haping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling, and packaging. </li></ul>
  5. 5. Information Promotion Contact Matching Negotiation Physical Gathering and distributing marketing research about the environment Developing and spreading persuasive communications about an offer Finding and communicating with prospective buyers Shaping and fitting the offer to the buyer’s need Agreeing on price and terms of the offer so ownership or possession can be transferred Distribution: transporting and storing goods Financing Acquiring and using funds to cover the costs of channel work Distribution Key Functions Channel Risk Taking Assuming financial risks such as the inability to sell inventory at full margin Distribution Channel Functions
  6. 6. Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer. Number of Channel Levels Wholesaler Jobber Retailer Consumer     Consumer Retailer Consumer  Producer 0-level channel Wholesaler Retailer Consumer   Producer 2-level channel Producer 3-level channel 1-level channel Producer
  7. 7. Travel Agents Tour Wholesalers Concierges Specialists: Brokers & Junket Reps Internet Hotel Representatives Consortia & Reservations Systems Global Distribution Systems National, State, and Local Tour Agencies Marketing Intermediaries
  8. 8. <ul><li>Travel Agents (TA’s) </li></ul><ul><ul><li>31,000 TA in the U.S.A. (1999) </li></ul></ul><ul><ul><li>Decreasing due to Internet and less commission </li></ul></ul><ul><ul><li>Commission: Airlines 5 %, hotels 10%, cruises 15% </li></ul></ul><ul><ul><li>TA’s use toll- free numbers, CRS or GDS * when making reservation for hotels </li></ul></ul><ul><ul><li>Companies are a major source of travel bookings. </li></ul></ul>Marketing Intermediaries * Mostly used
  9. 9. Supplier Wholesaler Travel agent Tour Packages Usually Air travel + lodging may include [ meals + entertainment + ground transportation + sightseeing tours + special entrance fees] Tour Wholesalers A company that operates as an intermediary between the travel product supplier and the retail travel agent in the marketplace. (Tour operators often operate as wholesalers.) Marketing Intermediaries
  10. 10. <ul><li>Tour Wholesalers </li></ul><ul><ul><li>Usually targeted at the leisure market </li></ul></ul><ul><ul><li>Retail TA’s sell wholesalers’ tour packages. </li></ul></ul><ul><ul><li>They get discounts from airlines or hotels </li></ul></ul><ul><ul><li>Break even point is usually achieved at 85 % of sale. </li></ul></ul><ul><ul><li>USTOA requires $100,000 indemnity bond. </li></ul></ul><ul><ul><li>Usually resort hotels are dependent on tour wholesalers </li></ul></ul><ul><ul><li>Almost all major airlines have vacation packages promoted through brochures and their web sites. </li></ul></ul>Marketing Intermediaries
  11. 11. <ul><li>Specialists: Tour Brokers, Motivational Houses and Junket Reps. </li></ul><ul><ul><li>Tour brokers sell motor coach tours . Trips to college and sporting events, tours built around Mardi Gras. </li></ul></ul><ul><ul><li>Motivational houses provide incentive travel to companies offered to their employees. </li></ul></ul><ul><ul><li>Junket reps maintain lists of casino gamblers. Junket reps get a commission based on the amount the casino earns from the players. </li></ul></ul>Marketing Intermediaries
  12. 12. <ul><li>Hotel Representatives </li></ul><ul><ul><li>HR sell hotel rooms and services in a distant market area and receive a straight commission, a commission plus a salary, or a combination of both. </li></ul></ul><ul><li>National, State, and Local Tourist Agencies (CVB’s) </li></ul><ul><ul><li>Supply information and promote an area, a state or country. </li></ul></ul><ul><ul><li>Usually they deal with conferences, exhibits or conventions </li></ul></ul>Marketing Intermediaries
  13. 13. <ul><li>Consortia and Reservation Systems </li></ul><ul><ul><li>A consortium is a group of hospitality organizations that is allied for the mutual benefit of its members (Leading Hotels of the World, Supranational, Utell, Tulip). </li></ul></ul><ul><ul><li>Reservation systems provide a central reservation services for hotels. </li></ul></ul><ul><ul><li>Hotel Chain Reservation Systems vs. Independent Reservation Systems </li></ul></ul>Marketing Intermediaries
  14. 14. <ul><li>Global Distribution Systems </li></ul><ul><ul><li>GDSs were originally developed by the airlines in 1960s </li></ul></ul><ul><ul><li>GDS’s are computerized reservation systems </li></ul></ul><ul><ul><li>GDS connects many CRS of different hospitality companies. </li></ul></ul><ul><ul><li>Major GDS’s: Sabre, Worldspan, Galileo, Amadeus. </li></ul></ul><ul><ul><li>Amadeus-largest in Europe and Latin America (155,000 TA) </li></ul></ul><ul><ul><li>Galileo connects TA’s to 500 airlines, 40 Rent a Car companies, 47,000 hotels, 370 tour operators. </li></ul></ul><ul><ul><li>Worldspan web site: TA’s can book airlines, rental cars, and shows and make restaurant reservations all from one site. </li></ul></ul>Marketing Intermediaries
  15. 15. <ul><li>Internet </li></ul><ul><ul><li>Became an effective distribution channel. </li></ul></ul><ul><ul><li>In 2003, Internet sales reached $ 25.2 billion (10% of the total travel business market). </li></ul></ul><ul><ul><li>Total hotel sales over internet $5 billion </li></ul></ul><ul><ul><li>Marriott takes 10,000 reservation a day. </li></ul></ul><ul><ul><li>Southwest airlines over a billion dollars through its web site. </li></ul></ul><ul><ul><li>Restaurants on-line ordering–Pizza Hut, and Domino pizza. </li></ul></ul><ul><ul><li>Expedia: Over 7 million visitors a month </li></ul></ul><ul><ul><li>Advantages-24 hours, color picture, video tour, accessible anywhere, print hard copy, low cost, </li></ul></ul>Marketing Intermediaries Travelocity Expedia Priceline
  16. 16. Channel Behavior & Organization <ul><li>A channel will be most effective when all members cooperate to attain overall channel goals and satisfy the target market. </li></ul><ul><ul><li>Channel conflict occurs when channel members are disagree over goals and roles </li></ul></ul><ul><li>Conflict occurs at two level: </li></ul><ul><ul><li>Horizontal Conflict occurs among firms at the same level of the channel, i.e retailer to retailer. </li></ul></ul><ul><ul><li>Vertical Conflict occurs between different levels of the same channel, i.e. wholesaler to retailer. </li></ul></ul><ul><li>For the of a channel each member’s role must be specified and conflict must be managed. </li></ul>
  17. 17. Vertical marketing channel Manufacturer Retailer Conventional marketing channel Manufacturer Wholesaler Conventional Distribution Channel vs. Vertical Marketing Systems Consumer Consumer Retailer Wholesaler
  18. 18. Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreements Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members Degree of Direct Control Channel Organization Types of Vertical Marketing Systems
  19. 19. <ul><li>The franchisor permits the franchise to use its trademark, name and advertising. </li></ul><ul><li>In U.S.A. 700,000 franchise ~about $ 850 billion sales </li></ul><ul><li>Franchised hotels account ~ 65 percent of room supply. </li></ul><ul><li>Starting a new business: 20 percent chance for survival </li></ul><ul><li>Buying an existing business: a 70 percent chance for survival </li></ul><ul><li>Buying a franchise: a 90 percent chance for survival </li></ul>Vertical Marketing System Franchising Hotel franchises: Choice hotels, Holiday Inns, Sheraton Inns, Hilton inns Restaurant franchises: Mc Donalds, Burger King, KFC, Pizza Hut, T.G.I. Franchises
  20. 20. Advantages Disadvantages Franchisor 1. Capital for growth 2. Faster growth 3. Additional management 4. Additional income 1. Lower potential profits 2. Controlling service quality 3. Controlling firm image Franchisee 1. Lower risk 2. Established brand name 3. Successful business plan 4. Expert assistance 1. Franchisee fees 2. Lack of freedom 3. Controlled by franchisor Vertical Marketing System Franchising
  21. 21. <ul><li>Another form of contractual agreement </li></ul><ul><li>Allow two or more organizations to benefit from each other’s strengths. </li></ul><ul><li>7-Eleven sells Dunkin Donuts in 2,000 of its stores </li></ul><ul><li>Embassy suites has Red Lobster restaurants located in its hotels. </li></ul><ul><li>Chain fast-food operations are located in convenience stores. </li></ul><ul><li>Airline alliances: SAS-Continental, Delta-Korean Airlines </li></ul>Vertical Marketing System Alliances
  22. 22. c Vertical Marketing System Alliances Trade for preferred relationship with global networks Gain preferred access to each other’s local customer base Pool policy expertise, costs, and capabilities Implement consumer-oriented, commercially driven operations and services
  23. 23. <ul><li>Horizontal Marketing Systems: Two or more companies at one level who join to follow a new marketing opportunity. </li></ul><ul><ul><li>Seaworld offers tickets at a discount to an automobile club. </li></ul></ul><ul><ul><li>In return, Seaworld gains access to several hundred thousand automobile club members </li></ul></ul><ul><li>Multi-channel Marketing Systems: Single firms that set up two or more marketing channels to reach one or more customer segments. </li></ul><ul><ul><li>McDonald’s sells its products through independent franchises, but owns more than one-fourth of its outlets. </li></ul></ul>Horizontal Marketing Systems
  24. 24. <ul><li>Customer needs </li></ul><ul><ul><li>Victoria House in Belize </li></ul></ul><ul><li>Attracting channel members </li></ul><ul><ul><li>A small chain hotel be advised to choose one travel agency chain or work in key cities that are likely to generate business. </li></ul></ul><ul><li>Evaluating major channel alternatives </li></ul><ul><li>1. Economic criteria </li></ul><ul><li>MGM hotel; Tour Operators vs. Travel Agencies. </li></ul><ul><li>2. Control criteria </li></ul><ul><li>Franchise control/quality control </li></ul>Selecting Channel Members
  25. 25. <ul><li>E-mail [email_address] </li></ul><ul><li>For reservations use the e-mail Reservation Form </li></ul><ul><li>Call us toll free from US or Canada 1-888-535-8832 / 1-800-948-3770 </li></ul>
  26. 26. <ul><li>Three secrets of successful retailing: </li></ul><ul><li>“ Location! Location! Location!” </li></ul><ul><li>Location depends on the firm’s marketing strategy. </li></ul><ul><li>There are four steps in choosing a location. </li></ul><ul><li>1. Understanding the marketing strategy and target market of the company. </li></ul><ul><ul><li>Downtowns, freeways, near airports, </li></ul></ul><ul><li>2. Regional analysis involves the selection of geographic market areas. A firm needs to make sure that a region has sufficient and stable demand to support the firm, today and in the future. </li></ul>The Business Location
  27. 27. <ul><li>3. Choosing the area within the region: Demographic, psychographic characteristics and competition are factors to consider. </li></ul><ul><li>4. In choosing the individual site, business will consider several factors: </li></ul><ul><ul><li>Compatible businesses, Competition, Potential demand generators, </li></ul></ul><ul><ul><li>Residential communities, profile of prospective customers, shopping centers. </li></ul></ul><ul><ul><li>Accessibility, traffic, speed of traffic, visibility, </li></ul></ul>The Business Location
  28. 28. <ul><li>C h a p t e r 1 9 </li></ul>

×