Distribution channels


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Distribution channels

  1. 1. PRINCIPLES OF MARKETING Distribution Channels and Logistics Management
  2. 2. Distribution Channels • A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption. • Channel decisions – affect other marketing decisions – involve long-term commitments
  3. 3. Role of Intermediaries Role of Intermediaries •Greater efficiency in making goods available to target markets. •Intermediaries provide – Contacts – Experience – Specialization – Scale of operation •Match supply and demand.
  4. 4. Channel Functions Channel Functions •Information •Promotion •Contact •Matching •Negotiation •Physical Distribution •Financing •Risk taking
  5. 5. Channel Levels Channel Levels •Manufacturer •Wholesaler •Retailer •Consumer
  6. 6. Channel Behavior and Conflict Channel Behavior and Conflict • The channel will be most effective when: – each member is assigned tasks it can do best. – all members cooperate to attain overall channel goals and satisfy the target market. • Focus on individual goals leads to conflict – Horizontal Conflict occurs among firms at the same level of the channel. – Vertical Conflict occurs between different levels of the same channel.
  7. 7. Vertical Marketing Systems Vertical Marketing Systems • Corporate – common ownership at different channel levels • Contractual – contractual agreement among channel members • Administered – leadership assumed by dominant members
  8. 8. Innovations in Marketing Systems Innovations in Marketing Systems Horizontal Marketing Horizontal Marketing System System Two or more companies at one channel level join together to increase coverage Example:Banks in Grocery Stores Hybrid Marketing Hybrid Marketing System System A single firm sets up two or more marketing channels to increase coverage Example:Retailers, Catalogs, and Sales Force
  9. 9. Channel Design Decisions Channel Design Decisions Analyzing Consumer Service Needs Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Setting Channel Objectives & Constraints Identifying Major Alternatives Identifying Major Alternatives Intensive Intensive Distribution Distribution Selective Selective Distribution Distribution Exclusive Exclusive Distribution Distribution Evaluating the Major Alternatives Evaluating the Major Alternatives
  10. 10. Channel Management Decisions Channel Management Decisions Motivating Motivating Evaluating Evaluating FEEDBACK Selecting Selecting
  11. 11. Logistics Logistics • Involves entire supply chain • Increasing importance of logistics – effective logistics is becoming a key to winning and keeping customers. – logistics is a major cost element for most companies. – the explosion in product variety has created a need for improved logistics management. – information technology has created opportunities for major gains in distribution efficiency.
  12. 12. Goals of Logistics system Goals of Logistics system • Provide a Targeted Level of Customer Service at the Least Cost. • Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels
  13. 13. Logistics Functions Logistics Functions • Order Processing • Warehousing • Inventory Management • Transportation • Design system to minimize costs of attaining objectives
  14. 14. Transportation Modes Transportation Modes Rail Rail Nation’s largest carrier, cost-effective Nation’s largest carrier, cost-effective for shipping bulk products, piggyback for shipping bulk products, piggyback Truck Truck Flexible in routing & time schedules, efficient Flexible in routing & time schedules, efficient for short-hauls of high value goods for short-hauls of high value goods Water Water Low cost for shipping bulky, low-value Low cost for shipping bulky, low-value goods, slowest form goods, slowest form Pipeline Pipeline Ship petroleum, natural gas, and chemicals Ship petroleum, natural gas, and chemicals from sources to markets from sources to markets Air Air High cost, ideal when speed is needed or to High cost, ideal when speed is needed or to ship high-value, low-bulk items ship high-value, low-bulk items
  15. 15. Integrated Logistics Management Integrated Logistics Management Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All Teamwork the Marketing Channel Organizations. Cross-Functional Teamwork inside Cross-Functional Teamwork inside the Company the Company Building Channel Partnerships Building Channel Partnerships Third-Party Logistics Third-Party Logistics