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Distribution channel managment
1) The document discusses distribution and channel management, including selecting intermediaries, designing marketing channels, and managing supply chains. It describes indirect and direct distribution approaches and considerations for each. 2) Key factors in selecting channel design include the nature of the product, business, competition, and environmental forces. Characteristics of potential intermediaries like market coverage, costs, resources, and reputation are also important. 3) Effective distribution balances reaching enough customers through limited retail locations. Profitability depends on revenues exceeding channel costs. The document outlines sources of potential channel conflict and the role of dominant channel leaders.
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Distribution channel managment
- 1. Distribution and ChannelManagement Product Price Customer Distribution (Place) Promotion Distribution: The activities that make products available to customers when and where they want to purchase them
- 2. Channel-Selection Decision Who arepotential customers? • Where do they buy? • When do they buy? How do they buy? • What do they buy? 50% are men 15% buy with iPhone ale S Most male buyers are single with no children USA 100% of sales are domestic 25% buy instore 39% use laptops 50% use desktops 40% women buy online
- 3. Distribution / ChannelManagement is Important Because: • • • It affects sales — if the product is not available it can’t be sold It affects profits — distribution can contribute up to 50 percent of the final selling price of some goods It influences customer satisfaction The Marketing Channel Creates the Utility of: • • • • time = when place = where possession = access information = communication
- 4. Marketing Channel: Thegroup of individuals and organizations that direct the flow of products from producers (business) to customers – B2C 1 2 3 4 5
- 5. The Channel canhave many Intermediaries (B2C) A.) 2 1 Ma Co nu B.) 2 1 tai fac 3 2 Ma Wh nu ole fac tur er 2 1 Ma ler tur er 1 nu fac Ag tur er en t tai er ler 4 3 Wh ole er nsu me r Co nsu me r 5 Re sal Co 4 Re sal r 3 Re nu D.) me tur er Ma C.) nsu fac tai ler Co nsu me r
- 6. And International DistributionChannels Can Include More as Exporters and Importers
- 7. Business to BusinessMarketing Channels (B2B) E.) 2 1 Bu Bu sin F.) sin ess 2 1 Bu G.) Bu trib ess uto sin ess Bu sin ess ess 3 Ag Bu en sin t 2 1 sin r 2 1 Bu H.) 3 Dis sin ess Ag 3 en t ess Dis 4 trib uto Bu r sin ess
- 8. Marketing Channel Design IndirectDistribution Uses intermediaries to reach the target market • • • • Type Location Density Channel Levels Direct Distribution vs Reaches the target market directly • Uses its own sales force or distribution outlets • Uses the Internet
- 9. Marketing Channel Design IndirectDistribution is considered when: • • • Intermediaries can perform distribution functions more efficiently and at a lower cost The target market is hard to reach directly The business does not have the resources to perform the distribution function 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 10. Marketing Channel Design DirectDistribution is considered when: • The target market is easily identifiable • A knowledgeable and personal sales-force is a key ingredient • The business has a wide variety of products available for the target market • Sufficient resources are available • Intermediaries are not available for reaching the target market • Intermediaries do not possess the capacity to service the requirements of the target market 2 1 Ma nu Co fac tur er nsu me r
- 11. Marketing Channel Design InternetMarketing Channels: • • • • • • • • • • • SEO (Search Engine Optimization) PPC (Pay Per Click Campaigns) Social Media Marketing Affiliate Marketing Shopping Channels (ie. Google Product) Mobile Marketing Video Marketing eDM (email Direct Marketing) Online PR / Article Content Marketing Display Advertising Directory / Review Sites (ie. Yelp)
- 12. Marketing Channel Design MultipleMarketing Channels: Simultaneously using different marketing channels to reach diverse target markets. Oakley Retail / Outlet Stores Oakley Website Specialty Retailers Online Retailers Mail Order Catalogs Retail Stores SGHI Website
- 13. Putting together allthe Intermediaries in the Marketing Channel Creates the Supply Chain Key Tasks in Supply Chain Management • • • • planning = coordination the partnerships to meet customer needs sourcing = purchasing the goods and services to support the channel delivering = moving the product through the channel fortifying = the relationship with the customer
- 14. Selecting the ChannelDesign Nature of the product: • • • • Technical / complex (Specialist and Agents) Customized and specific (Direct Distribution) Less expensive / standardized (Longer Channels) Brand image exclusivity (Limited Availability) 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 15. Selecting the ChannelDesign Nature of the business: • It’s size and scope – e.g. can it afford an in-house salesforce • Does it have an established distribution network • How much control does it want over distribution 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 16. Selecting the ChannelDesign The Competition: • What distribution channels and intermediaries do they use? • Is it an international product? • What’s the geographical spread? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 17. Selecting the ChannelDesign Environmental Forces: • • • • Adverse economic conditions in play New technologies available e.g. software delivery New labor or environmental laws Taxes, tariffs, and trade agreements 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 18. Selecting the ChannelDesign Characteristics of the Intermediaries: • • • • • Market Coverage Sales Forecast Costs Resources Profitability • • • • • Control Motivation Reputation Competition Contracts 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 19. Selecting the ChannelDesign Market Coverage: • • • • Does the profile of customers match the target market profile? Are the number of potential customers big enough to meet the required distribution penetration? Is the sales force big enough to cover the territory? Is the existing delivery fleet and warehouse facilities adequate? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 20. Selecting the ChannelDesign Sales Forecast: • What’s their sales forecast? • Are they realistic? • What are they willing to commit to in inventory? • Do they have a marketing budget? Some manufacturers even ask their distributors for a marketing plan showing how they intend to market the supplier’s products. 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 21. Selecting the ChannelDesign Costs: • What will the relationship cost in terms of discounts, commissions, stock investment and marketing? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 22. Selecting the ChannelDesign Resources: • Does the target market require anything special such as technical assistance, installation, quick deliveries, instant availability? • If so can the distributor provide it? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 23. Selecting the ChannelDesign Profitability: • How much profit will they generate for the manufacturer? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 24. Selecting the ChannelDesign Control: • • • • Do they have a reporting system in place? How do they deal with problems? How often are review meetings scheduled? Can you influence the way they present your products? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 25. Selecting the ChannelDesign Motivation: • Does the intermediary convey a sense of excitement and enthusiasm about the product? • What their sales force reaction to the product? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 26. Selecting the ChannelDesign Reputation: • Does the intermediary have a solid track record of successes? • How long have they been in business? • Is their business dependent on one key-player, or is team based? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 27. Selecting the ChannelDesign Competition: • Does the intermediary distribute any competitor’s products? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 28. Selecting the ChannelDesign Contracts: • Does the intermediary demand exclusivity? • Is the contract binding or flexible based on performance? 3 2 1 Ma nu fac Wh tur er ole sal Re 4 er tai ler Co nsu me r
- 29. Intensity of MarketCoverage Intensive Selective Convenience products such as Coke, Doritos Consumer products ie. laptops, televisions Available in many retail locations Available in some retail locations Exclusive Specialty products ie., Rolex watches Available in few retail locations
- 30. Supply Chain Management EffectiveDistribution Occurs when a limited number of retail locations account for a significant percentage of the market. For example, the product is distributed 30% of available retail outlets, but those retailers account for 80% of the market.
- 31. Supply Chain Management Profitability •Margins = (Revenues - Channel Costs) Channel costs are: Distribution costs / Advertising costs / Selling Costs
- 32. Supply Chain Management ChannelConflict Occurs when one channel member believes another channel member is engaged in behavior that is preventing them from achieving their goals. Sources of Channel Conflict Channel member bypasses another member and sells or buys direct Profit margins are uneven between channel members Manufacturer believes channel member is not providing attention to its product Manufacturer engages in dual distribution
- 33. Supply Chain Management ChannelPower The channel leader may be any member of the supply chain. Referred to as the Channel Captain, they are the dominant member that takes on the role of coordinating, directing, and influencing the other member’s goal achievements Forms of Power Ability to reward or coerce other members Experts within the market Legitimate right to dictate behavior
- 34. Supply Chain Management StrategicRelationships Two common strategies are Vertical Marketing Systems and Horizontal Marketing Systems
- 35. Supply Chain Management VerticalMarketing Systems Manufacturers and intermediaries working closely together They plan production, delivery and promotional schedules. Share resources when possible. Managed by the Channel Captain Example: Luxottica The manufacturer Luxottica purchased the brand “Oakley” and the retail presence of “The Sunglass Hut” to deliver its products.
- 36. Supply Chain Management HorizontalMarketing Systems Occurs when two organizations on the same channel level cooperate (e.g. two wholesalers or two retailers) They share their expertise and channels Decreases time to market entry Example: Apple / Starbucks partnership The purpose was for Starbucks customers to wirelessly browse, search, preview, and purchase music from iTunes.
- 37. Legal Issues inChain Management Dual Distribution The use two or more marketing channels to distributed the same products to the same target market. Considered illegal when the manufacturer uses company-owned outlets to force independent retailers out of business by undercutting their prices.
- 38. Legal Issues inChain Management Restricted Sales Territory Favored by intermediaries to protect a sales territory. Conflicting rulings by the courts regarding the restraint of trade.
- 39. Legal Issues inChain Management Tying Agreements An agreement where the manufacturer requires intermediaries to purchase other products in addition to the most popular items. The related practice of full-line forcing, where the manufacturer requires the intermediary to carry the entire line. Deemed okay by the courts if they are able to carry competing products
- 40. Legal Issues inChain Management Exclusivity An agreement where the manufacturer forbids intermediaries to carry competing products. Deemed illegal if: • If the deal blocks as much as 10% of market share • The sales revenue is deemed “sizable” • The manufacturer is larger and intimidating to the intermediary
- 41. Legal Issues inChain Management Refusal to Deal The courts have held that manufacturers have the right to choose channel members with which they will do business. However, within existing channels manufacturers may not legally refuse to deal with intermediaries merely because they resist policies that are anticompetitive or restrain trade.