distribution strategies(4210)

MARK4210, 2014 Spring, L1/L2
MARK4210: Strategic Marketing
2014 Spring, Section L1/L2
[Class #11]
Distribution Strategies

2
Distribution Strategies
 Concerned with the channels a firm employs to
make its goods and services available to customers
 Channels – types of organized structures of
intermediate buyers & sellers that bridge the
time/space between manufacturers and end-users
 Includes:
• Channel Structure
• Distribution Scope
• Multiple Channels
• Channel Control
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009

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 Depends on product characteristics & consumer needs
Channel Design
Design Criteria Soft drink Luxury bag Cell phone*
Volume High Low Medium
Assortment High Low High
Number of outlets
needed
Many Few Some
Distance willing
to travel
Low High Medium
Willingness to
wait
Low High Medium
Needs personal
service
Low High Medium
*Average cell phone,
not high end

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Channel Structure Strategy
 Refers to the number of intermediaries that may be
employed in moving goods from manufacturers to
customers
 Options
• Direct Distribution – no intermediaries involved, shortest
channel
• Indirect Distribution – goods pass through intermediaries/
agents

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Channel Structure: Direct Distribution
Manufacturers
Consumers

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Channel Structure: Indirect Channel
Structures – Consumer Goods

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Channel Structure: Indirect Channel
Structures (2) – Business-to-Business

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Direct vs Indirect

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Distribution Scope Strategy
 For an efficient channel network, the manufacturer
should clearly define the target customers it intends
to reach – this determines the scope of distribution
 Strategic alternatives:
• Exclusive distribution
• Selective distribution
• Intensive distribution
Planning for Distribution Channels and Marketing Logistics, Chapter 9, Building a Marketing Plan, Wong, Radel, Ramsaran-Fowdar, Harvard Business Publishing, January 31, 2011

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Manufacturer
Manufacturer
Manufacturer
Distribution Scope Strategy
Planning for Distribution Channels and Marketing Logistics, Chapter 9, Building a Marketing Plan, Wong, Radel, Ramsaran-Fowdar, Harvard Business Publishing, January 31, 2011

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Distribution Scope: Exclusive
Distribution
 One agent/retailer serving a given area is granted
sole rights to sell the product
 Products that need to maintain aura of high quality
and product desirability

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Distribution Scope: Intensive
Distribution
 Product is available at all possible retail outlets – in
wide variety of different & competing institutions in a
given area
 Most applicable for convenience goods (bought on
sight vs. sought) – affordable, low margin goods, fast
turnover

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 All supermarket channel outlets
 All convenience store channel
outlets
 Etc…

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Distribution Scope: Selective
Distribution
 Several, but not all, outlets distribute a product
 Frequently used by “shopping goods” (typically
sought on basis of attractive price or quality
characteristics)
 Ideal situations:
• Environments where few outlets can have high sales
volume (i.e., adding outlet coverage has marginal sales
increase)
• Requires carrying full product line with high service
 Outlets should be limited by criteria that meet the
product’s overall distribution objectives (e.g.,
inventory level, customer service, showroom space)Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009

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“Authorized dealers”

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Manufacturer
Intensive vs Exclusive
Manufacturer

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Multiple-Channel Strategy
 Refers to a situation in which two or more different
channels are employed for distribution of goods and
services
 Market must be segmented so that each segment
gets the services it needs and pays for them, but is
not charged for services it does not need
 Need to address potential dealer resentment and
control problems
 Basic types:
• Complementary
• Competitive

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Multiple Channel: Complementary
 Each channel handles a different non-competing
product or non-competing market segment
 Complementary channels allow products to reach
new customers that are otherwise not served by
existing channels, or traditional distribution channels
are saturated (intense competition)

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21

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Multiple Channel: Competitive
 Exists when the same product (sometimes in
different brands) is sold through different but
competing channels
 Though debatable, intention is that competing
dealers will increase overall sales
 Also dictated by changing environment and
consumer buying preferences (e.g., drugstores
selling groceries, grocery stores selling drugs)

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Direct Channel
Retail ChannelOnline Channel

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Channel Control Strategy
 Traditional channel arrangements consisted of
loosely aligned entities serving their own needs
 Channel control can lead to improved profits as
inefficiencies are corrected

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Channel Control: Vertical Marketing
Systems
 Increasing trend replacing conventional marketing
channels – up to 80% of US consumer goods
market
 Vertical marketing systems are professionally
managed and centrally programmed networks
designed to achieve operating economies and
maximum market impact, from points of production
to end users
 Sometimes called “centrally coordinated systems”

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Channel Control: Types of Vertical
Marketing Systems
Types Description
Corporate • Successive stages of production and distribution are
owned by a single entity – forward and backward
integration
Administered • Dominant firm within channel system (either
manufacturer, wholesaler, or retailer) coordinates flow of
goods via ‘power’
• “Channel Captains”
• Large companies that guide channel networks without
actually owning them
Contractual • Independent firms within a channel structure integrate
programs on a contractual basis to realize economies
and market impact (e.g., franchises)

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Corporate:
Administered:
Contractual:

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Distribution – the Rise of e-Commerce
Source: Infographic from My Coupon Codes, based on 2010 Nielsen survey of more than 27,000 Internet users from North America, South America, Asia Pacific, Europe and Middle East.
2010 Nielsen Survey 2010 Nielsen Survey

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Types of e-Commerce
Source: E-Commerce, business, technology, society. Kenneth C. Laudon, Carol Guercio Traver, Pearson Education, Inc., 2004

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Source: E-Commerce, business, technology, society. Kenneth C. Laudon, Carol Guercio Traver, Pearson Education, Inc., 2004
e-Commerce impact to Industry Value
Chains

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