This document discusses distribution channels and logistics. It defines distribution channels as the interdependent organizations that make a product available for consumption and notes that channel decisions affect other marketing decisions and involve long-term commitments. It also discusses the functions of intermediaries in distribution channels, different types of channels including direct and using distributors, levels within channels, and innovations in channel design. The document also summarizes logistics functions, transportation modes, and integrated logistics management.

1. 12-112-1
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

2. 12-212-2
Why Use Distribution Channels?
• To make the product or service available to
consumers.
– risk
– cost

3. 12-312-3
Direct Channels of Distribution
• Manufacturer’s sales office
• Manufacturer’s branch office
• Catalog mail order

4. 12-412-4
Why Use Distributors?
• Efficiency
• Information
• Contact and promotion
• Matching
• Transportation and storage
• Financing and risk taking
• Negotiation

5. 12-512-5
Role of IntermediariesRole of Intermediaries
• Greater efficiency in making goods
available to target markets.
• Intermediaries provide
–Contacts
–Experience
–Specialization
–Scale of operation
• Match supply and demand.

6. 12-612-6
Channel FunctionsChannel Functions
•Information
•Promotion
•Contact
•Matching
•Negotiation
•Physical Distribution
•Financing
•Risk taking

7. 12-712-7
Channel LevelsChannel Levels
•Manufacturer
•Wholesaler
•Retailer
•Consumer

8. 12-812-8
Channel Behavior and ConflictChannel 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 ConflictHorizontal Conflict occurs among firms at the same level
of the channel.
– Vertical ConflictVertical Conflict occurs between different levels of the
same channel.

9. 12-912-9
Vertical Marketing SystemsVertical Marketing Systems
• A vertical marketing system (VMS) is one in which
the main members of a distribution channel—
producer, wholesaler, and retailer—work together
as a unified group in order to meet consumer
needs.
• Corporate
– common ownership at different channel levels
• Contractual
– contractual agreement among channel members
• Administered
– leadership assumed by dominant membersleadership assumed by dominant members

10. 12-1012-10
Corporate
A corporate vertical marketing system can be involved with the
ownership that of the levels of distribution or production chain that is
associated with a single company
Contractual
This is a kind of vertical marketing system that has formal agreement
involved in it that exists between various levels that of the production
or it can be between the levels of distribution channel. This is done
for coordinating the overall process that is related with the particular
company. A common form of contractual VMS is franchising.

11. 12-1112-11
Administered
this is a kind of VMS that has one member from the production as
well as the distribution chain has more dominance and they
organize the whole nature that is associated with the vertical
marketing system in an informal manner. This is due to the sheer
size that is associated with the company.

12. 12-1212-12
Innovations in Marketing SystemsInnovations in Marketing Systems
Horizontal MarketingHorizontal Marketing
SystemSystem
Horizontal MarketingHorizontal Marketing
SystemSystem
Hybrid MarketingHybrid Marketing
SystemSystem
Hybrid MarketingHybrid Marketing
SystemSystem
Two or more
companies at one
channel level join
together to increase
coverage
Example:Banks in
Grocery Stores
A single firm sets up
two or more
marketing channels
to increase coverage
Example:Retailers,
Catalogs, and Sales
Force

13. 12-1312-13
Channel Design DecisionsChannel Design Decisions
Analyzing Consumer Service NeedsAnalyzing Consumer Service Needs
Setting Channel Objectives & ConstraintsSetting Channel Objectives & Constraints
Exclusive
Distribution
Exclusive
Distribution
Selective
Distribution
Selective
Distribution
Intensive
Distribution
Intensive
Distribution
Identifying Major AlternativesIdentifying Major Alternatives
Evaluating the Major AlternativesEvaluating the Major Alternatives

14. 12-1412-14
Channel Management DecisionsChannel Management Decisions
SelectingSelecting
MotivatingMotivating
EvaluatingEvaluating
FEEDBACK

15. 12-1512-15
Goals of Logistics systemGoals 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

16. 12-1612-16
Logistics FunctionsLogistics Functions
• Order Processing
• Warehousing
• Inventory Management
• Transportation
• Design system to minimize costs of attaining
objectives

17. 12-1712-17
Transportation ModesTransportation Modes
Rail
Nation’s largest carrier, cost-effective
for shipping bulk products, piggyback
Rail
Nation’s largest carrier, cost-effective
for shipping bulk products, piggyback
Truck
Flexible in routing & time schedules, efficient
for short-hauls of high value goods
Truck
Flexible in routing & time schedules, efficient
for short-hauls of high value goods
Water
Low cost for shipping bulky, low-value
goods, slowest form
Water
Low cost for shipping bulky, low-value
goods, slowest form
Pipeline
Ship petroleum, natural gas, and chemicals
from sources to markets
Pipeline
Ship petroleum, natural gas, and chemicals
from sources to markets
Air
High cost, ideal when speed is needed or to
ship high-value, low-bulk items
Air
High cost, ideal when speed is needed or to
ship high-value, low-bulk items

18. 12-1812-18
Integrated Logistics ManagementIntegrated Logistics Management
Concept Recognizes that Providing Better Customer
Service and Trimming Distribution Costs Requires
TeamworkTeamwork, Both Inside the Company and Among All
the Marketing Channel Organizations.
Cross-Functional Teamwork inside
the Company
Cross-Functional Teamwork inside
the Company
Building Channel PartnershipsBuilding Channel Partnerships
Third-Party LogisticsThird-Party Logistics