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Physical Channel of Distribution
The document discusses various types of distribution channels, defining them as interconnected organizations that facilitate the availability of products or services to consumers. It outlines different marketing systems, including conventional, vertical, and hybrid marketing systems, emphasizing the relationships and roles of manufacturers, wholesalers, and retailers within these channels. Additionally, it highlights the significance of contractual agreements, such as franchises, in optimizing distribution efficiency and effectiveness.
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Physical Channel of Distribution
- 1. PHYSICAL CHANNEL OF DISTRIBUTION Vijyata| Assistant Professor | Ranchi Women’s College | Ranchi University
- 2. DEFINITION The set ofinterdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.-' The channel of distribution is therefore all those organizations through which a product must pass between its point of production and consumption
- 3.
- 4. DISTRIBUTION CHANNEL LEVELS( Consumer) MANUFACTURER CONSUMER CONSUMER RETAILER MANUFACTURER CONSUMER WHOLESALER MANUFACTURER CONSUMER WHOLESALER MANUFACTURER RETAILER JOBBER RETAILER Fig: Customer Marketing Channels Zero-level One-level Two-level Three level
- 5. DISTRIBUTION CHANNEL LEVELS(Industrial) MANUFACTURER INDUSTRIAL CONSUMER INDUSTRIAL CONSUMER Industrial Distributor MANUFACTURER INDUSTRIAL CONSUMER Manufacturer’s Representative or Sales Branch MANUFACTURER INDUSTRIAL CONSUMER Manufacturer’s Representative or Sales Branch MANUFACTURER Industrial Distributor Fig: Industrial Marketing Channels
- 6. FOUR TYPES OFCHANNEL ORGANIZATION Manufacturer Wholesaler Retailer Consumer Consumer Manufacturer Retailer Wholesaler CONVENTIONAL CHANNEL DESIGN VERTICAL MARKETING SYSTEM Manf.1 Manf.2 W2 R2 Cons.2Cons.1 HORIZONTAL MARKETING SYSTEM Manufacturer Retailer Cons.2Cons. 1 Busi. Cons.1 Wholes aler Retailer HYBRID MARKETING SYSTEM
- 7. A conventional distributionchannel consists of one or more independent producers, wholesalers and retailers. Each is a separate business seeking to maximize its own profits, even at the expense of profits for the system as a whole. No channel member has much control over the other members and no formal means exists for assigning roles and resolving channel conflict CONVENTIONAL DISTRIBUTION CHANNEL
- 8. A vertical marketingsystem (VMS) consists of producers, wholesalers and retailers acting as a unified system. One channel member owns the others or has contracts with them, or wields so much power that they all cooperate. The VMS can be dominated by the producer, wholesaler or retailer. They achieve economies through size, bargaining power and elimination of duplicated services. VERTICAL MARKETING SYSTEM (VMS)
- 9. VMS CORPORATE VMS CONTRACTUAL VMS Wholesaler- sponsored voluntary chains Retailer Co- operatives Franchise Organization Manufacturer sponsoredretailer franchise system Service firm sponsored retailer franchise system Manufacturer sponsored wholesaler franchise system ADMINISTERED VMS
- 10. CORPORATE VMS: In acorporate VMS, co-ordination and conflict management are attained through common ownership at different levels of the channel. Petrol distribution through chains of petrol stations owned by the oil company is an example of delivery and control achieved by such a system
- 11. ADMINISTERED VMS : Anadministered VMS co-ordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of one of the parties. Eg. – Nestle Maggi, Cadbury ,pepsi ,coke
- 12. CONTRACTUAL VMS : Acontractual VMS consists of independent organizations at different levels of production and distribution, which join together through contracts to obtain more economies or sales impact than each could achieve alone. It is primarily done by means of, Wholesaler’s sponsored chains, Retailer cooperatives or Franchise.
- 13. FRANCHISEE: A franchise isa contractual association between a franchisor - a manufacturer, wholesaler or service organization - and an independent channel member (the franchisee), which buys the right to sell the franchisor's branded product or service - Manufactured-sponsored Retailer Franchise system : Car company and Car Dealer - Manufactured-sponsored Wholesaler Franchise system : Soft drink company and distribution firm - Service –firm Sponsored retailer Franchise system : Play schools, study centres
- 14. HORIZONTAL MARKETING SYSTEM InHMS, two or more companies at one level join together to follow a new marketing opportunity. By combining their capital, production capabilities or marketing resources, companies can accomplish more than any one company working alone. Companies might join forces with competitors or non-competitors.
- 15. HYBRID MARKETING SYSTEM Multichanneldistribution systems adopted by companies is often called hybrid marketing channels. Such multichannel marketing occurs when a single firm sets up two or more marketing channels to reach one or more customer segments.
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