Report on Distribution Channels
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Distribution channels refer to the intermediaries involved in making products available to end users, and include manufacturers, distributors, wholesalers, retailers, and consumers. The document discusses how distribution channels have evolved from older push models dominated by manufacturers to newer pull models where information technology and customer demands have increased power and expectations. It also outlines the key functions performed by different actors in direct and indirect distribution channels.
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Report on Distribution Channels
- 1. Distribution Channels Marketing Management MANUEL OCAMPO JR. MBA - PCU
- 2. OLD WAY NEW WAY Manufacturer as channel captain Retail power increasing Distribution arrangements fixed Distribution arrangements variable Conflict models dominate Cooperative models ascendant Push inventory systems (loading intermediaries common) Pull inventory (efficient consumer response systems) Direct marketing rare Direct marketing common Telecommunications infrequent Telecommunications widely used
- 3. OLD WAY NEW WAY Overnight distribution unavailable Overnight distribution increasing Fast delivery rare Delivery speed highly valued Information technology poorly used Information technology essential Distribution – local / regional Distribution – regional/national/global Slow progression: exclusive →selective → intensive Fast progression: exclusive →selective → intensive Customers patient Customers impatient
- 4. are sets of independent organizations involved in the process of making a product or service available for use or consumption. They are the set of pathways a product or service follows after production, culminating in purchase and use by the final end-user. Distribution Channels
- 5. Why do business need to use Distribution Channels? Because selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales
- 12. CONTACT Finding and communicating with prospective buyers PROMOTION Developing and spreading persuasive communications about an offer INFORMATION Gathering and distributing marketing research and intelligence information about the marketing environment
- 13. PHYSICAL DISTRIBUTION Transporting and storing goods NEGOTIATION Agreeing on price and other terms of the offer so that ownership or possession can be transferred MATCHING Shaping and fitting the offer to the buyer’s needs
- 14. RISK TAKING Assuming financial risks such as the inability to sell inventory at full margin FINANCING Acquiring and using funds to cover the costs of channel work
- 15. Suppliers manage most contact with consumers and end users Direct Channel Intermediaries like distributors, wholesalers, and retailers play a major role in transferring products to consumers and end users Indirect Channel
- 16. DIRECT DISTRIBUTION INDIRECT DISTRIBUTION Small potential customer base Large potential customer base Custom-tailored products Stockable items, manufactured in large quantities but sold in small quantities Large quantity sales Small quantity sales Complex end-user customer purchasing decisions — multiple functions and high-level executives Simple end-user purchasing decision — often by low-level purchasing agents Delivery speed not critical Rapid delivery and service important
- 18. MANUFACTURER MANUFACTURER MANUFACTURER MANUFACTURER Industrial Customer Industrial Customer Industrial Customer Industrial Customer Industrial Distributors Manufacturer Representative Manufacturer Sales Branch ZeroLevel OneLevel TwoLevels ThreeLevels
- 19. PUSH STRATEGY Induce intermediaries to carry, promote and sell the product to end-user. PULL STRATEGY Manufacturer uses advertising and promotion to induce customers
- 20. PRODUCER INTERMEDIARIES END USER / CUSTOMER PRODUCER INTERMEDIARIES END USER / CUSTOMER PUSH STRATEGY PULL STRATEGY Marketing activities Marketing activities Demands Demands Demands Demands Marketing activities
- 21. HORIZONTAL CONFLICT This is conflict between firms at the same level of the channel
- 22. VERTICAL CONFLICT Refers to conflicts between different levels of the same channel
- 23. INTENSIVE SELECTIVE EXCLUSIVE A form of distribution aimed at having a product available in every outlet A form of distribution achieved by screening dealers to eliminate all but a few in any single area A form of distribution that established one or a few dealers within a given area
- 24. Price Policy Conditions of Sale Distributor’s Territorial Rights Mutual Services and Responsibilities
- 25. 1 What is the distributor’s credit and financial condition? 2 What is the distributor’s selling capability? What is its historic sales performance? 3 Will the distributor forgo competitive products? Does it welcome the supplier’s products? 4 What is the distributor’s general reputation among suppliers and customers? 5 Does the distributor have adequate market coverage? 6 How competent is the distributor’s management? 7 How does the distributor rate on aggressiveness, enthusiasm and taking initiative? 8 Is the distributor the appropriate size to do business with us?
- 27. REFERENCES 1. Kotler, Philip, Marketing Management Millennium Ed. Pearson Custom Publishing: New Jersey, 2000. 2. Stone, Marilyn and John Desmond, Fundamentals of Marketing. Routledge; New York, 2007. 3. Capon, Noel, Managing Marketing in the 21st Century. Wessex: New York, 2009. 4. Kotanabe, Masaaki and Kristaan Helsen, Global Marketing Management, 5th Ed. Wiley and Sons: New York, 2010.
Editor's Notes
- IN THE MARKETING MIX, ONE OF THE Ps is PLACE which refers to THE DISTRIBUTION CHANNELS