Distribution Channel Functions This CTR relates to the material on pp. 354-355. Distribution Channel Functions Information. This function involves gathering and distributing marketing research and intelligence about the environment for planning purposes. Discussion Note: The use of scanner technology has dramatically changed this function in the last few years. Promotion. This involves developing and spreading persuasive communications about an offer. Contact. Contact involves finding and communicating with prospective buyers. Matching. This function consists of shaping and fitting the offer to the buyer’s needs by manufacturing, grading, assembling, and packaging. Negotiation. This involves reaching an agreement on price and other terms. Physical Distribution . This function consists of the transporting and storing of goods. Financing. This function addresses the acquiring and using of funds to cover the costs of channel work. Risk Taking. This function assumes the risk of carrying out the channel work. Discussion Note: Students often assume business is risk-free. You might expand upon the link between risk and value-added services as the justification for profits.
Channel Levels and Channel Conflict This CTR corresponds to Figure 12-2 (A) on p. 355 and relates to the material on pp. 355-356. Channel Levels Distribution channels can be described by the number of channel levels involved. A channel level is defined as each of the marketing intermediaries that perform some work in bringing the product and its ownership closer to the final buyer. Distribution channels can be categorized broadly as: Direct Marketing Channel . This is a marketing channel that has no intermediary levels. The company sells directly to final consumers. Discussion Note: The company may not be the actual producer. Land’s End only makes a small fraction of its clothes but coordinates the sale and ships from its warehouses. Dell Computer assembles its computers on site but from component parts made elsewhere. Indirect Marketing Channels . These contain one or more intermediary levels.
Channel Management Decisions This CTR relates to the material on pp. 369-370. Channel Management Decisions Selecting Channel Members. Choosing middlemen will vary in difficulty be product and producer. Very large and well known companies often have more qualified middlemen seeking to carry their products than the company can effectively use. Some new products will be resisted by existing channels and may require adopting new channel members to carry the line. Motivating Channel Members. Channel members must be motivated to perform. Positive motivators come from high margins, special deals, premiums, cooperative advertising allowances, display allowances, and sales contests. Negative motivators may include threatening margins, delaying delivery, or ending the relationship. Long term cooperation is enhanced by distribution programming which involves building a planned, professionally managed, VMS that meets al channel member needs. Evaluating Channel Members. Assessing channel members requires regular measurement of performance against established criteria such as sales quotas, inventory levels, customer delivery time, training, and overall customer service for each channel member. Effective channel management rewards superior performance and seeks to improve substandard performance in a cooperative professional partnership. Channel member replacement should be used as a last resort with sincere efforts to improve performance have not succeeded.
Logistics Systems This CTR relates to the material on pp. 374-377. Instructor’s Note: Transportation is covered separately on the following CTR. Nature of Logistics Systems Costs . Distribution costs stem from factors other than just size. How products are transported, stored, sorted, inventoried, ordered, and tracked can all affect distribution costs over and above the sheer volume being distributed. Modern facilities utilizing technology to help innovate what it means to physically distribute goods both save on costs and become a viable promotional tool in providing customer service. Order Processing . Processing orders is an area of distribution that benefits from the application of computer technology. Innovative applications of hardware and software can streamline order processing by connecting the salesperson with dispatchers and warehouses. Warehousing . Storage of products to best meet demand requires decisions on stocking locations, estimation of time to be stored and distinguishing between storage warehouse needs and distribution centers utilizing automation to move goods quickly. Inventory . The cost of holding inventory requires developing accurate knowledge on when to order and how much to order to meet demand but not overburden inventory processing capacity.
Marketing Channels for Business Goods BusinessProducer User Agent/ BusinessProducer Broker User BusinessProducer Wholesaler User Agent/ BusinessProducer Wholesaler Broker User
Evaluation of Channel Alternatives Economic Criteria – -Potential sales, costs and profits of channels Control Criteria -Amount of control company has over sales efforts Adaptive Criteria -flexibility of channel to adapt to changing situations
Costs Costs Minimize Costs of Order Processing Order Processing Minimize Costs of Submitted Attaining Logistics Submitted Attaining Logistics Processed Processed Objectives Objectives Shipped Shipped LogisticsTransportation Functions Water, Truck, Warehousing WarehousingRail, Pipeline & Air Storage Storage Distribution Distribution Inventory Inventory When to order When to order How much to order How much to order Just-in-time Just-in-time
Customer Service Concept Customer service is the ability of logistics management to satisfy users in terms of: - time - dependability - communication - convenience
Companies today place greater emphasis on logistics because….. – Effective logistics is becoming a key to winning and keeping customers. – Logistics is a major cost element for most companies.
– The explosion in product variety has created a need for improved logistics management.– Information technology has created opportunities for major gains in distribution efficiency.
Classification of Retailing Retailing and Wholesaling
Amount of Service Amount of Service Self-Service, Limited-Service and Self-Service, Limited-Service and Full-Service Retailer Full-Service Retailer Product Line Product Line Length and Breadth of the Product Length and Breadth of the Product Assortment Assortment Relative Prices Relative Prices Pricing Structure that is Used Pricing Structure that is Used by the Retailer by the Retailer Retail OrganizationsIndependent, Corporate, or Contractual Ownership Organization
Mail Order Mail Order ••Catalogs --from clothing to computers Catalogs from clothing to computers••Direct Mail --brochure offering a product Direct Mail brochure offering a product or service at one point in time. or service at one point in time. Direct Selling Direct Selling ••Door-to-Door Sales --declining in U.S. Door-to-Door Sales declining in U.S. ••Parties & Networks --presentations Parties & Networks presentations ••Telemarketing --over the phone Telemarketing over the phone Automatic Vending Automatic Vending ••Best suited to inexpensive merchandise Best suited to inexpensive merchandise and food and beverages. and food and beverages. Direct Response Television Direct Response Television ••Home Shopping Networks --TV channels Home Shopping Networks TV channels that sell products that sell products
What is Wholesaling? All the activities involved in selling goods and services to those buying for resale or business use. Wholesaler - those firms engaged primarily in wholesaling activity.
Easy EasyInquiry Inquiry Error-Free Error-Free and Accuracy Invoicing and Invoicing Order Order Reliable On-time On-time Delivery Delivery Delivery Post-Sales Post-Sales Easy Claims Easy Claims Support Support Handling Handling Suppliers’ Logistics Systems Suppliers’ Logistics Systems
Warehouse and Materials-Handling Receive goods into warehouse Identify, sort, andFunctions label goods ofMaterialsHandling Dispatch the goods to temporary storage Recall, select, or pick the goods for shipment
Merchant Merchant Wholesaler Brokers/ Agents Brokers/ Agents WholesalerIndependently Owned Independently Owned They Don’t Take Title to They Don’t Take Title to Business that Takes Business that Takes the Goods, and They the Goods, and They Title to the Title to the Perform Only a Few Perform Only a Few Merchandise Merchandise Functions. Functions. it Handles. it Handles. Manufacturers’ Manufacturers’ Sales Branches Sales Branches and Offices and Offices Wholesaling by Sellers Wholesaling by Sellers or Buyers Themselves or Buyers Themselves Rather Than Through Rather Than Through Independent Independent Wholesalers. Wholesalers.
Right RightCost Place Right ProductRight RightTime Condition
Compete on value (not just price.)Save customers time and energy. Make shopping fun.