Copy Of Channel Of Distribution


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Copy Of Channel Of Distribution

  1. 1. DISTRIBUTION A set of independent organizations involved in the process of making a product or service available for use or consumption by the consumer or business users.
  2. 2. International distribution <ul><li>A relationship marketing perspective: it is all about creating long-term relationships for building up competitive advantage </li></ul>
  3. 3. <ul><li>Channels provide the means by which the firm moves the goods and services it produces to ultimate users </li></ul><ul><ul><li>Facilitate the exchange process by cutting the number of contacts necessary </li></ul></ul><ul><ul><li>Adjust for discrepancies in the market’s assortment of goods and services via sorting </li></ul></ul><ul><ul><li>Standardize exchange transactions </li></ul></ul><ul><ul><li>Facilitate searches by both buyers and sellers </li></ul></ul>The Role of Marketing Channels in Marketing Strategy
  4. 4. Types of Marketing Channels <ul><li>Marketing channel : system of marketing institutions that promotes the physical flow of goods and services, along with ownership title, from producers to consumer or business user; also called a distribution channel </li></ul><ul><li>Marketing intermediary : wholesaler or retailer that operates between producers and consumers or business users; also called a middleman </li></ul><ul><li>Wholesaler : marketing intermediary that takes title to goods and then distributes these goods further; also called a jobber or distributor </li></ul><ul><li>Direct Selling </li></ul>
  5. 5. <ul><li>Types of Marketing Channels </li></ul><ul><ul><li>Consumer Goods </li></ul></ul>
  6. 6. <ul><li>Types of Marketing Channels </li></ul><ul><ul><li>Business Goods </li></ul></ul><ul><ul><li>Services </li></ul></ul>
  7. 7. Producer Distributor Dealer Retailer Consumer Segment 1 Consumer Segment 2 Business Segment 1 Business Segment 2 Catalog Telephone Internet Sales Force <ul><li>Dual Distribution : Network that moves products to a firm’s target market through more than one marketing channel </li></ul>
  8. 8. <ul><li>Reverse Channels : Channels designed to return goods to their producers </li></ul>
  9. 9. Channel Strategy Decisions <ul><li>Selection of a Marketing Channel </li></ul><ul><li>Factors which impact the selection of a marketing channel include: </li></ul><ul><li>1- External Factor </li></ul><ul><li>2- Internal Factor </li></ul>
  10. 10. External distribution factors <ul><li>Customer characteristics </li></ul><ul><li>Product / service nature </li></ul><ul><li>Nature of the demand </li></ul><ul><li>Level of competition </li></ul><ul><li>Legal regulations </li></ul><ul><li>Local business practices </li></ul>
  11. 11. Internal decision factors <ul><li>Types of intermediaries </li></ul><ul><li>Desired market coverage </li></ul><ul><li>Channel length (desired levels) </li></ul><ul><li>Control resources </li></ul><ul><li>Degree of integration </li></ul><ul><li>Need for information and process sharing </li></ul>
  12. 12. <ul><li>Determining Distribution Intensity </li></ul><ul><ul><li>Distribution intensity: number of intermediaries through which a manufacturer distributes its goods </li></ul></ul>
  13. 13. <ul><li>Intensive distribution : channel policy in which a manufacturer of a convenience product attempts to saturate the market </li></ul><ul><li>Intensive market coverage </li></ul>M = Manufacturer W= Wholesaler R = Retailer
  14. 14. Selective distribution : channel policy in which a firm chooses only a limited number of retailers to handle its product line <ul><li>Selective market coverage </li></ul>M = Manufacturer W= Wholesaler R = Retailer
  15. 15. Exclusive distribution : channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a particular geographic area <ul><li>Exclusive market coverage </li></ul>M = Manufacturer W= Wholesaler R = Retailer
  16. 16. FAHAD UMER
  17. 17. <ul><li>Legal problems of exclusive distribution </li></ul><ul><ul><li>Exclusive-dealing agreement : arrangement between manufacturer and e-marketing intermediary that prohibits the intermediary from handling competing product lines </li></ul></ul><ul><ul><li>Closed sales territories : exclusive geographic selling region of a distributor </li></ul></ul><ul><ul><li>Tying agreement : Arrangement that requires a marketing intermediary to carry items other than those they want to sell </li></ul></ul>
  18. 18. Channel Management and Leadership <ul><li>Channel Captain : a dominant and controlling member of a marketing channel </li></ul><ul><li>Channel Conflict </li></ul><ul><ul><li>Horizontal Conflict </li></ul></ul><ul><ul><ul><li>Most often, horizontal conflict causes sparks between different types of marketing intermediaries that handle similar products </li></ul></ul></ul><ul><ul><ul><li>Sometimes results from disagreements among channel members at the same level </li></ul></ul></ul>
  19. 19. <ul><ul><li>Vertical Conflict </li></ul></ul><ul><ul><ul><li>Channel members at different levels find many reasons for disputes </li></ul></ul></ul><ul><ul><ul><li>Example: when retailers develop private brands to compete with producers’ brands or when producers establish their own retail outlets or WWW Sites </li></ul></ul></ul><ul><ul><li>The Gray Market </li></ul></ul><ul><ul><ul><li>Grey Good : product made abroad under license from a U.S. firm and then sold in the U.S. market in competition with that firm’s own domestic output </li></ul></ul></ul><ul><ul><ul><li>Viewed by producers as undesired competition </li></ul></ul></ul>
  20. 20. Physical Distribution <ul><li>A company’s physical distribution system contains the following elements: </li></ul><ul><ul><li>Customer Service </li></ul></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Inventory Control </li></ul></ul><ul><ul><li>Protective packaging and materials handling </li></ul></ul><ul><ul><li>Order Processing </li></ul></ul><ul><ul><li>Warehousing </li></ul></ul>
  21. 21. <ul><ul><li>Allocation of Physical Distribution Expenditures </li></ul></ul>
  22. 22. Functions performed by intermediaries <ul><li>Carrying of inventory </li></ul><ul><li>Demand generation </li></ul><ul><li>Physical distribution </li></ul><ul><li>After-sales services </li></ul><ul><li>Credit extension to customers </li></ul><ul><li>Information sharing </li></ul>
  23. 23. A typical export (distribution) procedure Exporter Importer Importer’s bank 2 Bank in exporter’s country 3 4 Manufacturing 5 Secure transport and documentation 6 Ship 7 Customs Import warehouse 9 8 1
  24. 25. <ul><li>Channels Design (11 C’s) </li></ul>- Customer Characteristics - Cultural Distribution - Competition - Company objectives (for market share and profitability) - Character (nature of product, positioning of the product) - Cost (cost incurred in maintaining the channel) - Coverage (intensive, selective, exclusive distributions) - Control (product/service presentations, quality, image) - Continuity - Communication - Capital (financial requirement)
  25. 26. <ul><li>Sources for finding Intermediaries </li></ul>- Govt. Agency - Private Sources <ul><li>Criteria for Screening Intermediaries </li></ul>- Performance - Professionalism <ul><li>Distributors agreement includes </li></ul>- Contract duration - Geographic boundaries - Compensation - Products and conditions of sale - Communication between parties
  26. 27. MARKETING LOGISTICS & SUPPLY CHAIN MANAGEMENT The tasks involved in planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to point of consumption to meet customer requirements at a profit. Supplier Company Reseller Customer Inbound Logistics Outbound Logistics Reverse Logistics
  27. 28. MAJOR LOGISTICS FUNCTIONS Warehousing Inventory Management Transportation (Inter modal transportation)
  28. 29. <ul><ul><li>The Supply Chain of a Manufacturing Company </li></ul></ul>
  29. 30. Global Channel Design <ul><li>Chosen intermediaries must meet criteria </li></ul><ul><li>work closely with distributors </li></ul><ul><li>build sustain brand </li></ul><ul><li>avoid discounting </li></ul><ul><li>‘ shops in shops’ approach e.g department stores </li></ul>
  30. 31. Nike’s ‘Do it yourself’ <ul><li>1970s independent distributors </li></ul><ul><li>successful brand at home </li></ul><ul><li>1980s established own subsidiaries overseas </li></ul><ul><li>Now controls most subsidiaries </li></ul><ul><li>even bought some distributors </li></ul>
  31. 32. Kodak’s own airfreight hub <ul><li>Minimise shipping errors and product handling </li></ul><ul><li>loaded onto trucks at Rochester plant </li></ul><ul><li>All paperwork is already completed </li></ul><ul><li>flight approval is obtained before truck arrives at airport (JFK) </li></ul>
  33. 34. CHANNEL DESIGN DECISION PROCESS A- ANALYZING CONSUMER NEED For maximum effectiveness channel analysis and decision making should be more purposeful. <ul><li>Do consumer want to buy from nearby location? </li></ul><ul><li>They willing to travel to more distant centralized locations? </li></ul><ul><li>Would they rather buy in person, over the phone, through mail or e-mail? </li></ul><ul><li>Do consumer want many add on services? etc. </li></ul>
  34. 35. B- SETTING CHANNEL OBJECTIVES <ul><li>Targeted level of customer services </li></ul><ul><li>Decide which segment to solve and the best channel to use in each case </li></ul><ul><li>Company wants to minimize the total channel cost of meeting customer services requirement </li></ul><ul><li>It also influenced by the nature of company, its products, its marketing intermediaries, its competitors (Perishable product requires direct marketing.) </li></ul>C- IDENTIFY MAJOR ALTERNATIVES <ul><li>TYPE OF INTERMEDIARIES </li></ul><ul><li>Company sales force (Assign Territories to Sales Persons) </li></ul><ul><li>Manufacturer agencies (Hire manufacturer’s agents) </li></ul><ul><li>Industrial Distributor (Exclusive Distribution) </li></ul>
  35. 36. <ul><li>NUMBER OF MARKET INTERMEDIARIES </li></ul><ul><li>Intensive Distribution (Coca Cola) </li></ul><ul><li>Exclusive Distribution (Outlets) </li></ul><ul><li>Selective Distribution (Use of more than one, but fewer than all) </li></ul><ul><li>RESPONSIBILITIES OF CHANNEL MEMBERS </li></ul><ul><li>They should agree on price policies, condition of sale, territorial rights and specific services to be performed by each party. </li></ul><ul><li>Mutual services and duties need to be spelled out carefully especially in franchise and exclusive distribution channels. </li></ul>D- EVALUATING MAJOR ALTERNATIVE <ul><li>Each alternative should be evaluated as: </li></ul><ul><li>Economic (Cost, Sales, Profitability) </li></ul><ul><li>Control (According to Situation) </li></ul><ul><li>Adaptive Criteria (Flexible, It can adopt to the environmental changes) </li></ul>
  36. 37. E- EVALUATING CHANNEL MEMBERS <ul><li>Regularly Check Channel Members performance against standards such as sales quota, average inventory level, customer delivery time, treatment of damage and lost good, cooperation in company promotion and training programmes and services of the customers. </li></ul><ul><li>Distributors are adding good value for customers. </li></ul><ul><li>Manufacturers need to be sensitive to their dealers. </li></ul>
  37. 38. CONVENTIONAL DISTRIBUTION CHANNEL V/S VERTICAL MARKETING SYSTEM, HORIZONTAL MARKETING SYSTEM CONVENTIONAL DISTRIBUTION CHANNEL A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits. VERTICAL MARKETING SYSTEM A distribution channel structure in which producers, wholesalers, and retailers act as unified system. One channel member owns the others, has contract with them, or has so much power that they are cooperate.
  38. 39. TYPES OF VMS Vertical marketing system that combines successive stages of production and distribution under a single ownership – channel leadership is established through common ownership. CORPORATE VMS CONTRACTUAL VMS A vertical marketing system in which independent firms of different level of production and distribution joint together through contracts to obtain more economies or sales impact then they could achieve along such as Franchise. ADMINISTERED VMS A vertical marketing system that coordinates successive stages of production and distribution not through common ownership of contractual ties but through the size and power of one of the parties. Manufacturers of top brands can obtain strong trade cooperation and support from resellers.
  39. 40. Producer Wholesaler Retailer Consumer Consumer Wholesaler Retailer Producer Conventional Marketing Channel Vertical Marketing Channel
  40. 41. HORIZONTAL MARKETING SYSTEM A channel arrangement in which two or more companies at one level joint together to follow a new market opportunity. By working together companies can combine their financial, production or marketing resources to accomplish more than any one company could alone. e.g; Askari and Daewoo PSO & Pizza Hutt
  41. 42. CHANNEL LEVEL A layer of intermediaries that perform some work in bringing the product and its ownership closer to the final buyer. DIRECT MARKETING CHANNEL A marketing channel that has no intermediary level. IN-DIRECT MARKETING CHANNEL A channel involving one or more intermediary level.
  44. 45. CHANNEL MEMBERS Producer Consumer Consumer Retailer Producer Producer Wholesaler Retailer Consumer ZERO-LEVEL ONE-LEVEL SECOND-LEVEL Direct Marketing In-Direct Marketing In-Direct Marketing
  45. 46. HOW CHANNELS ARE CHOSEN PRODUCTS <ul><li>Perishable </li></ul><ul><li>Grocery items </li></ul><ul><li>Customized </li></ul>CUSTOMER <ul><li>Need and expectation? </li></ul><ul><li>Willing to go to buy the Product? </li></ul><ul><li>How much quantity, they need? </li></ul>MARKETS Urban or rural