Distribution Flashcards
Distribution channels defined
Distribution refers to bringing the product to the market and giving it to the final consumer
Distribution channels are sets of interdependent organisations involved in the process of making a product or a service available for use or consumption
Why marketing channels
Gather info, develop comms, negotiate prices , place orders, store and transport, provide credit, make sales
These functions must be performed by specialist members of the channel
In a direct channel the manufacturer must take on all of these functions potentially reaping the financial benefits but also assuming all costs
In an indirect channel,Wholesalers and retailers take on various functions and in return earn revenue in the form of a mark up(commission)
Distribution efficiency
Direct distribution - manufacturers to customers - e.g. 36 contact points for 6 manufacturers and 6 customers
Using an intermediary - e.g. A retailer recurs the number of contact points by two thirds (12 contact points now)
7 Rs of distribution
Customers want
RightProduct/service in Right Quantity in Right condition at the Right time and Rights place for the Right Customer at the Right cost
Distribution helps meet these demands
Types of distribution channels for consumer goods
Producer to consumer
Producer to retailer to consumer
Producer to wholesaler to retailer to consumer
Producer to agent to wholesaler to retailer to consumer
Distribution channel for industrial goods
Producer to industrial customer
Producer to agent to industrial customer
Producer to distributor to industrial customer
Producer to agent to distributor to industrial customer
Service channels
Service provider to consumer business customer
Service provider to agent to consumer or business customer
Role of retailers and wholesalers in distribution
Wholesaling -is the sorting,storing and reselling or products to retailers and businesses
Retailing - involves the sale of products or services to consumers
Benefits of channel intermediaries
Improving efficiency
Improving accessibility (location and time )
Providing specialist services (car servicing)
Reconciling the needs of producers and consumers (manufacturers are typically specialists, but consumers want large choice )
Logistics decisions
Information required :
Production-what how and when to make
Inventory- how much to make and how much to store
Transportation - how and when to move product
Location - where best to do what activity
Physical distribution
Process of carrying goods or services to customers
Trucks -faster than train and water but slower than air
Air- fastest but subject to availability of airports
Rail- cost effective but limited to rail lines and still need trucks to move from stations
Water- slowest but very cost effective only accesible by water ways and then need trucks to deliver
Channel integration
Conventional marketing channels - producer has little or no control over channel intermediaries because of their independence
Franchising - a legal contract in which producer and channel intermediaries agree each members rights and obligations is called a franchise
Can be manu and retailer , manu and wholesaler , wholesaler and retailer ,retailer and retailer e.g. McDonald’s
Channel ownership - total control over distributor activities - corporate vertical marketing system - Pepsi bought KFC and Pizza Hut forcing them to sell Pepsi
Channel management
Selection-1) identify potential change members 2) develop selection criteria
Motivation-channel members need to be motivated to act as a distributor and allocate adequate commitment and resources to the producers lines
Training -training requirements depend on internal competencies of distributors
Evaluation - helps decide which channel members to retain and which to drop
Managing conflict - all firms are independent this conflict may arise, maybe through difference in goals etc depending on conflict , solution will differ - compromise
Channel strategy
Refers to broad principles though which the firm seeks to achieve its distribution objectives; which are usually set in terms of how,when and where the firm plans to have its products made available to its target markets
Steps for designing the distribution strategy are :
Defining customer service levels Distribution objectives and steps Set of activities The distribution organisation Key performance indicators Critical success factors
Important decisions involved when crafting a channel strategy
- The length of the channels
- Intensity at various levels
- The types of intermediaries involved
- sales expectations
- inventory maintenance
- attitudes
- competitive products handled
