1 Channel Management / Distribution. 2 A channel of distribution comprises a set of institutions...
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Transcript of 1 Channel Management / Distribution. 2 A channel of distribution comprises a set of institutions...
2
A channel of distribution comprises a set of institutions
which perform all of the activities utilised to move a
product and its title from production to consumption
Bucklin - Theory of Distribution Channel Structure
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Physical distribution is…
Organizing and moving products through the channels
aka: Logistics = ordering, transporting, storing, handling and inventory control
The 3rd largest expensefor most businesses
(#1 Materials #2 Labor)
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Explain how channel members add value
Right PLACE Right TIME
Place UTILITYLocation – having the product where customers can buy it
Time UTILITYHaving the product available when the customer
wants/needs it
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Channel members add value to a product by performing certain channel activities expertly
MarketingPackagingFinancingStorageDeliveryMerchandisingPersonal selling
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3 Dimensions of Channel Design
1.Types of intermediaries involved
2.Length of the channel
3.Intensity of various levels (Exclusive, Selective, Intensive)
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Tasks of Intermediaries - Wholesalers
• Break down ‘bulk’• Buys from producers and sell small quantities to
retailers• Provides storage facilities• Reduces contact cost between producer and
consumer
• Wholesaler takes some of the marketing responsibility e.g sales force, promotions
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Tasks of Intermediaries - Retailer
• Much stronger personal relationship with the consumer
• Hold a variety of products
• Offer consumers credit
• Promote and merchandise products
• Price the final product
• Build retailer ‘brand’ in the high street
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3 Dimensions of Channel Design
1.Types of intermediaries involved
2.Length of the channel
3.Intensity of various levels (Exclusive, Selective, Intensive)
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• Channel length = number of levels in a distribution channel.
Manufacturer Manufacturer Manufacturer Manufacturer
Consumer Consumer Consumer Consumer
Retailer Retailer Retailer
Wholesaler Wholesaler
Agent
2 level2 level 3 level3 level 4 level4 level 5 level5 level
Length of Channel
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Describe when a channel will be most effective
The channel must be properly managedRecognize the importance of their task
and make informed decisionsEach member is assigned tasks it can
do best
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Describe when a channel will be most effective (cont.)
• Channel members share a common goal– Commitment to quality of the product– Satisfying the target market’s needs and
wants– All members cooperate to attain overall
channel goals
• If the channel is not effective, conflict occurs…..
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Distinguish between horizontal and vertical conflict
• Horizontal Conflict: occurs between channel members at the same level
– Good, old-fashioned business competition
– Ex: two retailers selling pet supplies compete to sell to the same target market
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Distinguish between horizontal and vertical conflict (cont.)
• Vertical Conflict: occurs between channel members at different levels within the same channel
– Producers and wholesalers, wholesalers & retailers, or producers and retailers
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3 Dimensions of Channel Design
1.Types of intermediaries involved
2.Length of the channel
3.Intensity of various levels (Exclusive, Selective, Intensive)
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Intensity of Channel Structure
• Channel intensity: the number of intermediaries at each level of the marketing channel.
All PossibleIntermediaries
Relatively FewIntermediaries
Just OneIntermediary
Intensive ExclusiveSelective
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Intensive Distribution
• = the use of all suitable outlets to sell a product.
• The objective is complete market coverage and the ultimate goal is to sell to as many customers as possible, wherever they choose to shop.
• Ex. Motor oil is sold in quick-lube shops, farm stores, auto parts retailers, supermarkets, drugstores, hardware stores, warehouse clubs, and other mass merchandisers.
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Selective Distribution• = a limited number of outlets in a given
geographical area are used to sell the product.
• Very important to select channel members that maintain the image of the product & are good credit risks, aggressive marketers & good inventory planners.
• Ex. Armani & Lucky Brand sell their clothing only through top department stores that appeal to the affluent customers who buy its merchandise. It does not sell in a chain megastore or a variety store.
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Exclusive Distribution• = protected territories for distribution of a product in
a given geographic area; business maintains tight control over a product
• Ex. Franchisor legally requires a franchisee to sell only the franchisor’s products
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Explain how customer service facilitates order processing
• Ensures timely delivery of products
• Effective communication is important– Order processing
• Correct shipping information• Correct products• Handling complaints• Reducing the probability of complaints• Nice and friendly people
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Customer
Warehouse
Call Center
Online Order
Inventory Check
Items
in Stock?
No, Customer Notified of Backorder
Yes, Item Packed for Shipment
Accounts Receivable Processes Payment
Item Shipped
Actions to Facilitate
Order Processing
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Describe the role of customer service in following up on orders • Following up with your customers after the
sale is an important part of providing good customer service.
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Satellite tracking
a dispatcher has current
knowledge of a delivery truck’s
location and destination
Use of Technology in Distribution
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Use of Technology in Distribution (cont.)
Tracking of packageBar coding on packagePackage scanned at transition
points in distribution chainCustomer uses internet to
follow package along distribution chain; e-mail may be used
Global distribution: in some countries the postal service is not reliable; package tracking facilitates global trade