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Marketing Channels &Distribution

Part2

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Disintermediation

Occurs when producers sidestepintermediaries and sell directly to finalbuyers, or when radically new types of

channel intermediaries displacetraditional ones.

The Internet has made the disintermediation ofmany traditional retailers possible.

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Disintermediation ExampleCalyx & Corollasells fresh flowersand plants direct to

consumers over thephone and via theWeb, drasticallyreducing the time ittakes flowers toreach consumersvia conventionalretail channels.

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(Non-) Disintermediation

Example

Black & Decker chose to avoid disintermediation by not using theInternet to sell their products. Instead B&D directs consumers tostores that carry its products.

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Company sales force vs. ManufacturersRep Company sales force

Employed directly by the firm in outside or insidesales capacity.

Manufacturers agency/representative

Independent firms whose sales people handleseveral companies products simultaneously

Outsourcing Distribution

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How many intermediaries? Intensive distribution

Stock product in as many outlets as possible.

Exclusive distribution

Granting a limited number of outlets the exclusiveright to sell product.

Selective distribution Somewhere in between Intensive and Exclusive

Distribution.

Distribution Strategy Alternatives

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Selective Distribution

Maytag uses selective distribution likemany furniture and appliancemanufacturers.

The Where to Buy page on theirWeb site assists buyers in findingstores that carry the Maytag brand.

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Every country has its own unique distributionsystem that has evolved over time.

Examples Japan:

complex, multi-layered distribution systems hard for Western firms to penetrate.

India and China: inefficient distribution systems despite their enormous size. separate countries within a country Poorer but improving transportation infrastructures

International Channel Decisions

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Public Policy and Distribution

Exclusive distribution &dealing (upstream or

downstream)

Exclusive territorialagreements (franchising)

Tying agreements(illegal)

If Xerox required every business whobought or leased their copiers to alsobuy their brand of paper, it would bea tying agreement.

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Definition : The physical flow of goods,services, and related information frompoints of origin to points of consumption.

Includes: Inbound distribution Outbound distribution

Reverse distribution

Marketing Logistics

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Inventory Management

Must strike a balancebetween too much and too little

inventory buffers and shortages carrying costs and

ordering/setup costs

Just-in-time inventorysystems

RFID or Smart Tagtechnology

RFID technology promises toautomate the entire distributionchain, resulting in significant costsavings.

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Transportation

Trucks Railroads

Ships Pipelines Air

Internet Intermodal

transportation

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Intermodal Transportation

Intermodal transportation combines two or more modes oftransportation. Fishyback = water and trucks; Piggyback = trucks andrail; Trainship = water and rail; Airship = air and water.

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Third-Party Logistics

Most small and mediumsize companiesoutsourcetransportation to UPSor other logistics

providers.