Distribution channel managment
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Transcript of Distribution channel managment
Product
Promotion
Price Customer Distribution(Place)
Distribution and Channel Management
Distribution: The activities that make products available to customers when and where they want to purchase them
40% women buy online
50% use desktops
25% buy instore
15% buy with iPhone
100% of sales are domestic
39% use laptops
Most male buyers are single with no children
50% are men
Sale USA
Channel-Selection Decision
Who are potential customers? • Where do they buy? • When do they buy?How do they buy? • What do they buy?
Distribution / Channel Management is Important Because:
• It affects sales — if the product is not available it can’t be sold • It affects profits — distribution can contribute up to 50 percent of the final selling price of some goods • It influences customer satisfaction
The Marketing Channel Creates the Utility of:
• time = when• place = where• possession = access• information = communication
Marketing Channel: The group of individuals and organizations that direct the flow of products from producers (business) to customers – B2C
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The Channel can have many Intermediaries (B2C)
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Manufacturer
Consumer
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Manufacturer
AgentWholesaler
RetailerConsumer
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Manufacturer
Wholesaler
RetailerConsumer
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Manufacturer
RetailerConsumer
A.)
B.)
C.)
D.)
And International Distribution Channels Can Include More as Exporters and Importers
Business to Business Marketing Channels (B2B)
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Business
Business
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Business
AgentDistributor
Business
1 2 3
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Business
AgentBusiness
Business
Distributor
Business
E.)
F.)
G.)
H.)
vs
Marketing Channel Design
Indirect Distribution
Uses intermediaries to reach the target market
• Type • Location • Density • Channel Levels
Direct Distribution
Reaches the target market directly
• Uses its own sales force or distribution outlets • Uses the Internet
Marketing Channel Design
Indirect Distribution is considered when:
• Intermediaries can perform distribution functions more efficiently and at a lower cost • The target market is hard to reach directly • The business does not have the resources to perform the distribution function
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Manufacturer
Wholesaler
RetailerConsumer
Marketing Channel Design
Direct Distribution is considered when:
• The target market is easily identifiable • A knowledgeable and personal sales-force is a key ingredient • The business has a wide variety of products available for the target market • Sufficient resources are available • Intermediaries are not available for reaching the target market • Intermediaries do not possess the capacity to service the requirements of the target market
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Manufacturer
Consumer
Marketing Channel Design
Internet Marketing Channels:
• SEO (Search Engine Optimization) • PPC (Pay Per Click Campaigns) • Social Media Marketing • Affiliate Marketing • Shopping Channels (ie. Google Product) • Mobile Marketing • Video Marketing • eDM (email Direct Marketing) • Online PR / Article Content Marketing • Display Advertising • Directory / Review Sites (ie. Yelp)
Marketing Channel Design
Multiple Marketing Channels:
Simultaneously using different marketing channels to reach diverse target markets.
Mail Order Catalogs Retail Stores SGHI Website
Oakley Retail / Outlet Stores Oakley Website Specialty Retailers Online Retailers
Putting together all the Intermediaries in the Marketing Channel Creates
the Supply Chain
Key Tasks in Supply Chain Management
• planning = coordination the partnerships to meet customer needs • sourcing = purchasing the goods and services to support the channel • delivering = moving the product through the channel • fortifying = the relationship with the customer
Selecting the Channel Design
Nature of the product:
• Technical / complex (Specialist and Agents) • Customized and specific (Direct Distribution) • Less expensive / standardized (Longer Channels) • Brand image exclusivity (Limited Availability)
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Nature of the business:
• It’s size and scope – e.g. can it afford an in-house salesforce • Does it have an established distribution network • How much control does it want over distribution
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
The Competition:
• What distribution channels and intermediaries do they use? • Is it an international product? • What’s the geographical spread?
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Environmental Forces:
• Adverse economic conditions in play • New technologies available e.g. software delivery • New labor or environmental laws • Taxes, tariffs, and trade agreements
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Characteristics of the Intermediaries:
• Market Coverage • Sales Forecast • Costs • Resources • Profitability
• Control • Motivation • Reputation • Competition • Contracts
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Market Coverage:
• Does the profile of customers match the target market profile? • Are the number of potential customers big enough to meet the required distribution penetration? • Is the sales force big enough to cover the territory? • Is the existing delivery fleet and warehouse facilities adequate?
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Sales Forecast:
• What’s their sales forecast? • Are they realistic? • What are they willing to commit to in inventory? • Do they have a marketing budget? Some manufacturers even ask their distributors for a marketing plan showing how they intend to market the supplier’s products.
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Costs:
• What will the relationship cost in terms of discounts, commissions, stock investment and marketing?
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Resources:
• Does the target market require anything special such as technical assistance, installation, quick deliveries, instant availability? • If so can the distributor provide it?
1 2 3 4
Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Profitability:
• How much profit will they generate for the manufacturer?
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Control:
• Do they have a reporting system in place? • How do they deal with problems? • How often are review meetings scheduled? • Can you influence the way they present your products?
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Motivation:
• Does the intermediary convey a sense of excitement and enthusiasm about the product? • What their sales force reaction to the product?
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Reputation:
• Does the intermediary have a solid track record of successes? • How long have they been in business? • Is their business dependent on one key-player, or is team based?
1 2 3 4
Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Competition:
• Does the intermediary distribute any competitor’s products?
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Manufacturer
Wholesaler
RetailerConsumer
Selecting the Channel Design
Contracts:
• Does the intermediary demand exclusivity? • Is the contract binding or flexible based on performance?
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Manufacturer
Wholesaler
RetailerConsumer
Intensity of Market Coverage
IntensiveConvenience
products such as Coke, Doritos
Available in many retail locations
SelectiveConsumer
products ie. laptops, televisions
Available in some retail locations
ExclusiveSpecialty products ie., Rolex watches
Available in few retail locations
Supply Chain Management
Effective Distribution
Occurs when a limited number of retail locations account for a significant percentage of the market. For example, the product is distributed 30% of available retail outlets, but those retailers account for 80% of the market.
Supply Chain Management
Profitability
• Margins = (Revenues - Channel Costs)
Channel costs are: Distribution costs / Advertising costs / Selling Costs
Supply Chain Management
Channel Conflict
Occurs when one channel member believes another channel member is engaged in behavior that is preventing them from achieving their goals.
Sources of Channel Conflict
Channel member bypasses another member and sells or buys direct
Profit margins are uneven between channel members
Manufacturer believes channel member is not providing attention to its product
Manufacturer engages in dual distribution
Supply Chain Management
Channel Power
The channel leader may be any member of the supply chain.
Referred to as the Channel Captain, they are the dominant member that takes on the role of coordinating, directing, and influencing the
other member’s goal achievements
Forms of Power
Ability to reward or coerce other members
Experts within the market
Legitimate right to dictate behavior
Supply Chain Management
Strategic Relationships
Two common strategies are Vertical Marketing Systems and Horizontal Marketing Systems
Supply Chain Management
Vertical Marketing Systems
Manufacturers and intermediaries working closely together
They plan production, delivery and promotional schedules.
Share resources when possible.
Managed by the Channel Captain
Example: Luxottica
The manufacturer Luxottica purchased the brand “Oakley” and the retail presence of “The Sunglass Hut” to deliver its products.
Supply Chain Management
Horizontal Marketing Systems
Occurs when two organizations on the same channel level cooperate (e.g. two wholesalers or two retailers)
They share their expertise and channels
Decreases time to market entry
Example: Apple / Starbucks partnership
The purpose was for Starbucks customers to wirelessly browse, search, preview, and purchase music from iTunes.
Legal Issues in Chain Management
Dual Distribution
The use two or more marketing channels to distributed the same products to the same target market.
Considered illegal when the manufacturer uses company-owned outlets to force independent retailers out of business by undercutting their prices.
Legal Issues in Chain Management
Restricted Sales Territory
Favored by intermediaries to protect a sales territory.
Conflicting rulings by the courts regarding the restraint of trade.
Legal Issues in Chain Management
Tying Agreements
An agreement where the manufacturer requires intermediaries to purchase other products in addition to the most popular items.
The related practice of full-line forcing, where the manufacturer requires the intermediary to carry the entire line. Deemed okay by the courts if
they are able to carry competing products
Legal Issues in Chain Management
Exclusivity
An agreement where the manufacturer forbids intermediaries to carry competing products.
Deemed illegal if:
• If the deal blocks as much as 10% of market share • The sales revenue is deemed “sizable” • The manufacturer is larger and intimidating to the intermediary
Legal Issues in Chain Management
Refusal to Deal
The courts have held that manufacturers have the right to choose channel members with which they will do business.
However, within existing channels manufacturers may not legally refuse to deal with intermediaries merely because they resist policies that
are anticompetitive or restrain trade.