MultiMedia by Stephen M. Peters© 2001 South-Western College Publishing Chapter 14 Distribution...

MultiMedia by Stephen M. Peters © 2001 South-Western College Publishing

Chapter14Distribution

Strategies

Introduction to


Learning Objectives

Explain advantages and disadvantages of a direct channel of distribution, and identify factors that could determine the optimal channel of distribution.

Differentiate between types of market coverage. Explain how the distribution process can be accelerated. Explain how retailers can serve manufacturers. Explain how wholesalers can serve manufacturers and

retailers. Explain strategy and potential benefits of vertical channel

integration.


Distribution and a Firm’s Value

Cost of delivering a product to customers

Firm’s Expenses

Distribution Decision

Firm's Profits and

Value

Degree to which product is

distributed across outlets, and types of

outlets selected

Firm’s Revenue


Distribution: Direct Channel

ConsumerConsumer ConsumerConsumer ConsumerConsumer

Advantages of direct channels:

• Lower price to customer.

• Producer has full control.

• Producer obtains first-hand feedback.

• Online ordering.

ProducerProducer


Distribution: Direct Channel

ConsumerConsumer ConsumerConsumer ConsumerConsumer

Disadvantages of direct channels:

• Producer plays several roles.

• Higher promotional expenses.

• Producer needs more employees.

• Producer may need to sell on credit.

ProducerProducer


Distribution: One-Level ChannelRetailers

Nike Brand Tennis Shoes

Foot Locker Stores

Sears JC Penney


Distribution: One-Level ChannelWholesalers

Wholesaler AWholesaler A Wholesaler BWholesaler B Wholesaler CWholesaler C

Business CustomersBusiness Customers Business CustomersBusiness CustomersBusiness CustomersBusiness Customers

ProducerProducer


Distribution: Two-Level Channel Two intermediaries participate.

RetailerRetailer

WholesalerWholesaler

RetailerRetailer

ProducerProducer


Optimal Channel of Distribution

Dependent Upon: Ease of transporting. Degree of standardization.


Intensive Distribution

Put products into as many retail outlets as possible.

Convenience goods utilize this kind of distribution.


Selective Distribution

Use on a preferred group of retailers in an area.

Helps assures producers of quality sales and service.


Exclusive Distribution

Use of only one or a few retail outlets in a given geographic area.

Retailer has exclusive rights to sell product.

More likely to carry more inventory and give better service.

Can create or maintain the prestige of the product.


Transportation Truck

Cost SpeedOn Time

DependabilityFlexibility Handling

Products

Moving from low to high

Fast High Medium

The above criteria represents the industry as a whole.


Transportation Air

Cost SpeedOn Time


Products

Highest Fastest Low Low

B727-200 Specifications

B727-200


CostCost SpeedSpeedOn Time

Dependability

On Time Dependability

Flexibility Handling Products

Flexibility Handling Products

Medium Slow Medium High

Transportation Train

The above criteria represents the industry as a whole not necessarily the Alaska Rail Road.


Transportation Water

Moving cargo in a changing world closer to Asia than any other major U.S. port, Seattle is the premier gateway between North America and the Far East. Centered within the Pacific Northwest, they serve inland markets with unmatched efficiency.

Cost SpeedOn Time


Products

Lowest Slowest Lowest Highest

The above criteria represents the industry as a whole.

Business Online: Port of Seattle


Transportation Pipeline

Cost SpeedOn Time


Products

Low Medium Highest Lowest


Characteristics of Retailers

• Number of outlets• Quality of service• Products offered• Store versus non-store


How Wholesalers Serve Manufacturers

• Warehousing• Sales expertise• Delivery to retailers• Assume credit risk to retailers• Information

• Warehousing• Sales expertise• Delivery to retailers• Assume credit risk to retailers• Information


Vertical Channel Integration

Vertical channel integration can occur by:•Manufacturers•Retailers

Vertical channel integration: Two or more levels of distribution are managed by a single firm.

MultiMedia by Stephen M. Peters© 2001 South-Western College Publishing Chapter 14 Distribution...

Documents

Transcript of MultiMedia by Stephen M. Peters© 2001 South-Western College Publishing Chapter 14 Distribution...