11. distribution and channel management Flashcards
Distribution channel
▪ = Marketing channel (of distribution)
→ The Place element of the Marketing mix
▪ = A group of interdependent organizations that together make
the product available to (end) users
▪ = All organizations through which product must pass between
point of production and final consumption
▪ = “Downstream” part of supply chain
channel intermediaries
= The organizations that facilitate the distribution of products
to customers
▪ Usually organized in what is called a “supply chain”
▪ = The means by which the products are moved from producer
to final customer.
functions of channel intermediaries
Basic question: to sell directly to the ultimate customer or to
use channel intermediaries such as retailers and wholesalers?
▪ Reconciling the needs of producers and consumers
▪ Improving efficiency
▪ Improving accessibility
▪ Providing specialist services
Two conflicting situations
Manufacturers typically sell a
large quantity of a limited range
of goods
Consumers and business usually
want only a limited quantity of a
wide range of goods
Improving efficiency
The number of transactions between
three producers and three customers
is reduced by using one intermediary.
Direct distribution == 9 transactions
With an intermediary == 6 transactions
Distribution and selling costs/effort,
therefore, are reduced.
improving accessibility
Major divides needed to be bridged
▪ Location gap: producers and customers are geographically
separated.
* Asian cars in Europe
* Riders delivering Restaurant meals at home
▪ Time gap: the distance between production and
buying/consumption moments.
* Internet stores: 365/24/7 buying
providing specialist services
Manufacturers are not always prepared/equipped to provide
specialist services.
▪ Intermediaries may be better prepared to
▪ Sell
▪ Provide service, credit, (extra) warranty
▪ Install/setup/configure
multichannel distribution
Distribution may take many forms depending on the type of product,
size of organization and market.
▪ Distribution may be direct (manufacturer to consumer) or indirect
(through wholesalers, agents and retailers to the consumer)
▪ Examples of multichannel distribution include organization-specific
(high street) stores, other specialist retail outlets (e.g., Currys, PC World),
catalogue shops (Argos), agents, on-line retail stores (Amazon) and
organization-specific websites.
How channel members add value
Distributors make the buying process much easier for consumers. Again, think
about what life would be like without grocery retailers.
* Help to improve distribution efficiency
* Reduce the cost of distribution
* Have necessary infrastructure
* Facilitate the information transmission
Behaviour in marketing channels
Each channel member is dependent on others
▪ Each channel member has specialized role
▪ Each channel member takes on duties that they can perform
“best”
▪ All channel members should work together and coordinate
channel selection - market factors
▪ Buyer behaviour → people have expectations on where to buy products
▪ Buyer needs → Product-related Information, Installation, Technical assistance
▪ Willingness of the channel intermediaries to market a product
▪ Sharing High Margins? Refusal? → Maybe hiring salespeople is better for the manufacturer
▪ Location and geographical concentration of customers
▪ Concentrated demand? → increased incentives for direct distribution
▪ Fragmentated demand? → increased need of using intermediaries
channel selection - producer factors
▪ Lack of adequate resources to perform channel functions
* Financial, Managerial, Customer-based skills
▪ Product mix offered by the producer
* Wide mix? → direct-selling may be more cost-effective
* Narrow mix or single-product? → direct-selling costs may be unaffordable
▪ Desired degree of control of channel operations
* Key element, commonly overlooked
* Using intermediaries reduces producer control about changes in Product, Price, Promotion
channel selection - product factors
▪ Large products are normally sold directly by firms
▪ Also complex products
▪ A professional / technical selling approach may be required
▪ Highly perishable products required a very short / very efficient distribution
chain → fresh stock
▪ Several products combined in one order → parcel collection points!
channel selection - competitive factors
▪ What if the competition controls the distribution chain?
▪ Direct-selling approach: hiring salespeople
▪ Setting up an own distribution network → may be expensive
channel selection - technology factors
Internet, e-commerce, web-based stores and apps for selling
▪ Benefits: lower distribution costs, better access to difficult target groups, more
transparancy (tracking)
▪ Disadventages: conflict between distribution territories, less control over access to
consumers
▪ Result: intensified levels of competition
