7. Distribution Channel Decisions/Strategy Flashcards
Marketing channel: 2
- The set of interdependent organizations involved in the process of making a product or service
- Many services are distributed through marketing channels, but it need different activates
Objectives of distribution channels 6
- Increase the availability of the good or service to potential customers
- Satisfy customer requirements by providing high levels of service
- Ensure promotional effort
- Obtain timely and detailed market information
- Increase cost-effectiveness
- Maintain flexibility
Institutions Found in Marketing Channels 4
- Merchant wholesalers
- Agent midllemen
- Retailers
- Facilitating agencies
Merchant wholesalers
Take title to the goods the handle, sell primarily to other resellers, industrial and comercial customers
Agent midllemen 3
- Include manufacturer’s representatuves and brokers.
- Also sell to other resellers, industrial or comercial customers, but do not take title to the goods.
- Usually specialize in the selling function and represent client manufacturers on a comission basis
Retailers 2
- Sell goods and services directly to ultimate customers for personal use.
- Take title to goods they handle, are compensated by the margin between the price they pay for those goods an the price they receive from their customers
Facilitating agencies
Include advertising agencies…etc specialised in one or more marketing functions, work on due for service basis to help clients perform those functions more effectively and efficiently
Channel Design Alternatives
individual consumers or organizational customers
The decision depends on: 3
- Which distribution objectives are considered most important
- which is influenced by the business’s competitive strategy
- Other components of the marketing program, including characteristics of the product
Availability and the Satisfaction of Customer Service Requirements
Achieving a desired level of product availability is largely a matter of gaining the cooperation of appropriate numbers and types of retail outlets
Three basic strategies of retail coverage: 3
- Intensive Distribution
- Exclusive Distribution
- Selective Distribution
Intensive Distribution
A form of distribution aimed at having a product available in every outlet e.g. toothpaste
Exclusive Distribution
one or a few dealers within a given area e.g. prestige clothing
Selective Distribution
A form of distribution achieved by screening dealers to eliminate all but a few in any single area e.g. home appliances
Multichannel Distribution 2
- Dual (two-channel) distribution systems
- Hybrid system
Channel Design for Global Markets
When designing marketing channels to reach customers in more than one country, the manager faces a couple of additional issues:
- When entering a new national market for the first time, he or she must decide on an entry strategy.
Market Entry Strategies 3
Exporting
- Export merchants (buy and sell)
- Export agents (sell on a commission basis)
- Cooperative organisations (export for several producers/farm products)
Contractual entry modes
- Licensing
- Franchising
- Contract manufacturing
Overseas direct investment
- Joint ventures
- Sole ownership
Exporting:
The simplest was to enter a foreign market because it involves the least commitment and risk
Contractual entry modes:
Nonequity arrangements that involve transfer of technology and/or skills to an entity in a foreign country
Contract manufacturing 4
Involves Sourcing a product from a manufacturer located in a foreign country for sale there or elsewhere
- Turnkey construction contract
- Coproduction
- Countertrade
- Buyback arrangement
Licensing
A contractual arrangement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, licence fees or some other form of compensation.
Licensing Advantages: 5
- Reduces development costs and risks of establishing foreign enterprise.
- Lack capital for venture.
- Unfamiliar or politically volatile market.
- Overcomes restrictive investment barriers.
- Others can develop business applications of intangible property.
Licensing Disadvantages: 3
- Lack of control.
- Cross-border licensing may be difficult.
- Creating a competitor.
Franchising
A form of licensing, which goes far beyond conventional licensing. The franchisor provides the franchisee with an extensive company concept, which comprises a successful product and marketing concept as well as the fundamentals of managing the business.
Franchising: Disadvantages 2
- Shared revenues
- Must sometimes train locals how to meet the standards of the franchiser
Turnkey construction contract:
require the contractor to have a project up and operating before releasing it to the owner
Coproduction:
involves a company’s providing technical know-how and components in return for a share of output
Buyback arrangement
products being sold are used to produce other products.
Joint Venture
In most definitions involves the transfer of capital, equity, manpower and technology from the foreign partner to an existing local firm.
’ In exchange for:
- Tacit knowledge about a market
- Specific competencies
- Access to a network Holistic market entry
Channel Alternatives 2
- domestic middlemen
- foreign middlemen
Channel Design for Services 2
- The marketing of services does not require the same kind of distribution networks as does the marketing of tangible goods
- Marketing channels for services tend to be short—hence the emphasis on franchising
Channel Control Strategies 2
Strategies used by manufacturers to improve their perceived economic power and to gain better cooperation from channel members
- Pull strategy
- Push strategy
Trade Promotions—Incentives for Motivating Channel Members
Manufacturers typically use a combination of incentives to gain reseller support and push their products through the channel
Most of these incentives constitute sales promotion activities:
- Consumer promotions
- Trade promotions
Consumer promotions:
Coupons, rebates, and contests, aimed at stimulating consumer purchases
Trade promotions:
Which encourage resellers to engage in activities that will support and increase local sales
Channel Conflicts and Resolution Strategies 3
- manage it better
- legal constraints on how much and what kinds of power can be used to resolve conflicts
- control channel members’ actions
Factors Influencing the Location Decision 4
- Population
- Accessibility
- Competition
- Costs
Means for obtaining a sustainable cost advantage: 5
- A no-frills product
- Innovative product design
- Cheaper raw materials
- Innovative production processes
- Low-cost distribution Reductions in overhead
Factors Influencing Layout and Display
Strategies for Maintaining Competitive Advantage 2
- –Through differentiation of their product offering
- –By maintaining a low-cost position
Methods of Differentiation (2)
- Dimensions of product quality
- Dimensions of service quality (SERVQUAL Model):
Dimensions of product quality (9)
- Functional performance
- Durability
- Conformance with specifications
- Variety of features
- Reliability
- Serviceability
- Fit and finish
- Quality reputation of the brand name
- Equity
•Dimensions of service quality (SERVQUAL Model) (5)
- Tangibles
- Reliability
- Responsiveness
- Empathy
- Assurance
•Measuring customer satisfaction
To gain the knowledge necessary to continually improve the value of their offerings to customers, firms must understand how satisfied existing and potential customers are with their current offerings - Improving customer retention and loyalty
Pyramid Corporate social Responsibility (4)
- Philanthropic Responsibilities -> Be a good corporate citizen
- Ethical Responsibilities -> Be ethical
- Legal Responsibilities -> Obey the law
- Economic Responsibilities -> be profitable
Ethical Issues in the Marketing Program 4
1.Product-Related Ethical Issues
–Failure to disclose risks, product design, counterfeit products
2.Pricing-Related Ethical Issues
–Price discrimination, price fixing, superficial discounting
3.Supply Chain-Related Ethical Issues
–Labor issues, raw material sources, quality control
4.Promotion-Related Ethical Issues
–False or misleading communication, ambiguous statements, bribery, direct marketing fraud
THE ROLE OF INTERNET 2
E-commerce has created radical changes in distribution strategies
- disintermediation (i.e. the elimination of intermediaries) are now common
- facilitates global expansion and mass customization
IDENTIFICATION OF SEGMENTS BY SERVICE REQUIREMENTS
The marketing logistics manager first needs to determine the dimensions of service that customers most value, e.g. speed, reliability or availability.
