Chapter 10:

Explain why companies use distribution channels and the functions these channels perform.

Discuss how channel members interact and how they organize to perform the work of the channel.

Identify the major channel alternatives open to a company.

Explain how companies select, motivate, and evaluate channel members.

Discuss the nature and importance of physical distribution and integrated logistics management.

Chapter Objectives

The Nature of Distribution

Channels

Set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

Why are Marketing Intermediaries used?

The use of intermediaries result from their greater efficiency in making goods available to target markets.

Offers the firm more than it can achieve on its own through the intermediaries:

Contacts

Experience

Specialization

Scale of operation

Intermediaries play an important role in matching supply and demand.

Producers produce narrow assortments, but consumers want broad assortments.

Intermediaries buy large quantities of many producers and break them down into the smaller quantities preferred by consumers.

Distribution Channel Functions

A distribution channel moves goods from producers to consumers. It overcomes the major time, place, and possession gaps that separate and services from those who would used them.

Members of the marketing channel: Information

Promotion

Establishing contact

Matching buyers with sellers

Negotiation

(Physical distribution, Financing, Risk-taking)

If the channel is functioning the way that it should be, the work of the channel should be divided so that the various functions can be assigned to the channel members who can perform them most efficiently and effectively to provide satisfactory assortments of goods to target consumers.

Number of Channel Levels

A channel level is a layer of middlemen that performs some work in bringing the product and its ownership closer to the final buyer.

DIRECT MARKETING CHANNEL

Where is there are no intermediary levels between manufacturer and consumer.

INDIRECT MARKETING CHANNEL

Where there can be numerous and a variety of intermediaries involved in bringing the good or service from the manufacturer to the consumer or business customer.

Business marketing channels are similar in their design except the intermediaries perform functions relative to the business market rather than consumer market.

Types of Flows: Physical Flow of products

Flow of ownership

Payment Flow

Information Flow

Promotion Flow

https://www.youtube.com/watch?v=ALoo4vrKKUw

RETAILING

&

WHOLESALING

IT INCLUDES ALL THE ACTIVITIES

INVOLVED IN SELLING GOODS OR

SERVICES DIRECTLY TO FINAL

CONSUMER FOR THEIR PERSONAL, NON-BUSINESS USE.

RETAILING

A retailer is a business whose sales come primarily from retailing.

Manufacturer, wholesaler, and retailer can all do retailing.

Retailing can be dine in stores(store retailing) or out of a store (non-store retailing).

Direct mails, catalogues, telephone, TV home shopping shows, home and office parties, door-to-door, vending machines, Internet, etc.

TYPES OF RETAILERS

Relative Prices

Pricing structure that is used by the retailers.

RETAIL ORGANIZATION

Independent, corporate, or contractual ownership organization

AMOUNT OF SERVICE

Self-service, limited service and full-service retailer.

PRODUCT LINE

Length and breadth of the product assortment.

RETAILERS CAN OFFER THREE LEVELS OF

SERVICES:

SELF-SERVICE RETAILER

– are retailer provide few or no services to

shoppers. Shoppers perform their own location.

a. Self-service is the basis of all discount

performance.

b. It is typically used by sellers of

convenience goods and nationally branded, fast

moving shopping goods.

LIMITED SERVICE RETAILER

-are retailers that provide only a limited number

if services to shoppers.

a. They carry more shopping goods about

which consumers need information.

b. Their increased operating cost result in

higher prices

L-SERVICE RETAILER

- Are retailers that provide a full range of services to shoppers.

a. These stores usually carry more specialty goods and slower-moving items.

b. Personnel assists customers in the buying process.

c. They provide many services which result in higher operating costs that are usually passed on to the customer as higher prices.

Classification Of Retailing-

PRODUCT LINE

Retailers can also be classified based on the length and breadth of their product

assortments.

Specialty Store

Department Stores

Supermarkets

Convenience Stores

Superstores

SPECIALTY STORE-carry narrow product lines with a deep

assortment within that line. These stores seem to be flourishing because of the increasing use of market segmentation ,market targeting and product specialization.

DEPARTMENT STORE

- are retail organizations that carry a wide variety of product lines such as clothing, home furnishing, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers.

SUPERMARKETS-are large, low-cost,low-margin,high-volume, self-service stores that carry a wide variety of food, laundry, and household products.

CONVENIENCE STORE- Is a retail store located near a residential area, opens long hours, seven days a week and carries a limited line of high-turnover convenience goods.

SUPERSTORES- Are stores almost twice the size of regular supermarkets. They carry large assortment of routinely purchased food and nonfood items and offer such services as dry-cleaning, post-office, photo finishing, check cashing, bill paying, etc.

Retailers:

According To Their Relative Prices

DISCOUNT STORE- Sells standard merchandise at lower prices by

accepting lower margins and selling higher volume.

A true discount store regularly sells its merchandise at lower prices, offering mostly national brands, not inferior goods.

Intense competition from other discounters and department stores have forced many discount retailers to “trade up’.

OFF-PRICE RETAILERS-buy at less than regular wholesale prices and sell at less than retail, usually carrying a changing and unstable collection of higher-quality merchandize.

Primary Types

Independent off-price retailers

Factory outlet

Warehouse clubs or wholesale clubs or membership warehouses

Classification of retailing-retail Organization

Corporate Chain

(two or more outlets commonly owned and controlled)

Voluntary Chain

(wholesaler-sponsored group of independent retailers)

Retailer Corporation

(a group of independent retailers that bands together to set up jointly owned

central wholesale operation)

Franchise Organization

(contractual association between a manufacturer, wholesaler, or service organization)

Merchandising Conglomerates

(combine several different retailing forms under central ownership)

CORPORATE CHAIN

MERCHANDISING CONGLOMERATES

FRANCHISE ORGANIZATION

Retailer Marketing Decision

1. The retailer’s product assortment must match target shoppers expectation.

PRODUCT ASSORTMENTBrand of merchandise merchandisingEvents product differentiationStrategiesSERVICE MIXKey tool of non-price competitionFor setting one store apart from one anotherSTORE’S ATMOSPHEREPhysical LayoutFeel that suits the target market and moves

customers to buy

2. A retailer’s price policy is a crucial positioning factor and must be decided in relation to target market, product and service assortment, and competition.

PRICE DECISIONTarget marketProduct and serviceAssortmentcompetition

3. The promotion decision involves deciding among the normal promotion tools of advertising personal selling ,sales promotion, and public relations to reach customers

PROMOTION DECISION Using advertising Personal selling Sales promotion Public relationDirect marketing to reach customers

Place Decision

Location is the key to the retailer’s ability to attract customers. The cost of the right location are a significant part of the retailer’s overall expense consideration.

Most stores today cluster to increase their ability to pull in consumers. And give them the convenience of one-stop shopping.

Forms of Clustering

CENTRAL BUSINESS DISTRICT

- problems have occurred with this form for several years due to consumers moving to the suburbs. Some central business districts are making comebacks by using tactics that have successful for shopping malls.

SHOPPING CENTER

- this is a group of retail businesses planned, developed, owned, and managed as unit.A regional shopping center is the largest and

most dramatic shopping center. It generally contains between 40-200 store and attracts customers from a wide area.

A community shopping center contains between 15-40 retail stores.

The neighborhood shopping center generally contains between 5-15 stores and is close and convenient for consumers. These centers are also called strip-malls.

WHOLESALING

The activities involved in selling goods and services to those buying for resale or business use.

Wholesalers – are those engaged primarily in wholesaling activity.

Channel Functions of Wholesalers

1. SELLING AND PROMOTING

wholesalers help one another in reaching out to members of the channels

2. BUYING AND ASSORTMENT BUILDING

wholesalers save their customers much work

3. BULK-BREAKING

wholesalers break large lots into small quantities as s service for their customers.

4. WAREHOUSING

wholesalers hold inventories thereby reducing their customer’s risk.

5. TRANSPORTATION

wholesalers provide quick delivery

6.Financing

wholesalers finance inventories for their customers thereby moving the risk away from the manufacturing.

7. Risk-bearing

wholesalers absorb risk by taking title to the goods they posses

8.Market information

wholesalers give information about market condition to customers.

9.Management services and advice

wholesalers help their customers with the training function and show them how to attract display merchandise,promotemerchandise and establish inventory control systems.

Three major types of Wholesalers

1.Merchant wholesalers - independently ownedbusinesses that takes title to the merchandisethey handle.

1. full-service wholesalers

2. limited service wholesalers

2. Brokers and agents – don’t take title to thegoods and perform only a few functions.

3.Manufacturer’s sale branch and office-wholesaling by sellers or buyers themselvesrather than through independent wholesalers.

Wholesalers define their targets groups

by examining and classifying:

1. Size of customer

2. Type of customer

3. Need for service

4. By other means

Marketing Logistics and Supply Chain Management

Marketing Logistics (Physical Distribution)- involves the tasks of planning, implementing, andcontrolling the physical flow of materials and finalgoods from points of use to meet the needs ofcustomers at a profit.

List and briefly discuss the marketing channelfunctions to the right customers in the right place atthe right time.

It addresses:

- Outbound distribution

- Inbound distribution

- Reverse distribution

- Entire supply management

MAJOR LOGISTICS FUNCTIONS

1. ORDER PROCESSING- minimize cost of

attaining logistics objectives

2. WAREHOUSING- storage, distribution

automated

3. INVENTORY- when to order, how much to

order just-in-time.

4. TRANSPORTATION- carriers affects the

pricing of the products, delivery performance,and condition of the goods when they arrive.

Order processing

Warehousing

Inventory

Transportation

Integrated Supply Chain Management

is the logistics concept that emphasizesteamwork, both inside the company andamong all the marketing channelorganizations, to maximize theperformance of the entire distributionsystem.

Integrated Logistics Management

Recognizes that providing better customerservice and trimming distribution costs requiresTeamwork, both inside the company and amongall the marketing channel organizations.

Involves

-cross-functional teamwork inside the company

- building channel partnership

- thirty-party logistics

End of Chapter 10 ^_^