Distribution Decisions

Jeremy Kees, Ph.D.

To get us thinking…

1. What different channels are available for you to purchase the following products?

2. Through which type of channel do you prefer to purchase the following products? Explain.– Automobile

– Clothing

– Computer

– Music

– LCD / Plasma TV

Some Terms….

• Place Marketing• Distribution• Supply Chain Management• Logistics• Marketing Channels

…..all deal with the most efficient means by which to get the product to the consumer

Marketing Channels (Terms)

• Marketing channels—sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

• Value network—a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.

Marketing Channels

• The “Middleman”• Marketing Intermediaries• Traditional Supply Chains

The Role of Marketing Channels• First and foremost…ADDING VALUE!• But more specifically…

– Move products from producer to consumer (downstream)

– Move payment from consumer to producer (upstream)

• There are lots of necessary distribution functions that are outside of our core competency (e.g., transport products, store products, order processing, etc.)

Managing Channel Conflict

• Horizontal Conflict

• Multichannel Conflict

• Vertical Conflict– Wal-Mart versus Vendors

– Video

Points of Discussion

• Is Wal-Mart good for America??– Try to be open-minded and unbiased

– Make a case for each side of the debate

• What lies at the heart of the channel conflict between WM and it’s suppliers?– Are there any ethical issues to consider?

Supply Chain Management (terms)Supply chain management (SCM): Starts before physical distribution, covering procurement of inputs, conversion into finished products, and product movement to final destinations

Logistics: Planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer needs at a profit.

SCM/Logistics Decisions

• Order Processing• Warehousing• Inventory• Transportation

• The key here is INTEGRATION (through information technology)!!

SCM/Logistics Costs

Mode Speed Depend-ability in Meeting

Schedules

Frequency of

Shipments

Availabil-ity in

Different Locations

Flexibility in

Handling

Cost

Rail Average Average Low Low High Average

Water Very slow Average Very low Limited Very high Very low

Truck Fast High High Very extensive

Average High

Pipeline Slow High High Very limited

Very low Low

Air Very fast High Average Average Low Very high

Physical Distribution

Retailing

• All activities involved in selling goods or services directly to final consumers for personal, nonbusiness use.

A Brief History Lesson…

• General Stores (early 1900s)• Supermarkets (1930s)• Discount Stores (1950s)• Convenience Stores (1960s)• Off-Price Retails (1980s)

Types of Retailers

• Specialty store

• Department store

• Supermarket

• Convenience store

• Discount store

• Off-price retailer

• Superstore

• Catalog showroom

Retailing Concepts

• Retail Life-Cycle• Wheel-of-Retailing

High-end strategy• High prices• Excellent facilities and services

• Upscale consumers

Low-end strategy• Low prices• Limited facilities and services

• Price-sensitive consumers

Medium strategy• Moderate prices• Improved facilities• Broader base of

value- and service-conscious consumers

Retailing Decisions

• Target market• Product assortment

and procurement• Price

– High-markup, lower-volume

– Low-markup, higher-volume

• Services and store atmosphere

• Store activities and experiences

• Communications• Location

** POSITIONING!!