Place by khahson


Place / Distribution Channels / Delivery System

Place is selection of distribution channels to deliver goods to consumers.

Key issues in Distribution Channel::

-    Coverage and density (Exclusive, Selective, Intensive)

-    Channel length (no. of intermediaries between consumer and producer)

-    Power and alignment of different elements

-    Logistic and physical distribution

-    Support and after sale service

-    Channel design decision (Customer, Product characteristics, Distributor characteristics, Channel choosed by
competitors, Supplier‟s own characteristics)

Nature and Importance and Functions of Marketing Channels:

Marketing Channel (distribution channel) is a set of interdependent organizations(intermediaries) involved
in the process of making a product or service available for use or consumption by consumer or business user. Each
organization performs a specialized and specified role.

Importance includes:

1.    Channel decisions affect other marketing decisions

2.    Competitive advantage could be gained.

3.    Involves long term commitments to other firms

4.    Channel members add value through

a.    Their contacts, experience, specialization and scale (economies) of operation.

b.    Matching supply and demand

c.    Bridging Time, Place and Possession gap

Functions performed by members of marketing channel:

Functions that help to complete transactions:
1.    Information (Marketing research and intelligence information)

2.    Promotion (Developing and spreading persuasive communication)

3.    Reselling (Finding and communicating with prospective buyers)

4.    Matching (shaping and fitting to the buyers’ needs e.g. assembling, packing)

5.    Negotiation

Functions that help to fulfill the completed transactions:

6.    Physical distribution (Transportation, storing and Inventory management)

7.    Financing (Acquiring and using funds)

8.    Risk taking (Assuming the risk of carrying out the channel work)

“You can eliminate middle man, but not middle man‟s functions”

Types of Distribution channels:

Direct distribution channel has no intermediary.

-     Intermediaries don‟t get their share.

-     Intermediaries don‟t get dominant

-     Own sales force is best for geographically centered buyers.

Indirect distribution channel has one or more intermediaries.

-     Where resources are insufficient to finance large sales force.

-     Where no local knowledge of market

-     Suitable for geographically spread buyers.

Types of Distributors:

a) Franchisees:

“Trade in name of parent in exchange of initial fee + share of sales volume”

b) Distributors/Dealers:

“Buy and resell at profit”
-    Dealing in narrow range of products;

-    Sometimes exclusive distribution or dealing only one manufacturer;

-    Also provide after sale services.

c) Agents: (vs. Dealers)

“Consigned for commission on sale)

d) Wholesaling:

“Selling goods to business buyers”

e) Retailing:

“Selling goods to consumer buyers”

f) Multiple Stores:

“Sell under the „own label‟ brand name”

How do channel firms interact and organize to do the work of the channel:

Channel Conflict is disagreement among marketing channel members on goals, roles and rewards (who should do
what for what reward). It may be

Ø Horizontal, conflict among firms at same level of channel e.g. dealers may complain that others are pricing too
low or selling beyond their territory.

Ø Vertical, conflict among firms at different level of channel e.g. conflict with dealers when opening online stores
even though for hard to reach customers.

Disintermediation is eliminating or replacing intermediaries. e.g. opening online stores

Marketing logistic and Supply Chain Management (SCM):

Marketing logistic (or physical distribution) involves planning, implementing and controlling the physical
flows of goods, services form points of origin to points of consumption.

Marketing logistic addresses whole Supply Chain Management i.e.

§ Outbound distribution (moving product form factory to reseller and ultimately to consumers)Downstream

§ Inbound distribution (moving products from supplier to factory) Upstream

§ Revere distribution (moving broken, unwanted or excess products returned by consumers or resellers)
Major logistic functions/ Functions in distribution process:

§ Warehousing

o Production and consumption cycles rarely match.

o A company must decide, how many, what types and where

o Company might use either storage ware house or distribution centers.

§ Inventory management

o Managers must maintain balance between too little and too much inventory.

o Just in time requires accurate forecasting along with fast, frequent and flexible delivery

o Just in time substantial cost saving in carrying and handling cost and low obsolescence.

§ Logistic information management, In VMI (Vendor Managed Inventory) customer share real-time data on sales
and current inventory levels with supplier and supplier then takes full responsibility for managing inventories and

§ Transportation

§ Promotion

§ Display

New technology in Distribution:

-     DRTV

-     Internet (B2C)

o Websites

o Email

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