Академический Документы
Профессиональный Документы
Культура Документы
This refers to how an organisation will distribute the product or service they are
offering to the end user. The organisation must distribute the product to the user at the
right place at the right time. Efficient and effective distribution is important if the
organisation is to meet its overall marketing objectives. If an organisation
underestimatea demand and customers cannot purchase products because of it,
profitability will be affected.
Which Distribution Channel Will They Use?
Two types of channel of distribution methods are available. Indirect distribution
involves distributing your product by the use of an intermediary for example a
manufacturer selling to a wholesaler and then on to the retailer.. Direct distribution
involves distributing direct from a manufacturer to the consumer For example Dell
Computers providing directly to its target custmers. The advantage of direct
distribution is that it gives a manufacturer complete control over their product.
Distribution Strategies
Depending on the type of product being distributed there are three common
distribution strategies available:
1. Intensive distribution Used commonly to distribute low priced or impulse purchase
products eg chocolates, soft drinks.
2. Exclusive distribution Involves limiting distribution to a single outlet. The product
is usually highly priced, and requires the intermediary to place much detail in its sell.
An example of would be the sale of vehicles through exclusive dealers.
3. Selective Distribution A small number of retail outlets are chosen to distribute the
product. Selective distribution is common with products such as computers,
televisions household appliances, where consumers are willing to shop around and
where manufacturers want a large geographical spread.
If a manufacturer decides to adopt an exclusive or selective strategy they should select
a intermediary which has experience of handling similar products, credible and is
known by the target audience.
As you will be aware from your experiences as a consumer, producers rarely sell their goods
or services directly to the person that consumes them. Marketing channels, or place in
terms of the marketing mix, are the means by which interdependent organizations
move products or services from the producer to the person that purchases or consumes
the product. This is the basic role of distribution.
Different customers have different needs. Customers in different segments have different
needs, for example a food distributor will sell flour in different ways when it sells to a hotel as
opposed to when the sales to a wholesaler. A business customer will have different needs to
a retail customer, for example a stationary distributor will sell printer paper in bulk directly to
a large company but will sell a single ream (500 sheets) indirectly to the average
householder via his local stationery store.
There are many types of intermediaries including wholesalers, agents, retailers, the Internet,
licensing and franchising. The main modes of distribution will be looked at in more detail as
follows:
They break down bulk into smaller packages for resale by a retailer.
They buy from producers and resell to retailers. They take ownership or
title to goods whereas agents do not (see below).
Wholesalers offen reduce the physical contact cost between the producer
and consumer e.g. customer service costs, or sales force costs.
An agent will typically secure an order for a producer and will take a
commission. They do not tend to take title to the goods. This means that
capital is not tied up in goods. However, a stockist agent will hold
consignment stock (i.e. will store the stock, but the title will remain with
the producer. This approach is used where goods need to get into a market
soon after the order is placed e.g. foodstuffs).
Agents can be very expensive to train. They are difficult to keep control of
due to the physical distances involved. They are difficult to motivate.
The retailer will hold several other brands and products. A consumer will
expect to be exposed to many products.
Retailers will often offer credit to the customer e.g. electrical wholesalers,
or travel agents.
The retailer will give the final selling price to the product.
Retailers often have a strong brand themselves e.g. Ross and Wall-Mart
in the USA, and Alisuper, Modelo, and Jumbo in Portugal.
The main benefit of the Internet is that niche products reach a wider
audience e.g.
Scottish salmon direct from an Inverness fishery.
There are low barriers to entry as set up costs are relatively small.
There is a huge growth in online retailing. People buy physical products from companies
such as Amazon or eBay, as well as a whole plethora of other smaller retailers marketing in
a wide variety of small niches, also known as the long thin tail of marketing. There are many
transaction related products such as theatre tickets and software upgrades that can be
bought solely online. One way of segmenting Internet users was identified by McKinsey in
2000 and is summarised here as follows:
Simplifiers experienced Internet users who seek convenience and low prices.
Surfers an innovative minority who enjoy buying niche items and experiences based upon
their own initiative.
Bargainers price sensitive surfers looking for the best price.
Connectors those new to the Internet who want to connect with others via Facebook and
Twitter, with little knowledge to go much further.
Routiners who have a small number of favourite sites which they visit often, such as online
banking for example.
Sportsters who spend most of their time looking at entertainment and sport.
Which of the above best represent you and your buyer behaviour when you are online?
The logistics manager integrates all elements of physical distribution and will optimise the
flow of services and goods. There is a large amount of planning and organising in terms of
the whole process, which includes selecting other agents and suppliers who are integrated
into the process. Often logistics will integrate forwards with the supply chain of a large
customer. An example of current thinking on logistics would include Just In Time
Management (JIT) where components are delivered directly to manufacturing sites as the
producers need them on the assembly line.
Let us consider the nature of distribution by looking at a very simple example of how it
works in relation to our everyday experiences.
A basic example would be a tin of vegetable soup. The entire chain would begin with the
seeds that the farmer sews and then plants. The farmer would sell the vegetables to the
soup manufacturer, who would create soup from a recipe and then package the soup in a
tin, and then bulk pack tins into a box and then those same boxes onto a pallet. The pallets
would be driven by lorry or some other vehicle to a wholesaler. Independent retailers whilst
visiting the wholesaler would break down a pallet and take a box of tinned soup. The retailer
would return to his or her store and open the boxes of soup and place individual items onto
a shelf next to similar products. The purchaser or customer would enter the store and buy a
series of products including tinned soup. Having paid for the products the customer returned
home and cooked soup for his or her family. The family eats the soup and they are the final
consumers, as opposed to customers. This is an example of a very basic marketing channel
in operation.
The case is that a manufacturer will attempt to maximise the accessibility of his product to
as many consumers as possible. A prime example of this is Coca-Cola and their attempt to
put a bottle of Coke within the arms reach of every consumer. For Coca-Cola this means a
number of channels of distribution including manufacturing, transportation, bottling,
wholesaling, retailing, vending machines and any other form of distribution you can think of.
Coca-Cola maximises its accessibility.