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MARKETING S F

MANAGEMENT

ESSION
IVE

DISTRIBUTION

Session Objectives
Define what a channel of distribution is and understand its
contribution to efficient and effective marketing effort.
Differentiate between types of intermediary and their
roles.
Appreciate the factors influencing channel design,
structure and strategy and the effect of conflict and
cooperation within channels.
Define logistics, appreciating the importance of customer
service and its implementation within logistics.
Identify the functions involved in logistics and the
decisions contributing to their management.

Marketing Channels Defined

A marketing channel is the structure linking a


group of individuals or organisations through which
a product or service is made available to the
consumer or industrial user.

Types of Intermediary

Franchisees

Retailers

Wholesalers
Agents
and brokers

Distributors
and dealers

Intermediary Definitions
A wholesaler is an intermediary buys
products in bulk,
usually from manufacturers, and resells them
to trade customers, usually small retailers.
A retailer sells direct to the consumer and
may either purchase direct from the
manufacturer or deal with a wholesaler,
depending on purchasing power and volume.

Intermediary Definitions
A distributor or dealer is an intermediary
who adds value through special services
associated with stocking or selling
inventory, credit and after-sales service.
A franchisee holds a contract to supply
and market a product or service to the design
or blue-print of the franchisor (the owner
or originator of the product or service).

Intermediary Definitions
An agent or broker is an intermediary who
has the legal authority to act on behalf
of the manufacturer, although they do
not take legal title to the goods or handle
the product directly in any way.

Functions of Channel Intermediaries


Reconciling
the needs of
producers
and
consumers

Number of transactions
Creating bulk

Improving
Efficiency

Between
Producers
&
Consumers
Breaking Bulk

Direct Distribution

1
P

4
P

6
7

8
C

Distribution Using a Channel Intermediary

C
5

2
P

C
6

3
P

P = Producer
C = Customer
I = Channel intermediary

Functions of Channel Intermediaries


Reconciling
the needs of
producers
and
consumers

Between
Producers
&
Consumers
Breaking Bulk

Number of transactions
Creating bulk

Selling
Servicing
Installation

Improving
Efficiency
Improving
Accessibility

Providing
Specialist
Services

Location
Time

DISTRIBUTION
CHANNELS FOR
CONSUMER GOODS

DISTRIBUTION CHANNELS FOR CONSUMER GOODS

Producer

Consumer

Producer

Producer

Producer

Agent

Retailer

Consumer

Wholesaler

Retailer

Consumer

Wholesaler

Retailer

Consumer

DISTRIBUTION
CHANNELS FOR
INDUSTRIAL GOODS

DISTRIBUTION CHANNELS FOR INDUSTRIAL GOODS


Industrial
Consumer

Producer

Producer

Producer

Producer

Industrial
Consumer

Agent

Agent

Distributor

Industrial
Consumer

Distributor

Industrial
Consumer

DISTRIBUTION
CHANNELS FOR
SERVICES

DISTRIBUTION CHANNELS FOR SERVICE GOODS

Consumer or
Industrial Customer

Service
Provider

Service
Provider

Agent

Consumer or
Industrial Customer

Channel Strategy Defined


Channel strategy refers to the approach taken about the
allocation and performance of roles, the basis of
remuneration within the system, and the effectiveness
of alternative configurations in enabling market
penetration to be achieved competitively and efficiently.

Channel Strategy
Channel
Channel
Strategy
Strategy

Channel
Channel
Selection
Selection

Channel
Channel
Intensity
Intensity

Channel
Strategy

Market
Factors
Channel
Selection

Distribution
Intensity

Competitive
Factors

Lack of ability
Product mix
Control

Product
Factors
Degree of close contact
Cost f product
Perishability
Bulkiness/complexity

Recruit sales-force
Producer owned

Intensive

Channel
Strategy

Distribution
Intensity

Buyer behaviour
Willingness of
intermediaries
Location

Channel
Integration

Producer
Factors

Channel
Selection

Channel
Channel
Integration
Integration

Channel
Integration

Distribution

Selective
Distribution

Exclusive
Distribution

Competition in Channels
Horizontal
Intertype
Vertical
Channel System

Competition in Channels
Horizontal

Retailer
(supermarket)

Retailer
(supermarket)

Agent

Agent

Competition in Channels
Intertype

Retailer
(supermarket)

Retailer
(independent)

Distributor
(full line)

Distributor
(limited line)

Competition in Channels
Vertical

Manufacturer

Wholesaler

Retailer

Competition in Channels

Retailer
(supermarket)

Retailer
(independent)

Distributor
(full line)

Retailer
(independent)

Distributor
(limited line)

Retailer
(independent)

Producer

Producer

Producer

Producer

Producer

Wholesaler

Retailer

Retailer

Consumer

Consumer

Consumer

Channel
Integration

Consumer

Wholesaler

Retailer

Consumer

Distribution
Intensity

Retailer

Wholesaler

Retailer

Channel
Selection

Wholesaler

Wholesaler

Horizontal Channel
Integration

Channel
Strategy

Vertical Channel Integration

Channel System

Vertical Marketing System Defined


A vertical marketing system refers to a channel of
distribution which is viewed as a coordinated whole and is
Effectively managed or led by one channel member.
The leadership might be contractual, or derived from
the power or dominance of one member, or arise from the
ownership of other channel members by one organisation.

Types of Vertical Marketing Systems

Corporate

Contractual

Administered

Conflict Defined
Channel conflict refers to tensions between two
channel members which arise from incompatibility
of actual or desired responses.

Types of Conflict

Manifest
conflict

Underlying
conflict

Power Defined
The power of a buyer or seller is his ability to
control the decision variables in the marketing
or purchasing strategy of another member in the
supply chain.

Source of Power

Reward

Legitimate
Power

Coercive

Referent

Expert

Physical Distribution Management Defined


Physical distribution management (PDM)
is concerned with the organisation and
management of the storage and movement
of goods from the end of the production
line to the end customer.

Logistics Defined
Logistics is the process of strategically
managing the movement and storage of
materials, parts, and finished inventory from
suppliers, through the firm and on
to customers.

Influences on the Logistic Process

Transport

Warehousing
Outbound
logistics
processor

Inventory

Information
Customer
service

Session 5: Key Terms

 _____ are intermediaries who have legal authority to act


on behalf of a seller in negotiating sales, but who do not
take title to goods themselves.
 The buying of large quantities of goods and then
reselling them in smaller lots is referred to as _____.

Session 5: Key Terms

 _____ refers to decisions taken about the allocation of


roles within a channel of distribution, and the way in
which the channel is formally or informally managed
and administered.
 _____ is a channel in which the producer deals directly
with the end customer without the involvement of
intermediaries.

Session 5: Key Terms

 _____ are intermediaries who add value through the


provision of special services associated with the selling
of a product and the after- sales care of the customer.
 An intermediary who holds a contract to supply and
market a product or service to operating standards and
criteria set by a franchisor is called a _____.

Session 5: Key Terms

 What term refers to an organisation or individual


through whom products pass on their way from the
manufacturer to the end buyer?
 _____ involves controlling stock levels within the
physical distribution function to balance product
availability against the need for minimising stock
holding costs.

Session 5: Key Terms

 _____ is the handling and movement of inbound raw


materials and other supplies as well as outbound
physical distribution.
 _____ ensures that the product is easily accessible to
customers and properly supported by the channel of
distribution.

Session 5: Key Terms

 The structure linking a group of organisations or


individuals through which a product or service is made
available to potential buyers is the _____.
 _____ is the handling and movement of outbound goods
from an organisation to its customers.

Session 5: Key Terms

 _____ buy products either from manufacturers or from


wholesalers and resell them to consumers.
 In a _____, the channel of distribution is viewed as a
coordinated whole and is effectively managed or led by
one channel member.

Session 5: Key Terms

 A _____ buys products in bulk, usually from


manufacturers, and resells them to trade customers,
usually small retailers.