Distribution channels and logistics management

The learning objectives

The nature of distribution channels Channel behavior and organization Channel design decisions Channel management decision Physical distribution and logistics management

1.The nature of distribution channels

What is distribution? Why are marketing intermediaries used? The function of distribution channel Channel level

What is distribution channel?

A 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.

How a Distributor Reduces the Number of Channel Transactions

1 2 3

4 5 6 7 8 9

A. Number of contacts without a distributor MxC=3X3=9

= Manufacturer

= Customer

How a Distributor Reduces the Number of Channel Transactions

1 4 Store 2 5

B. Number of contacts with a distributor MxC=3+3=6

3
= Manufacturer

= Customer

= Distributor

Distribution Channel Functions

Information

Transfer
Payments Physical Distribution Risk Taking

Communication Negotiation

Ordering Financing

Consumer Marketing Channels

0-level channel Manufacturer 1-level channel Manufacturer 2-level channel Consumer

Retailer

Consumer

Mfg

Wholesaler Wholesaler
Jobber

Retailer

Consumer

3-level channel Mfg

Retailer

Consumer

Industrial Marketing Channels

Manufacturer

Industrial distributors

Manufacturers representative Manufacturers sales branch

Consumer

Customers Desired Service Levels

Lot size Waiting time Spatial convenience Product variety Service backup

Why are marketing intermediaries used?

Distribution channel function

Information Promotion Contact Matching negotiation

Channel level

Channel behavior and organization

Channel conflict Vertical marketing system Horizontal marketing system Hybrid marketing systems

Types of Vertical Marketing Systems

Corporate
Common Ownership at Different Levels of the Channel

Administered
Leadership is Assumed by One or a Few Dominant Members

Contractual
Contractual Agreement Among Channel Members

Conventional Distribution Channel vs. Vertical Marketing Systems

Conventional marketing channel Manufacturer Vertical marketing channel Manufacturer Wholesaler Retailer Consumer

Wholesaler

Retailer

Consumer

Channel conflict

Horizontal conflict Vertical conflict

Vertical marketing systems

Conventional distribution VMS Corporate VMS Contractual VMS Administered VMS Franchise organization

2.channel design decision

Analyzing consumer service needs Setting channel objectives and constraints Identifying major alternatives Evaluating the major alternatives

Identifying major alternative

Types of intermediaries Number of marketing intermediaries Responsibilities of channel members

Break-Even Cost Chart

Manufacturers sales agency
Company sales force

Selling costs (dollars)

SB

Level of sales (dollars)

Number of marketing intermediaries

Intensive distribution Exclusive distribution Selective distribution

3.Channel management Decision

Selecting channel members Motivating channel members Evaluating channel members

Channel Management Decisions

Selecting Training Motivating Evaluating

FEEDBACK

4.physical distribution and logistics management

Physical distribution(marketing logistics) major logistics function Integrated logistics management Third-party logistics

Major logistics function

Order processing Warehousing Inventory transportation

Integrated logistics management

Cross-functional teamwork inside the company Building channel partnerships

Third-party logistics

An independent logistics provider that performs any or all of the functions required to get their clients product to market.