Place Distribution & Channels

Place Distribution

• A vital aspect of marketing, especially in international markets due to distance and transportation time.
• Distribution strategy varies based on market size and local conditions.
• Integral part of sales management.

Distribution Management

• Manages all activities related to the movement and coordination of supply and demand.
• Establishes time and place utility in goods; involves acquiring, distributing, and maintaining goods.

Distribution Planning

• Systematic decision-making for the physical transfer of goods and services.
• Functions include transportation, inventory management, and customer transactions.

Distribution Channel

• Composed of marketing intermediaries such as people and firms.
• Intermediaries function between the producers, customers, and industrial users.
• Channel members include: Manufacturers, Service providers, Wholesalers, Retailers, Marketing Specialists, and Consumers.

Basic Types of Distribution Channel

• Direct Channel Distribution: Transfers goods/services from manufacturer to customer without a middleman.
• Indirect Channel Distribution: Transfers goods/services from manufacturer to customers through independent intermediaries.

Transportation

• Enables an organization to transport goods to customers.
• Aids proper product distribution for customer satisfaction and patronage.

Basic Transportation Forms

• Railroads
• Motor carriers
• Waterways
• Pipelines
• Airways

Categories of Transportation Firms

• Common Carriers: Transport goods for any firm.
• Contract Carriers: Provide services to specific shippers based on agreements.

Inventory Management

• Provides a continuous flow of goods and matches inventory with sales demand.

Concepts of Inventory Management

• Just In Time: Minimizes inventory by ordering more frequently in lower quantities.
• Electronic Data Interchange (EDI): Computer linkups between suppliers, manufacturers, and wholesalers to monitor stocks.

Warehousing

• Physical facilities used for storing goods and supply for efficient deliveries.
• Private Warehouses: Owned and operated by firms for storing and distributing their own products.
• Public Warehouses: Provide storage and distribution services to any firm on a rental basis.

Bonded Warehousing

• Stores imported/taxable merchandise that can be released after the appropriate taxes are paid.

Field Warehousing

• A receipt is issued by a public warehouse for goods stored in public as collateral for a loan.

Wholesaling

• Process of buying, carrying, and merchandising goods for resale to organizational customers, retailers, and/or other wholesalers.
• Types of wholesaling: Manufacturing, Merchant, Agents and Brokers.

Retailing

• Business activity involving the sale of goods and services to the final user.
• It is the final stage of distribution where products eventually go to the consumer.
• Types of retailing: Independent Retailer, Retail Chain, Retail Franchising, Leased Department, Consumer Cooperative.

Store Location

• Selecting an optimal location for selling a product.
• Factors to consider: Accessibility, safety, and convenience.
• Basic Forms of Store Locations: Isolated Store, Unplanned Business District.

Scrambled Merchandising

• A retailer offers unrelated goods and services to capture different market segments.

Marketing Channel (Trade Channel or Channel of Distribution)

• A collection of interrelated intermediaries that direct products to consumers.
• Wholesalers and retailers act as merchants or agents.
• Members of channel marketing: Wholesalers, Bottlers, Dealers, Retailers.
• Evolution of marketing channels: Trade Era, Production Orientation Era, Sales Orientation Era, Marketing Orientation Era, Relationship Marketing Era, Social Marketing Era.
• Principal Tasks associated with the Sorting function: Categorizing, Break Bulk.
• Channel Types and Functions: One level, Two level, Three level.

Functions performed by channel members

• Performance of physical distribution, matching, time and place availability, financing, title transferring, risk-taking, research, promotion, and service.
• Distribution channel structures include Direct, Retailer, Wholesaler/Retailer, and Wholesaler/Jobber/Retailer.
• Middlemen serve as links between producers and consumers or industrial users.
• Types of Distribution Systems: Conventional, Vertical Marketing System (VMS), Administrative VMS, Contractual VMS.

Roles of Marketing Channels

• Provide an effective link between production and the consumer.
• Affect all marketing decision.
• Based on consumer circumstances.

Marketing Intermediaries

• Use of intermediaries results in greater efficiency in making goods to meet target markets.
• Innovate variations of products into the final products.
• Purchase large quantities and separate them into limited quantities.
• Types of Distribution Channels: Corporate VMS, Administered VMS, Contractual VMS, Strategic Channel Alliances, Gray Market.
• Functions of Distribution Channels: Selling and Promoting, Buying and Assortment Building.

Types of Middlemen

• Wholesale Middlemen: Independently owned businesses that take title to the products they handle.
• Types of Wholesalers: Cash-and-Carry, Truck Jobbers, Rack Jobbers.
• Retail Middlemen: Department stores, etc.
• Specialized Middlemen: Insurance companies, etc.

Distribution Strategies

• Intensive Distribution: Stocking products in as many outlets as possible.
• Exclusive Distribution: A vendor has exclusive rights to distribute a product in a specific area.
• Selective Distribution: Using more than one, but not all middlemen.
• Elements of Physical Distribution: Order Processing, Warehousing, Finished Goods Management, Materials Handling and Packaging, Shipping, Transportation.
• Channel Institution: Retailing focuses on margin and inventory turnover goals.
• Performance Measures: Gross margin return, Gross margin per employee.
• Demand-Side Positioning in Retailing: Bulk Breaking, Spatial Convenience, Waiting and Delivery Time, Customer Service.
• Mega Selling: Selling millions of units.

Mega Selling Expositions

• Large-scale, international events.
• Exhibitions: Events collectively displaying art, products, or skills.
• Non-Commercial Exhibitions: Museums devoted to conservation.
• Product Movement & Inventory Management: Managing inventory and stock.
• Product Storage: Storing products for future delivery.
• Holding a Wide Assortment: Resellers purchase large quantities but allow customers to buy in small portions.
• Meeting Unanticipated Demand: Storage offers a safeguard in cases of increases in demand.
• Needed for Large Shipping Quantities: Manufacturers prefer to ship in large quantities.
• Faster Response Time: Strategically located storage allows a marketing organization to respond quickly.

Channel Management

• Steps of the channel planning process: Planning premise, Situation analysis, Opportunities and obstacles, Goals and objectives, Determination of strategies, Action plans, The profit plan.
• Channel Organizing essential steps: Identify various jobs, Decide the types of agents, Establish relationship with individual units.
• Channel Controlling Methods: Contracts & agreements, Power & dependence, Structural controls, Field management.

Causes of channel conflict

• Role incongruities, Resource scarcities, Perceptual differences, Expectational differences, Goal incompatibilities, and Communication difficulties.

Marketing Channel Concept

• Marketing channels are a management organization to accomplish goals.
• It is a set of organizations in developing goods or services.
• Manufacturer and end-users are not part but intermediaries are.
• Channel participants defined as participants that engage in negotiator functions linked together by negotiation or ownership.
• Three basic distinctions of producers, intermediaries and consumers.
• Producers and manufacturers consist of firms or enterprises that are involved in conceptualizing, developing, or making of products, intermediaries are independent businesses that help producers.

Types of Wholesalers

• Merchant Wholesalers: Firms engaged in buying, storing, and handling products in large quantities for resale.
• Agents, Brokers, and Commission Merchants: Independent middlemen who don't take title but are actively engaged in buying and selling on behalf of others.
• Manufacturer's Sales Branches and Outlets: Owned and operated by manufacturers but are physically separated from the factories.

Distribution Tasks Performed by Wholesalers

• Market: Market coverage, Making sales contact, Holding inventory, Processing orders, Gathering market information, Customer support.
• Marketing channels are dynamic, allowing exchanges of, services, or even information.
• The industrial revolution altered how producers provided reach to consumers.

Environmental Factors Affecting Marketing Channels

• Channel manager must be aware of economic, competitive, sociocultural, technological, and legal variables that influence distribution channels.
• Competitive Environment, Horizontal competition, Intertype competition, Vertical competition.
• Sociocultural Environment: Age patterns, Ethnic mix, Educational trends, Family structure, Changing role of women.
• Technological Environment: Scanners, electronic data interchange, teleshopping.
• Legal Environment: Dual distribution, Exclusive dealing, Price discrimination, Price maintenance.

Behavioral Process in Marketing Channels

• Conflict in the Marketing Channel: Exists when a member of the marketing channel perceives that another member's actions impeded the attainment of his or her goals.
• Causes of Channel Conflict: Misunderstood Communications, Divergent Functional Specializations and Goals, Failings in Joint Decision-Making, Differing Economic Objectives.
• Distribution Intensity Levels: Intensive Distribution, Selective Distribution, Exclusive Distribution.