Distribution Channels PDF

Selective distribution...

Selective distribution 1. Wholesalers 7. COMMUNICATION DIFFICULTIES Example: Alpha Graphics, a franchiser of printing services faced difficulties when the franchisees felt a ★ provide bulk quantities of products for resale. - organizing a moderate number of wholesalers or retailers. lack of adequate support from franchisors. Franchisees would sent their royalty program payments to franchisors and then receive no 2. Retailers - The entrepreneur uses and tries to combine some channel controls and image with good sales volumes and profits. information about how their money was being spent to help improve their businesses. ★ sell in pieces to the final users. - Chosen dealers are selected based on credibility in the distribution of the product to the target market. 3. Marketing specialist ★ provides expertise in the field of marketing Exclusive distribution 1. Manufacturers - is the limited number of middlemen used in a geographic area. 1. Direct channel distribution ★ the makers or producers of a final product. - It is also organized in a region or provinces to handle the sales and distribution of the product. 2. Service Providers - They handle the distribution of the product and thus lessen the expenses. - the transfer or movement of goods and services from manufacturer to final user or customer without the intervention ★ provide intangible products to gain satisfaction from the customers. of an independent middleman. 3. Wholesalers 3. Intensive distribution - This is the channel or intermediaries chosen when the firms want to control the entire marketing program. ★ engaged in the activity of selling products to retailers, organizational users or other wholesalers and selling products for resale. 4. Retailers - organizing many middlemen that are used to obtain widespread market coverage and channel acceptance - They have close contact with consumers and have limited target markets. ★ selling goods in small quantities directly to the consumer. - Objective: high sales volume and profit. 5. Marketing Specialist 1. Wholesale - wholesalers include merchant wholesalers or distributors, manufacturers' representatives, agents and brokers. ★ one who is expert in the field of marketing. Corporate Channel 6. Consumers 2. Retail - includes department stores, hypermarkets, catalogs, on-line retail, etc. ★ fínal & ultimate (end) users of the product. - Some corporations develop their own vertical marketing systems. - They do this by undergoing international expansions and/or buying other firms. In a corporate vertical marketing 3. Specialized - includes insurance companies, finance companies, advertising agencies, etc. Wholesalers system, a firm at one channel level owns the firms at the next level or owns the entire channel. Middlemen can companies that specialize in moving goods from manufacturers to retailer; engage in this vertical integration structure. For example, many grocery chains own 1. The Trade Era They buy large quantities of product and then break the quantity down to smaller lots that they then sell to many different retailers. - food processing facilities such as dairies that supply their own Store. Production consisted in handmade goods that were limited and generally traded through exploration. Bottlers Cash-and-Carry Wholesalers 2. The Production Orientation Era companies that buy ingredients in large quantities. - This type caters more to small retailers. It has a limited line of fast-moving goods, sells for cash, and normally does not deliver. b. Enter the industrial age. Since goods were scarce, businesses focused mainly in manufacturing. Dealers Truck Jobbers As long as someone was producing, someone else would want to buy it. companies that buy an inventory of product. - They perform both selling and delivery functions. In the Philippines, ice delivery is a good example. This orientation rose to popularity due to shortages in the market, hence creating the foundation of Jean-Baptiste Say's famous remark: "Supply creates its own demand." Retailers Rack Jobbers store that sell products and services to consumers. Most of it includes drug stores, food stores and other specialty stores. - They provide services like delivery, shelving, inventory, and financing. They conduct activities like pricing the goods, keeping them arranged, 3. The Sales Orientation Era and keeping inventory records. This is usually focused on non-food items. After the Industrial Revolution, competition grew and focus turned to selling. 4 Classifications of Channel Conflicts Marketing, branding and sales became an important pillar as outputs surpassed demand, and companies competed for customers. - VERTICAL CONFLICTS VERTICAL CONFLICTS - HORIZONTAL CONFLICTS 4. The Marketing Orientation Era - INTERTYPE CONFLICTS : Vertical conflicts occur when there is a disagreement or miscommunication between two channel members continuously. This also happens From the second half of the 20th century onward, the saturation of markets led companies to bestow upon marketers the opportunity to - MULTI CHANNEL CONFLICTS when there is a difference in vision and mission, misunderstandings, and commonly because of poor communication. The main reason is the perform on a more strategic level. lack of clarity in role and dependence solely on the manufacturers. Through a profound knowledge of the customer, these professionals were involved in what the company would produce, its distribution 7 STEPS OF CHANNEL PLANNING PROCESS channels and pricing strategy. - 1. PLANNING PREMISE OR MISSION STATEMENT HORIZONTAL CONFLICTS Employees within an organization were also motivated to acquire marketing knowledge, which set the grounds to clients obtaining a general - 2. SITUATION ANALYSIS: brand experience. - 3. OPPORTUNITIES AND OBSTACLE: Horizontal conflict refers to a miscommunication among two or more channel members. These are conflicts between channel members at the - 4. GOALS AND OBJECTIVES: same level, examples are two or more retailers, two or more franchisees etc. Some of the conflicts can offer favorable benefits to the buyers. 5. The Relationship Marketing Era - 5. DETERMINATION OF STRATEGIES: Competition that can cause price war between two dealers or retailers can provide benefits to the consumers. The focus of companies shifts toward building customer loyalty and developing relationships with clients. - 6. ACTION PLANS AND RESPONSIBILITIES: Authors such as Don Peppers, Martha Rogers and Philip Kotler were instigators of the importance of creating bonds, considering that "the cost - 7. THE PROFIT PLAN: INTER TYPE CONFLICTS of attracting a new customer is estimated to be five times the cost of keeping a current customer happy." 4 Members of Channel Marketing Inter type conflict occurs when the intermediaries dealing in a particular product starts trading outside their normal product range. Large retailers 6. The Social/Marketing Era - Wholesalers often offer a large variety and thus they compete with small but specialized retailers. This concept is called "scrambled merchandising" where It concentrates on social interaction and a real-time connection with clients. - Bottlers the retailers keep the merchandise lines that are outside their normal product range Businesses are connected to current and potential customers 24/7 and engagement is a critical success factor. - Dealers Consider how much marketing has changed in the last century and will continue to shift as channels of communication, production levels and - Retailers Channel Planning a society alter. As markets expand and new marketing platforms emerge, the science and practice of this profession is being transformed by the minute. 8 Types of Store Strategy mix 1. PLANNING PREMISE OR MISSION STATEMENT: Establish the direction of the planning activity What we consider today to be the fastest way to reach our customers might be obsolete tomorrow. Therein lies the beauty of this - 1. Convenience store 2. SITUATION ANALYSIS: Verify the planning premise and develop an analysis of facts profession-change - 1. Convenience store 3. OPPORTUNITIES AND OBSTACLE: Identify specific, viable opportunities and obstacle plans - 3. Superstore 4. GOALS AND OBJECTIVES: Determine acceptable goals and set specific objectives as steps in their accomplishment DISTRIBUTION CHANNEL - 4. Combination store 5. DETERMINATION OF STRATEGIES: Plan of actions and activities calculated to result in reaching a specific goals - 5. Specialty store 6. ACTION PLANS AND RESPONSIBILITIES: Procedure or obtain action plan assignments, requirements, authorization, schedule, ➔ is a medium by which goods and services are made available to the consumers for use or consumption. - 6. Variety store measurements, controls, responsibilities , and support ➔ It is a means by which goods move from producers or manufacturers to consumers. ➔ Speed in product and service delivery and physical - 7. Department store 7. THE PROFIT PLAN: Document the financial expectations based on reaching the plan objectives and goals and provide the marketing budget location significantly affects the efficiency of a distribution channel. - 8. Retail catalogue showroom requirements ➔ performs the work of moving products from manufacturers to final consumers or business users. ➔ A good distribution channel shortens the time, place, and possession gaps between the manufacturers and consumers. Five Basic Transportation ➔ Distribution channels are essentially composed of marketing intermediaries. - 1. Railroads ➔ These intermediaries are persons and firms that operate between the producers and the customers or industrial users. - 2. Motor carriers CHANNEL COORDINATING - 3. Waterways 1. Physical distributions - 4. Pipelines Channel coordination solves the problem through some incentive scheme. Channel coordination (or supply chain coordination) aims at the transport and storage goods. - 5. Airways improving supply chain performance by aligning the plans and the objectives of individual enterprises. It focuses on inventory management 2. Matching and ordering decisions in distributed inter-company settings. Channel coordination models may involve multi-echelon inventory theory, multiple making available the assortment of goods and services desired by the channel member's customers. 6 elements of Physical Distribution decision makers, asymmetric information, as well as recent paradigms of manufacturing, such as mass customization, short product life-cycles, 3. Time and place - Order processing outsourcing and delayed differentiation. making them available at the time and in the place desired by the customers and consumers. - Warehousing - Finished goods management CHANNEL ORGANIZING 4. Finance - Materials handling and Packaging finances the first three functions. - Shipping The work of planning and organizing a system of marketing channel involves at least three (3) essential steps: 5. Transferring title - Transportation ensuring the legal and ownership passes to the final buyer. 1. Identify the various jobs and sub-job that must be done in order to sell the product and move them smoothly to markets. It is also necessary 6. Risk-taking to identify the factors that influence the manner in which these jobs must be done. bearing part of the risk inherent in business. 2. Decide the types of agents or marketing units that are expected to carry out jobs most effectively. 7. Research and prospecting 3. Select and establish relationships with the individual units suitable. finding out what potential buyers want. 8. Promotion and selling CHANNEL CONFLICT persuading potential buyers to buy. 9. Service In the context of a marketing channel, conflict exists when a member of the marketing channel perceives that another member’s actions impede pre-and after-sales service. the attainment of his goals. As Stern and Gorman state, In any social system, when a component perceives the behavior of another component 10. Support services to be impeding the attainment of its goals or the effective performance of its instrumental behavior patterns, an atmosphere of frustration insurance, documentation, management prevails. A state of conflict may, therefore, exist when two or more components of any given system of action, e.., a channel of distribution, become objects of each other's frustration. 1. Direct Marketing Channel MANUFACTURER - CONSUMERS The first type of marketing channel is a direct marketing channel. CAUSES OF CHANNEL CONFLICT This structure has no middlemen and intermediary levels. Goods and services are sold or served directly to the customers/consumers. 1. ROLE INCONGRUITIES Role: a set of prescriptions defining what the behavior of position members i.e. channel members) should be. Example: Franchisees 2. Retailer Marketing Channel MANUFACTURER- RETAILER - CONSUMERS This structure has middlemen and one intermediary level. 2. RESOURCE SCARCITIES Sometimes conflict stems from a disagreement between channel members over the allocation of resources The market intermediary in this type of marketing channel is the retailer needed to achieve their respective goals. Example: The retailers are viewed by both the manufacturer and the wholesaler as valuable. The retailer is the conduit of the manufacturer and the consumers. resources necessary to achieve their distribution objectives. String - is composed of a group of stores or shops with similar or compatible product lines, even items situated along the highway or main road. 3. PERCEPTUAL PREFERENCES Perception: the way an individual selects and interprets environmental stimuli. The way such stimuli are perceived, however, is often quite different from objective reality. Example: The use of point-of-purchase (POP) displays the manufacturer who provides these usually perceives POP as a valuable promotional tool needed to move products off a retailer's shelves. The retailer, on the other hand, perceives POP material as useless junk that serves only to take up valuable floor space. 1. Vending machines 4. EXPECTATIONAL DIFFERENCES Various channel members have expectations about the behavior of other channel members which coin or card operated machine which dispenses goods or services. sometimes, in reality, they do not behave like what they are expected. Example: Aamco, the U.S. largest transmission repair business. It eliminates the needs for hired sales personnel, allows 24-hour sales operation and can be placed outside of the store even without monitoring. 5. DECISION DOMAIN DISAGREEMENTS Example: Many manufacturers feel that pricing decisions are in their decision-making domain. The manufacturer makes it known to the retailer that if he/she does not abide by the manufacturer’s pricing "recommendations" the retailer will 2. Direct selling lose the product line. Retailers who need price flexibility in highly competitive markets often feel that by attempting to dictate pricing, the includes personal contact with consumers in their homes and telephone solicitations to attain satisfaction by providing convenience and safety manufacturer is encroaching (gradually moving) on the retailer's domain. to the customers. 6. GOAL INCOMPATIBILITIES BETWEEN CHANNEL MEMBERS Example: amazon.com. The goal of the publishers and manufacturers of 3. Direct marketing new books, CDs, DVDs, and consumer electronics products that sell their products through amazon.com is to sell as much of their products as exposes the consumer to a good or service via a non-personal medium and orders by phone or telemarketing or through the internet using possible through Amazon. Amazon's goal, on the other hand, is to sell as much merchandise as possible from whatever sources provide the email. most revenue and profits which includes used merchandise.