Marketing and Logistics: The Dynamics of Distribution

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Marketing and Logistics The Dynamics of
Distribution

• Fajer Al Mutawa
• Graduate Lancaster Business School, UK
• A GUST Logistics Forum - Guest Lecture
• July 6, 2008 GUST Mishref

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Agenda

• Marketing and Logistics
• P.L.A.C.E.
• Channel Functions
• Deciding to use a Channel
• Taking care of your Channel

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Marketing and Logistics
Philbert introducing the Theme of Guest Lecture
to 40 Student(G/B) s of Basic Marketing
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Where is Logistics?
UPSTREAM ACTIVITIES
PRODUCTION
PRODUCT
DOWNSTREAM ACTIVITIES
MARKETING
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Marketing 4 Ps
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P.L.A.C.E.
PLACE in Marketing and DISTRIBUTION
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PLACE

• Getting the product where the customer wants it
• How?
• DISTRIBUTION CHANNELS

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Distribution Channel

• What is a distribution channel?
• The intermediary, or chain of intermediaries,
  that the product has to pass through from
  producer to final user

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Why use channels?

• Why does a business give the job of selling its
  products to intermediaries?
• Efficiency of distribution costs.
• Intermediaries are specialists in selling.
• And they have the contacts, experience and scale
  of operation

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Channel Routes to Market
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Direct Indirect Routes to Market
Source Dibb, Simkin, Pride and Ferrell (2001)
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Some direct routes to market

• Door-to-door
• Internet
• Mail order
• TV selling
• Fully owned retail units
• Eg banks, some travel agencies, farm shop, some
  shops eg MS (UK).

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Example Louis Vuitton Distribution Channel
Online Retailer
Consumer
Consumer
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Channel Functions
The Channel Functions
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3 Main Channel functions

• Form- Getting the right stuff to you
• Time- When you want it
• Place- And where you want it
• And within that meeting organisational needs
  (i.e. profits)

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Other Channel Functions

• Information Gathering and distributing market
  research and intelligence - important for
  marketing planning
• Promotion Developing and spreading
  communications about offers
• Contact Finding and communicating with
  prospective buyers
• Matching Adjusting the offer to fit a buyer's
  needs, including grading, assembling and packaging

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More Channel Functions

• Negotiation Reaching agreement on price and
  other terms of the offer
• Physical distribution Transporting and storing
  goods
• Financing Acquiring and using funds to cover the
  costs of the distribution channel
• Risk taking Assuming some commercial risks by
  operating the channel

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Deciding to use a Channel
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Major Decisions

• Channel Route
• Channel Partner
• Channel breadth

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Channel Route

• Trade-off Cost of using intermediaries VS. Cost
  of direct sales
• usually intermediaries are cheaper, BUT.
• It is cheaper to go direct for BIG
  companies.....
• Small companies have no alternative!

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Think about.

• You loose control (somehow) of your product.
• WARNING Many suppliers seem to assume that once
  their product has been sold into the channel
  their job is finished!!

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Channel partner

• Which partner?
• Assess merits of potential partners
• Relationships
• Accessibility
• Flexibility
• Competitors
• Market Coverage

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How many partners?
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Channel breadth

• Intensive
• Selective
• Exclusive

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Taking care of your CHANNELS
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Channel Relationships

• Channel Power
• Channel Motivation

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Channel Power

• Having power
• Using power
• Abusing power

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Countervailing power Source Rangan and Bell
ALTERNATIVE CHANNELS TO MARKET
MARKET
PRODUCT
SUPPLIER/ MANUFACTURER
INTERMEDIARY/ RETAILER
SCALE/ SIZE
SCALE/ SIZE
LEGAL
LEGAL
ALTERNATIVE PRODUCTS TO SELL
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Channel Motivation

• Motivating channel members
• Power influence
• Incentives
• Promotions
• Better products!

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Thanks for Listening!

• Open Discussion ?

GLF THANKS Fajer Al Mutawa