Channels of Distribution

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Channels of Distribution

• PLACE The Third P

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Distribution Channels (Place)

• A set of interdependent organizations involved in
  the process of making a product or service
  available for use or consumption by the consumer
  or industrial user.

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Why Use Middlemen?

• Contacts
• Experience
• Specialization/expertise

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• You can cut out the middlemen but not the
  functions they perform
• Producer -------gtconsumer
• Middlemen break bulk and put together assortments
  desired by the market when and where
  desired/needed

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No. Of Channel Levels

• Manu. ----------------------gtCnsmr
• Direct marketing channel (O level)
• Man.--gtWhle.--gtJobber--gtretlr--gtCnsmr
• (3 level channel)
• Multichannels

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Channel Behavior

• Channel conflict
• Horizontal (e.g., Between 2 auto dealers, between
  dept. store and discount store)
• Vertical (e.g., Between auto dealers and
  manufacturer)

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Channel Organization

• CONVENTIONAL - informal, loosely associated
  channel members
• Vertical Marketing Systems (VMS) - channels
  MANAGED as a unit

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Types Of VMS

• CORPORATE VMS - own channel members (Sears)
• CONTRACTURAL VMS -
• . Wholesaler sponsored (IGA)
• . Retailer cooperatives
• . Franchises
• Administered VMS
• Channel captain based on power (PG Mattel
  Sears)

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Channel Design Decisions

• 1. Target market (needs, wants, behaviors)
• 2. Competition
• 3. Set objectives/identify constraints

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Channel Objectives Influenced By

• Target Groups
• Competition
• Product characteristics
• (milk vs. diamonds vs. cigarettes)
• Company characteristics (e.g., large vs. small)
• Middlemen availability/char.
• Environmental Factors

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• 4. Identify alternatives
• -Types of middlemen/no. Desired
• Intensive distribution
• Exclusive distribution
• Selective distribution
• 5. Evaluate alternatives
• Economic criteria
• Control criteria
• Adaptive criteria

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• 6. Select channel members
• 7. Motivate channel members
• 8. Evaluate channel members

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Physical Distribution

• Involves planning, implementing, and controlling
  the physical flow of materials and final goods
  from points of origin to points of use.

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Managing Physical Distribution

• 1) Set physical distribution objective
• Begin with target groups, competition
• E.G., "Deliver 95 of all orders within 72 hours"
• 2) Minimize costs for system
• Order processing
• Warehousing
• Inventory

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Retailing

• All the activities involved in selling goods or
  services directly to final consumers for their
  personal, nonbusiness use.

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Retailer Marketing Decisions

• Target market decision and target market position
• Product assortment and services decision
• Price decision
• Promotion
• Place (location)

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Wholesaling

• All activities involved in selling goods and
  services to those buying for resale or business
  use.

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Wholesaler Marketing Decisions

• Target market decision
• Product assortment and services decision
• Price decision
• Promotion decision
• Place decision