Channels of Distribution

1
Channels of Distribution

• Chapter Focus
• Distribution Channel Structure
• Consumer Markets
• Industrial Markets
• Electronic Markets
• Developing a Channel Strategy
• Managing Channel Systems

2
Channels of Distribution
.an organized network of agencies and
institutions that perform all the functions
required to link producers with end users.
Intermediaries bridge the discrepancy between
production and demand by performing three core
functions (1) Transactional Function (2)
Logistical Function (3) Facilitating Function
3
B2C Channel Options
Producer Consumer
Producer Retailers Consumer
Producer Wholesalers Retailers Consumer
Producer Agents Wholesalers Retailers Consu
mer
Direct ..Mediated .
4
B2B Channel Options
Producer Industrial Buyer
Producer Distributors Industrial Buyer
Producer Agents Distributors Industrial
Buyer
Producer Agents Wholesalers Distributors In
dustrial Buyer
Direct ..Mediated .
5
eChannels B-WebsTapscott, Ticoll and Lowy
(1999)
B-Webs a system of suppliers, distributors,
service and infrastructure providers and
customers that primarily use the Internet for
communication and transactions.
Self Organizing Hierarchical
Dynamic Alliance Pricing
Distributed Networks Aggregation
Value Chain
Control
Low High
Value Integration
6
Building a Channel System
Factors to Consider (1) Customer
Characteristics (2) Product Service
Characteristics - Product Life Cycle (3)
Corporate Intermediary Characteristics (5)
Environmental Factors
7
Vertical Marketing System(VMS)
Administered System The stages of production and
distribution are controlled by the size
and power of most influential member(s)
known as Channel Captain Contractual
System channel relationships are formalized
by contract. Corporate Systems channel
member owns or invests in various stages
of the production/distribution system.
8
Managing the VMS
a distribution channel that is centrally managed
to achieve greater efficiency and marketing impact
Power Sources Coercive XX XX XX
Reward XX XX XX Expert
XX Referent XX
Administered Contractual
System System
Corporate System
9
Channel Conflict in the VMS
Vertical Conflict conflict arises when one
channel member believes another channel member is
engaged in behavior that prevents it from
achieving its goals. Horizontal Conflict
conflict between intermediaries at the same level
in the channel. Multi-Channel Conflict
occurs when two ore more channels compete with
each other in selling to the same market.
Disintermediation occurs when one channel
member by-passes another member and sells or
buys products direct
10
Channel Conflict

• Managing Conflict
• Clear Channel Goals
• Clarify Channel Boundaries clear definition of
  markets
• Joint Board/Association Membership
• Build Trusting Relationships

11
Channel Design
In general ..
Introduction
Maturity
Growth
Exclusive Distribution restricted distribution
to reinforce image or provide enhanced service
support
Selective Distribution targeted distribution
Intensive Distribution universal distribution
typical of convenience products or services
There are exceptions!