Distribution. Marketing channels

1. DISTRIBUTION

Nina Zlateva, Ph. D
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2. Marketing channels

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Marketing channels
Supply chain and value delivery network
Supply chain: upstream (those who supply raw
materials, components, parts, information,
finances and expertise) and downstream
(wholesalers and retailers) partners.
Value delivery network: the company, suppliers,
distributors and customers who partner with
each other to improve the performance of
the entire system in delivering customer value.

3. Marketing (distribution) channels

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Marketing (distribution)
channels
A set of independent organisations that
help make a product or service available
for use or consumption by the consumer
or business user.

4. Adding value – key functions of intermediaries

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Adding value – key functions
of intermediaries
Information: gather and distribute marketing
research information about actors and forces
in the marketing environment;
Promotion: develop and spread persuasive
communication;
Contact: find and communicate with
prospective clients;
Matching: shape and fit the offer to buyers’
needs;

5. Adding value – key functions of intermediaries

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Adding value – key functions
of intermediaries
Negotiation:
reach an agreement on
price and other terms of the offer;
Physical distribution: transport and store
the goods;
Financing: acquire and use funds to cover
costs of the channel work;
Risk taking: assume the risk of carrying out
the channel work;

6. Channel levels

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Channel levels
Channel level: a layer of intermediaries that
performs some work in bringing the product and its
ownership closer to the final buyer.
Several types of flows connect the members of the
channel: physical, ownership, payment,
information, promotion
Direct marketing channel: no intermediary levels;
Indirect marketing channel: with one or more
intermediary levels;

7. Channel behaviour

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Channel behaviour
Members
of the channel are
interdependent;
Each member plays specific role;
They must cooperate in order to deliver
final customer value and satisfaction;
Disagreement over roles, goals and
reward generate channel conflicts:
- Horizontal – among firms at the same level
- Vertical – between different levels

8. Conventional distribution channel

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Conventional distribution
channel
Producer
Wholesaler
Retailer
Customer
Consists of one or more
independent producers,
wholesalers and retailers,
each a separate business
seeking to maximise its
own profit, even at the
expense of profits for the
system as a whole.

9. Vertical marketing system (VMS)

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Vertical marketing system
(VMS)
Retailer
Producer
Retailer
Wholesaler
Members at different levels
work together in a united
way to accomplish the
work of the channel.
Consumer

10. Types of VMS

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Types of VMS
Corporate VMS : Combines successive
stages of production and distribution
under single ownership – channel
leadership is established through common
ownership.
Contractual VMS: independent companies
at different levels of production and
distribution join together through contracts
to obtain more economies or sales
impact.

11. Types of VMS

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Types of VMS
Franchise organisation: contractual VMS in
which a channel member (franchisor) links
several stages in the productiondistribution process.
Administered VMS: successive stages of
production and distribution are
coordinated through the size and the
power of the parties.

12. Horizontal marketing system

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Horizontal marketing system
A channel arrangement in which two or
more companies at one level join
together to follow a new marketing
opportunity.
Competitors or noncompetitors combine
financial, production or marketing
resources to accomplish more that any
company could do alone.

13. Multichannel distribution systems

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Multichannel distribution
systems
A hybrid distribution channel in which a single
company sets up two or more marketing
channels to reach one or more customer
segments.

14. Changing channel organisation

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Changing channel
organisation
Disintermediation
– cutting out marketing
channel intermediaries by the producer or
displacement of traditional resellers by
radical new types of intermediaries.

15. Channel design decision

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Channel design decision
Designing effective marketing channels by analysing
needs, setting channel objectives, identifying major
channel alternatives and evaluate them.
Number of intermediaries:
- Intensive distribution: stocking in as many outlets as
possible;
- Exclusive distribution: giving a limited number of
dealers the exclusive right to distribute the company’s
products in their territories;
- Selective distribution: between the two options;

16. Types of distribution channels

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Types of distribution channels
Direct
distribution system – selling directly
through company’s own sales force or
through another firm’s sales force;
Intermediaries – wholesalers and retailers;

17. Evaluation criteria

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Evaluation criteria
Economic:
sales, costs, profitability
Control options;
Adaptive criteria = flexibility;

18. Wholesaling

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Wholesaling
Wholesaling:
all activities involved in
selling goods and services to those buying
to resale or business activities;
Wholesaler: a company engaged primary
in wholesaling activities;

19. Types of wholesalers

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Types of wholesalers
Merchant wholesaler: an independently owned
business that takes title to the merchandise it
handles;
Broker: a wholesaler who doesn’t take title to the
goods and whose function is to bring buyers and
sellers together and assist in negotiation;
Agent: a wholesaler who represents buyers or sellers
on a relatively permanent basis, performs only a few
functions and does not take titles to goods;

20. Retailing

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Retailing
Retailing:
all activities involved in selling
goods or services to directly to final
consumers for their personal non-business
use;
Retailer: a business whose sales come
primarily from retailing;

21. Classification of retailers

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Classification of retailers
Amount
of service:
- self-service
locate-compare-select
- full-service
Product line:
- Specialty store: narrow product line with a
deep assortment within the line
- Department stores: wide variety of product
lines operated as separate departments

22. Classification of retailers

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Classification of retailers
-
-
-
-
Supermarket: large, low-cost, low-margin, high
volume, wide variety of grocery and household
products;
Convenience store: small, local, open long
hours, limited line, high turnover convenience
goods;
Superstore: larger (than the supermarket), large
assortment of routinely purchased food
products, non-food items and services;
Service retailer

23. Classification of retailers

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Classification of retailers
Relative prices:
Discount store – standard merchandise at lower
prices, lower margins, higher volume
- Off-price retailer – buys at less-than-wholesale
price and sells at less-than-retailer price:
independent, factory outlets, warehouse clubs
Organisational approach
- Chain stores
- Franchise
-

24. Marketing logistics and supply chain management

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Marketing logistics and supply
chain management
Marketing logistics: planning, implementing
and controlling the physical flow of
materials, final goods and related
information from point of origin to points of
consumption to meet customer
requirements at a profit.
Supply chain management: managing
upstream and downstream value-added
flows of materials, final goods, and related
information among suppliers, the company,
resellers, and final consumer.

25. Tasks of logistic

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Tasks of logistic
Coordinate
activities of suppliers,
purchasing agents, marketers, channel
members and customers.
Forecasting, building and maintaining
information system, purchasing, planning,
order processing, inventory, warehousing,
transportation planning.

26. Importance of logistics

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Importance of logistics
Could
create a competitive advantage;
Could lead to cost savings;
Could create opportunities for major
gains in distribution efficiency;
Affects the company’s environment and
environmental sustainability efforts;

27. Major functions of logistics

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Major functions of logistics
Warehousing
– storing goods while they
wait to be sold;
Distribution centres: large, highly
automated warehouses designed to
receive goods from various plants and
suppliers, take orders, fill them efficiently,
and deliver goods to customers as quickly
as possible.

28. Major functions of logistics

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Major functions of logistics
Inventory
management
Transportation
Logistics information management:
managing the information flow