Distribution. The place element of the marketing mix.

Transcription

1 Distribution The place element of the marketing mix. Distribution makes products available in adequate quantities, in convenient locations, and at times when customers want to buy them. 1 TO DO Channel Intermediaries Types of distribution channel Channel management Physical distribution considerations Ethical considerations Summary 2

2 Channel intermediaries Functions: P C Breaking bulk P C Reduce number of transactions and create bulk for transport P C Accessibility to markets Provide specialist support service P P I C C P C 3 Types of Distribution Channels Consumer goods P A W R C Industrial goods P A D IC Services SP A C IC 4

3 decisions Channel selection Distribution intensity Channel integration 5 decisions Channel selection Distribution intensity Channel integration Market factors - buyer behaviour - geographical concentration of customers Producer factors - available resources - product mix offered Product factors - product size - bulky or difficult to handle? Competitive factors - competitor s control over traditional distribution channels 6

4 decisions Channel selection Distribution intensity Channel integration Intensive distribution use of all available markets (e.g. cigaretts) Selective distribution use of a limited number of outlets in a geographical area (e.g. computers) Exclusive distribution only one intermediary is used in a geographic area (e.g. cars sold by only one dealer in each town) 7 decisions Channel selection Distribution intensity Channel integration Conventional marketing channels independence of channel members, little or no control (e.g. pricing, brand image) Franchise operation legal contract in which producer and channel intermediaries agree each a member s rights and obligations Channel ownership by purchasing retail outlets, producers control their purchasing, production and marketing activities 8

5 e.g. International Franchising Benetton operates out of 5000 stores in 120 countries. Each Benetton franchisee pays a one-off lump sum so called key money in return benefits from brand name. 9 Channel management Selection Motivation Training Evaluation Managing Conflict 10

6 Channel management Selection Motivation Training Evaluation identification of candidates - trade sources - reseller enquiries Development of selection criteria - knowledge (market, product, customer) - market coverage - quality and size of sales force Managing Conflict 11 Channel management Selection Motivation Motivate channel members to - act as distributors - Allocate adequate commitment and resources to producer s lines Training Evaluation Managing Conflict Possible motivators - financial rewards - Territorial exclusivity - Development of strong work relataionship 12

7 Channel management Selection Motivation Training A need to train channel members depends on their internal competences Can take on two forms: - product knowledge - Company knowledge Evaluation Managing Conflict Can help build a spirit of partnership 13 Channel management Selection Motivation Training Evaluation Managing Conflict Identification of - shortfalls in distributor skills and competencies - lack of distributors motivation Important for - retention, training and motivation decisions Criteria include - sales volume and value, - Profitability, - Level of stocks - Quality and position of display 14

8 Channel management Selection Motivation Training Evaluation Managing Conflict Sources of channel conflict - differences in goals - Differences in desired product line Avoiding and resolving conflict - training in conflict handling - Developing a partnership approach - Channel ownership - coercion 15 Physical distribution system Customer service What level of customer service should be provided? Order processing How should the orders be handled? Inventory Control How much inventory should be held? Warehousing Where should the inventory be located? How many warehouses should be used? Transportation How will products be transported? Materials handling How will products be handled during transportation? 16

9 DHL. No one knows Asia like we do 17 DHL. No one knows Asia like we do 18

10 DHL. No one knows Asia like we do 19 Physical distribution system Customer service Improve availability, order cycle time, raise information levels, raise flexibility. Order processing Reducing time tends to be basic BPR or focus Inventory Control Balance has to be found as its cost Warehousing One large warehouse or many regional balance cost and customer service Transportation Planes, trains, cars, ships and pipes Materials handling Can it be packed into a container or on a pallet, does it have special requirements? 20

11 Ethical considerations Slotting allowance: power shift from manufacturer to retailers, retailers charge rent for shelf space Grey markets: product is sold through an unauthorised distribution channel, undercutting of prices (e.g. car re-importing) Exclusive dealing: manufacturer prohibits distributors that markets its products from selling the products of competing suppliers Restrictions in supply: small suppliers are concerned that the power of large manufacturers and retailers will mean they are squeezed out of the supply chain Fair trading: producers situated in countries of the developing world may suffer from economic hardship (e.g. Cafédirect) 21 22

12 Summary Channel intermediaries and their functions (break bulk, reduce number of transactions ) Types of distribution channel Factors in channel strategy (selection, distribution intensity and integration) Factors in channel management Physical distribution system components and considerations Ethical issues slotting allowances, fair trade and restricting supply 23 Bibliography Jobber, D.: Principles and Practice of Marketing. 4 th edition London: The McGraw-Hill Companies, pg

13 Thank you. 25