INTERMEDIARIES IN CHANNEL MANAGEMENT

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.

TO DO

Channel IntermediariesTypes of distribution channelChannel strategyChannel managementPhysical distribution considerationsEthical considerationsSummary

CHANNEL INTERMEDIARIES

Breaking bulk

Reduce number of transactions and create

bulk for transport

Accessibility to markets

Provide specialist

support service

P

P

P C

C

C

P

P

P

C

C

C

I

Functions:

TYPES OF DISTRIBUTION CHANNELS

Consumer Goods

Services

Industrial Goods

SP

P

P RA W C

A D IC

A C

IC

CHANNEL STRATEGY

Market factors

(buyer behavior,

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)

Channel Strategy Decisions

Channel selection Distribution Intensity Channel Integration

Intensive distribution – use of all available markets (e.g. cigarettes)

Selective distribution – use of a limited number of outletsin a geographical area (e.g. computers)

Exclusive distribution – only one intermediary is usedin a geographic area (e.g. cars soldby only one dealer in each town)

Conventional marketing channels – independence of channelmembers, little or no control (e.g. pricing, brand image)

Franchise operation – legal contract in which producer and channelintermediaries agree each a member’s rights and obligations

Channel ownership – by purchasing retail outlets, producerscontrol their purchasing, production and marketing activities

e.g. International Franchising

Benetton operates out of 5000 stores in 120 countries.Each BenettonFranchisee pays a one-offlump sum – so called

‘key money’ – in return benefitsfrom brand name.

CHANNEL MANAGEMENT

Selection

Motivation

Training

Evaluation

Managing Conflict

Identification of candidates(trade sources, reseller enquiries

Development of selection criteria{ knowledge (market, product, customer); market coverage; quality and size of sales force}

A need to train channel members depends on their internalCompetences. Can take on two forms:(product knowledge/ Company knowledge)

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…)

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)

Motivate channel members to(act as distributors; Allocate adequate commitment and ;resources to producer’s lines) Possible motivators( financial rewards; Territorial exclusivity Development of strong work relationship

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?

DHL. No one knows Asia like we do

DHL. No one knows Asia like we do

DHL. No one knows Asia like we do

ETHICAL CONSIDERATIONS

Slotting allowance:

power shift from manufacturer to retailers, retailers charge „rent” for shelf spaceGrey markets:

product is sold through an unauthorized 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 suppliersRestrictions in supply: small suppliers are concerned that the power of large manufacturers and retailers will mean they are squeezed out of the supply chainFair trading: producers situated in countries of the developing world may suffer from economic hardship (e.g. Café direct)

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