Marketing Management

MGT 2306Lesson 7

Lesson 7 Objectives

• Define what is Distribution• Explain the role of distribution in the

marketing mix• Comprehend the distribution channel

functions & intermediaries• List and explain the distribution strategy &

types of distribution

Distribution

Distribution (Pengedaran)

• Distribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means, or using indirect means through distribution channels involving intermediaries.

The role of distribution in the marketing mix

• provides locational convenience (kemudahan tempat)– place utility– time utility

Physical distribution involves

• Transporting (pengangkutan)

• Warehousing (pergudangan)

• Inventory management (pengurusan inventori)

• Order processing (pemprosesan pesanan)

What is a distribution channel? (saluran pengedaran)

• set of interdependent organisations (producers and intermediaries) involved in the process of making a product or service available to target markets

Types of Distribution channels

How do eggs get from the chicken to your table?

• Collected from various chicken farms• Graded (Categorized : Free-range, low-

cholesterol, Omega 3/6 infused)• Washed• Candled (???)• Graded By weight (A, B, C)• Packed (primary, secondary, shipping)• Coded

What is a distribution intermediary?

• Individual or firm (such as an agent, distributor, wholesaler, retailer) that links producers to other intermediaries or the ultimate buyer. Distribution intermediaries help a firm to promote, sell, and make-available a good or service through contractual arrangements or purchase and resale of the item.

• Also called marketing intermediary.

Why use intermediaries?

• lack of distribution facilities and expertise– high cost of acquiring distribution capability

• warehouses, order processing, transportation etc.

• specialisation• contactual efficiency• achieve economies of scale• overcome the discrepancy of quantity and

assortment

Distribution channel functions

ContactContact

FinancingFinancing

InformationInformationRisk takingRisk taking

PromotionPromotion

MatchingMatchingNegotiationNegotiation

Physicaldistribution

Physicaldistribution

• A distribution network is established by answering the questions of who, what, when, where, and how in terms of getting products to their end point.

Distribution Network(rangkaian pengedaran)

• Business operators must decide who is responsible for sending and receiving the product and who will transport it. They must also decide what products are transported to which outlets and whether there are different distribution strategies for different product lines. Someone must schedule when items will be sent from the production site and where they will be sent.

Distribution Network

• And finally, the distribution coordinators will arrange the best way for the network to operate.

Distribution Network

Types of Distribution

• Three types of distribution can be used to make product available to consumers:

(1) intensive distribution,

(2) selective distribution

(3) exclusive distribution.

Intensive Distribution

• Also known as “one to many” distribution• The aim is to make available the product in

as many places possible• Focus on production capability and wide

coverage• Normally used for fast-moving consumer

goods (FMCG) like food items, drink, snacks, household items.

Selective Distribution

• These are shopping products that require consumer involvement and also effort to purchase.

• The coverage is lesser as availability is only targeted at the location where a large number of consumers exist and may look for it.

• Goods are normally priced higher• Examples would be branded shoes, petrol,

pharmaceutical products or middle-range clothing or electronic equipment.

Exclusive Distribution

• These are speciality products which are sometimes pricey.

• Manufacturer might decide to open their own stores to sell their own product or control their distribution by careful selection of outlets or places to preserve exclusivity & image

• Examples would be golf equipment, pewter ware, high-end cars, designer equipment like watches, clothes, shoes etc.

Class exercise

• How are these products distributed?

a) Mandarin Oranges

b) Petrol

c) Ferrari Cars

d) Nike Shoes