Distribution channel desicions
Download as PPT, PDF7 likes1,147 views
This document discusses distribution channels and channel management decisions. It explains that distribution, or 'place', is a key element of the marketing mix as it is how customers can be reached and served. Effective distribution requires successfully integrating distribution within the overall marketing mix. Distribution channels help organize the exchange process and communications between manufacturers, intermediaries, and customers. Selecting and managing distribution channels, intermediaries, and outlets is important for meeting customer needs and maximizing sales and profits. The document outlines different types of channels and strategies manufacturers can use including intensive, selective, and exclusive distribution. It also discusses vertical marketing systems and factors that influence distribution channel decisions.
Distribution channel desicions
- 1. Lecture 13Lecture 13 Distribution channel decisionDistribution channel decision.. Channel management decisions.Channel management decisions.
- 2. The Importance ofThe Importance of PlacePlaceIt is a known fact that without distribution 'place' the bestIt is a known fact that without distribution 'place' the best product or service will not be delivered and the marketingproduct or service will not be delivered and the marketing mix will break down and fail it .mix will break down and fail it . It was once said that ‘place’ is one of the most powerfulIt was once said that ‘place’ is one of the most powerful elements of the marketing mix, as it is the one way that weelements of the marketing mix, as it is the one way that we can both reach andcan both reach and actually service the customer.actually service the customer. Place plays a pivotal role within the marketing mix, and thePlace plays a pivotal role within the marketing mix, and the key to success will be its successfulkey to success will be its successful integration within it, ensuring that customers get theirintegration within it, ensuring that customers get their products at the right place and at the rightproducts at the right place and at the right time.time. It also plays an important role, primarily because itIt also plays an important role, primarily because it ultimately affects the sales turnover and profit margins ofultimately affects the sales turnover and profit margins of the organization.the organization.
- 3. 1.1. It organizes the exchange process thoughIt organizes the exchange process though distributiondistribution 2.2. It organizes communicationsIt organizes communications Therefore sometimes the channels of distribution can be called marketing channels or combination of distribution and communications Distribution works on 2 main principles
- 4. Influences on distributionInfluences on distribution Fuel pricesFuel prices Environmental legislationEnvironmental legislation TaxationTaxation Transportation choicesTransportation choices National/globalNational/global transportationtransportation infrastructureinfrastructure Nature of product andNature of product and product characteristics –product characteristics – perishability and so onperishability and so on PackagingPackaging Product life cycleProduct life cycle Changing life cycleChanging life cycle The emergence of ICTThe emergence of ICT Customer expectationsCustomer expectations Level of complexity inLevel of complexity in customer buying behaviorcustomer buying behavior Competitive strategiesCompetitive strategies Product targetsProduct targets DemandDemand Market sizeMarket size Contribution toward costsContribution toward costs Marketing mixMarketing mix componentscomponents Customer servicesCustomer services Technical supportTechnical support
- 5. Distribution is ultimately about providingDistribution is ultimately about providing a service, a service of delivery to thea service, a service of delivery to the customer, essentially getting productcustomer, essentially getting product from A to B.from A to B. The main marketing issues elates toThe main marketing issues elates to channels.channels. The successful management of theThe successful management of the supply chain will be achieved throughsupply chain will be achieved through selecting, motivating, and controllingselecting, motivating, and controlling distributors and distribution outlets.distributors and distribution outlets.
- 6. Distribution channels:Distribution channels: definitiondefinition Distribution channels consists of a groupDistribution channels consists of a group of individuals or organization that assistof individuals or organization that assist in getting the product to the right placein getting the product to the right place at the right time.at the right time. They enable the manufactured productsThey enable the manufactured products to flow from a manufacturer to the end-to flow from a manufacturer to the end- user in many different ways.user in many different ways. Marketing intermediaries are groupsMarketing intermediaries are groups which are linking the producers andwhich are linking the producers and customers.customers.
- 7. WholesalersWholesalers –– they are buying products fromthey are buying products from manufacturer, store them within their warehouse andmanufacturer, store them within their warehouse and sell products to the tradesell products to the trade.. RetailersRetailers –– the final shopping points (real or virtual).the final shopping points (real or virtual). Their role is to manage the transaction in which theTheir role is to manage the transaction in which the buyer makes a purchase decisionbuyer makes a purchase decision Distribution/dealersDistribution/dealers –– groups of intermediaries who aregroups of intermediaries who are associating with stocking products for manufacturersassociating with stocking products for manufacturers and selling them on, including after-sales services, andand selling them on, including after-sales services, and credit facilities. Dealers are slightly different as they quitecredit facilities. Dealers are slightly different as they quite often specialize in selling one particular brand (caroften specialize in selling one particular brand (car dealers).dealers). Agents/brokersAgents/brokers// facilitatorsfacilitators –– do not take physicaldo not take physical procession of the goods, and act on behalf of theprocession of the goods, and act on behalf of the manufacturer to sell their products. Their aim is to bringmanufacturer to sell their products. Their aim is to bring buyers and sellers togetherbuyers and sellers together..
- 8. FranchiseeFranchisee –– holds a contact to marketholds a contact to market and supply a product or service that hasand supply a product or service that has been very strictly designed and developedbeen very strictly designed and developed by the franchiser. The franchiser has strictby the franchiser. The franchiser has strict terms and conditions on store design,terms and conditions on store design, store layout and contents sold within thestore layout and contents sold within the retail outlet.retail outlet. LicenseeLicensee –– similar to franchise. Thesimilar to franchise. The licensee pays royalties on sales to thelicensee pays royalties on sales to the licensor.licensor. MerchandiserMerchandiser –– are responsible for storeare responsible for store displays relating to different products.displays relating to different products.
- 9. Distribution is highly expensive, thereDistribution is highly expensive, there are a lot of add-on costs: marketing,are a lot of add-on costs: marketing, administrative, packaging, orderadministrative, packaging, order processing and receiving and makingprocessing and receiving and making paymentspayments Network of links for manufacturer canNetwork of links for manufacturer can contain 10 key buyers, who thencontain 10 key buyers, who then distribute out to another 10 buyers (10distribute out to another 10 buyers (10 x 10 = 100 links)x 10 = 100 links)
- 10. Lynne Troy Todd Diane Compaq IBM Apple Hewlett- Packard Computer City HP ® Diane Lynne Troy Todd Apple IBM Compaq Hewlett- Packard Contacts with no intermediaries 4 producer x 4 buyers=16 contacts Contacts with one intermediaries 4 producer + 4 buyers=8 contacts
- 11. Category of marketingCategory of marketing activitiesactivities Possible activities requiredPossible activities required Marketing informationMarketing information Marketing managementMarketing management Facilitating exchangeFacilitating exchange PromotionPromotion PricePrice Physical distributionPhysical distribution Customer servicesCustomer services RelationshipsRelationships Analysis of information such as sales data. Carrying outAnalysis of information such as sales data. Carrying out research studiesresearch studies Establish objectives, plan activities and manage. Co-Establish objectives, plan activities and manage. Co- ordinate financing, risk taking, evaluate channels activitiesordinate financing, risk taking, evaluate channels activities Choose and stock products that match buyers needsChoose and stock products that match buyers needs Set promotional objectives, co-ordinate advertising, personalSet promotional objectives, co-ordinate advertising, personal selling, promotionsselling, promotions Establish pricing policies, terms and salesEstablish pricing policies, terms and sales Manage transport, warehousing, materials handling, stockManage transport, warehousing, materials handling, stock control, and communicationscontrol, and communications Provide channels for advise, technical support, after-salesProvide channels for advise, technical support, after-sales services, and warrantiesservices, and warranties Facilitate communication, products, parts, credit control,Facilitate communication, products, parts, credit control, Maintain relationships between manufacturer and retailMaintain relationships between manufacturer and retail outlets, and customer/consumeroutlets, and customer/consumer
- 12. Direct •Internet •Telephone •Mail •Catalogue •Own channel Direct •Internet •Telephone •Mail •Catalogue •Own channel Salesforce •Own •Another firm’s •Contract Salesforce •Own •Another firm’s •Contract Intermediary •Franchise •Wholesaler •Agent/Merchant •Distributor •Partner Intermediary •Franchise •Wholesaler •Agent/Merchant •Distributor •Partner Distribution optionsDistribution options
- 14. Manufacturer Manufacturer ManufacturerManufacturer customer Customer Customer Customer Retailer Wholesaler Retailer Retailer Wholesaler Agent/broker Typical range of channel of distributionTypical range of channel of distribution
- 15. Channel levelsChannel levels AA zero-level channelzero-level channel (also called a(also called a direct-direct- marketing channel)marketing channel) consists of a manufacturerconsists of a manufacturer selling directly to the final customer. The majorselling directly to the final customer. The major examples are door-to-dour home parties, mailexamples are door-to-dour home parties, mail order, telemarketing, TV selling, Internet selling.order, telemarketing, TV selling, Internet selling. Avon sales representatives sell cosmetics door-Avon sales representatives sell cosmetics door- to-door.to-door. AA one-level channelone-level channel contains one sellingcontains one selling intermediary, such as a retailer.intermediary, such as a retailer. AA two-level channeltwo-level channel contains two intermediaries.contains two intermediaries. In consumer markets, these are typically aIn consumer markets, these are typically a wholesaler and a retailer.wholesaler and a retailer. AA three-level channelthree-level channel contains threecontains three intermediaries. In the mi packing industry,intermediaries. In the mi packing industry, wholesalers sell to jobbers, who sell to small retawholesalers sell to jobbers, who sell to small reta
- 16. Logistical value Stock Sorting Breaking bulk Transportation Value added logistical services Facilitating value Shared risk Marketing Administration Transportation value Financing Training Information After sales
- 17. The distribution channel and theThe distribution channel and the customercustomer Passing of goods and services direct from manufacturerPassing of goods and services direct from manufacturer to customersto customers Passing of goods and services via retailer and then to aPassing of goods and services via retailer and then to a consumerconsumer Passing of goods from manufacturer via a wholesalerPassing of goods from manufacturer via a wholesaler and then directly to a consumerand then directly to a consumer Passing of goods from manufacturer via wholesaler,Passing of goods from manufacturer via wholesaler, then on to a retailer, and subsequently on to a consumerthen on to a retailer, and subsequently on to a consumer Additionally, the manufacturer can distribute theAdditionally, the manufacturer can distribute the products via agent to a wholesaler, and then follow theproducts via agent to a wholesaler, and then follow the routesroutes
- 18. Selecting the channels ofSelecting the channels of distributiondistributionWhat are the product characteristics andWhat are the product characteristics and how do they affect methods ofhow do they affect methods of distribution?distribution? Who are their customers?Who are their customers? Where are their customers?Where are their customers? What are their customer requirements?What are their customer requirements? How, when and where do they want to buyHow, when and where do they want to buy products?products? What are their competitors doing by wayWhat are their competitors doing by way of distribution?of distribution? What is the cost of distribution?What is the cost of distribution? What are the legal and regulatoryWhat are the legal and regulatory constraints of distribution?constraints of distribution?
- 19. Intermediary selection criteriaIntermediary selection criteria Operational criteriaOperational criteria Knowledge of local marketsKnowledge of local markets Appropriate premises and equipmentAppropriate premises and equipment Technological systems and processesTechnological systems and processes Product knowledge and expertiseProduct knowledge and expertise Payment facilitiesPayment facilities Sales force structure, size, and effectivenessSales force structure, size, and effectiveness Efficient customer service infrastructureEfficient customer service infrastructure Strategic criteriaStrategic criteria Quality assurance processesQuality assurance processes Management abilityManagement ability InnovativeInnovative Willing partnershipWilling partnership Levels of loyalty and cooperationLevels of loyalty and cooperation
- 20. Channel strategyChannel strategy There are three types of marketThere are three types of market coveragecoverage:: Intensive –Intensive – as many available outlets asas many available outlets as possible (chocolate bars, newspapers)possible (chocolate bars, newspapers) Selective –Selective – different products are onlydifferent products are only available in some outlets (electricalavailable in some outlets (electrical appliances, certain bread)appliances, certain bread) ExclusiveExclusive -possibly only one outlet in the-possibly only one outlet in the geographical area (specialty products:geographical area (specialty products: special cars)special cars)
- 21. Intensive distributionIntensive distribution Intensive distributionIntensive distribution means that as manymeans that as many available outlets as possible hold this product,available outlets as possible hold this product, for example chocolate, newspapers, bread andfor example chocolate, newspapers, bread and so on. Intensive distribution will meanso on. Intensive distribution will mean convenience to the customer and increasedconvenience to the customer and increased customer satisfaction.customer satisfaction. The sale of groceries in petrol and serviceThe sale of groceries in petrol and service stations is an example of how intensivestations is an example of how intensive distribution has growndistribution has grown
- 22. Selective distributionSelective distribution Selective distributionSelective distribution is different in thatis different in that some products are only available fromsome products are only available from some outlets, for example electricalsome outlets, for example electrical appliances, certain brands of clothes andappliances, certain brands of clothes and fashion products.fashion products.
- 23. Exclusive distributionExclusive distribution Exclusive distribution is where possibly only theExclusive distribution is where possibly only the outlet in a certain geographic area supplies aoutlet in a certain geographic area supplies a product.product. This method of distribution usually relates toThis method of distribution usually relates to specialty products, for example special cars,specialty products, for example special cars, deluxe clothing and so on.deluxe clothing and so on. Often exclusive distribution is relevant to nicheOften exclusive distribution is relevant to niche products.products.
- 24. IntensiveIntensive SelectiveSelective ExclusiveExclusive Maximum # of outletsMaximum # of outlets covered to maximizecovered to maximize availabilityavailability Target outlets in as manyTarget outlets in as many geographical regions asgeographical regions as possiblepossible Consumer convenienceConsumer convenience productsproducts High # of purchasersHigh # of purchasers Nigh purchase frequencyNigh purchase frequency Impulsive purchaseImpulsive purchase Low priceLow price Medium level ofMedium level of customers – but likely tocustomers – but likely to be significantbe significant Less intensiveLess intensive distribution of outletsdistribution of outlets Retailers may requireRetailers may require specialist knowledgespecialist knowledge Shopping-basedShopping-based productsproducts Medium # of shoppersMedium # of shoppers Purchase is occasionalPurchase is occasional Purchase is more likelyPurchase is more likely to be plannedto be planned Medium priceMedium price Relatively fewRelatively few customerscustomers Limited retail outletsLimited retail outlets Close retailer-customerClose retailer-customer relationshipsrelationships Specialty productsSpecialty products Infrequent purchaseInfrequent purchase High involvement andHigh involvement and planned purchaseplanned purchase High priceHigh price
- 25. Vertical marketing systemsVertical marketing systems areare professionally managed and centrallyprofessionally managed and centrally coordinated marketing channelscoordinated marketing channels designed to achieve channel economiesdesigned to achieve channel economies and maximum marketing impact.and maximum marketing impact. Major types of vertical marketing systemsMajor types of vertical marketing systems:: corporatecorporate contractualcontractual administeredadministered
- 26. A distribution system where two or moreA distribution system where two or more channel members are connected by ownershipchannel members are connected by ownership or legal obligation (limited (simple) definition)or legal obligation (limited (simple) definition) A marketing channel in which a single channelA marketing channel in which a single channel member will coordinate or manage channelmember will coordinate or manage channel activities to achieve efficient, low-costactivities to achieve efficient, low-cost distribution, aimed at satisfying target marketdistribution, aimed at satisfying target market customer (expand definition)customer (expand definition)
- 27. Product design and developmentProduct design and development BrandingBranding PricingPricing PromotingPromoting Stock control and storageStock control and storage MerchandizingMerchandizing TransportationTransportation RetailingRetailing Customer serviceCustomer service Finance/creditFinance/credit Warranties/guarantiesWarranties/guaranties
- 28. Manufacturer- sponsored retail franchise system (Ford) Manufacturer- sponsored retail franchise system (Ford) Manufacturer- sponsored wholesale franchise system (Coca-Cola) Manufacturer- sponsored wholesale franchise system (Coca-Cola) Wholesaler-sponsored voluntary chains (Western Auto) Wholesaler-sponsored voluntary chains (Western Auto) Administered vertical marketing system Procter & Gamble Administered vertical marketing system Procter & Gamble Vertical marketing system Vertical marketing system Corporate vertical marketing system (Polo/Ralph Lauren) Corporate vertical marketing system (Polo/Ralph Lauren) Service- sponsored retail franchise system (Holiday Inn) Service- sponsored retail franchise system (Holiday Inn) Contractual vertical marketing system Contractual vertical marketing system Wholesaler-sponsored voluntary chains (Western Auto) Wholesaler-sponsored voluntary chains (Western Auto) Wholesaler-sponsored voluntary chains (Western Auto) Wholesaler-sponsored voluntary chains (Western Auto) Service sponsored franchise system (H&R Block) Service sponsored franchise system (H&R Block)
- 29. The combination of successiveThe combination of successive stages of production andstages of production and distribution under a singledistribution under a single ownership is aownership is a corporate verticalcorporate vertical marketing systemmarketing system.. These types of marketing systemsThese types of marketing systems can develop via eithercan develop via either forwardforward integrationintegration oror backward integrationbackward integration..
- 30. Under aUnder a contractual vertical marketingcontractual vertical marketing systemsystem,, independent production andindependent production and distribution firms integrate their effortsdistribution firms integrate their efforts on a contractual basis to obtainon a contractual basis to obtain greatergreater functional economies and marketingfunctional economies and marketing impactimpact than they could achieve alone.than they could achieve alone. Contractual systems are theContractual systems are the mostmost popularpopular among the three types ofamong the three types of vertical marketing systems, accountingvertical marketing systems, accounting for about 40% of all retail sales.for about 40% of all retail sales.
- 31. Contractual VMSContractual VMS Wholesaler-sponsored voluntaryWholesaler-sponsored voluntary chains:chains: Wholesalers organize voluntaryWholesalers organize voluntary chains of independent retailers to helpchains of independent retailers to help them compete with large chainthem compete with large chain organizations.organizations. The wholesaler develops a program inThe wholesaler develops a program in which independent retailers standardizewhich independent retailers standardize their selling practices and achieve buyingtheir selling practices and achieve buying economies that enable the group toeconomies that enable the group to compete effectively with chaincompete effectively with chain organizations.organizations.
- 32. Contractual VMSContractual VMS Retailer cooperatives:Retailer cooperatives: Retailers take theRetailers take the initiative and organize a new businessinitiative and organize a new business entity to carry on wholesaling and possiblyentity to carry on wholesaling and possibly some production.some production. Members concentrate their purchasesMembers concentrate their purchases through the retailer co-op and plan theirthrough the retailer co-op and plan their advertising jointly.advertising jointly. Profits are passed back to members inProfits are passed back to members in proportion to their purchases, Nonmemberproportion to their purchases, Nonmember retailers can also buy through the co-opretailers can also buy through the co-op but do not share in the profits.but do not share in the profits.
- 33. Contractual VMSContractual VMS Franchise organizations:Franchise organizations: AA channel member called achannel member called a franchisorfranchisor might link several successive stages inmight link several successive stages in the production-distribution process.the production-distribution process. Franchising has been the fastest-Franchising has been the fastest- growing retailing development ingrowing retailing development in recent years.recent years. Although the basic idea is an old one,Although the basic idea is an old one, some forms of franchising are quitesome forms of franchising are quite new.new.
- 34. FranchisingFranchising is a contractualis a contractual arrangement between a parentarrangement between a parent company (acompany (a franchisorfranchisor) and an) and an individual or firm (aindividual or firm (a franchiseefranchisee) that) that allows the franchisee to operate aallows the franchisee to operate a certain type of business under ancertain type of business under an established name according toestablished name according to specific rules.specific rules. Franchise association in Europe,Franchise association in Europe, USA, Russia.USA, Russia.
- 35. Administered vertical marketingAdministered vertical marketing systemssystems achieve coordination atachieve coordination at successive stages of productionsuccessive stages of production and distribution by theand distribution by the sizesize andand influenceinfluence of one channel memberof one channel member rather than through ownershiprather than through ownership..
- 36. The combination of institutions at theThe combination of institutions at the same level of channel operation undersame level of channel operation under one managementone management
- 37. The balance of power within theThe balance of power within the distribution channeldistribution channel The balance of power within the distribution channelThe balance of power within the distribution channel is an interesting concept to consider. As each partyis an interesting concept to consider. As each party has its own set of objectives to pursue and its ownhas its own set of objectives to pursue and its own agenda, fitting in with a partner organization canagenda, fitting in with a partner organization can potentially cause conflict.potentially cause conflict. Who then holds the balance of power?Who then holds the balance of power? Is it the manufacturer because they have the productsIs it the manufacturer because they have the products available for market?available for market? Or the intermediary, who may decide they do not want toOr the intermediary, who may decide they do not want to sell on the product to retail outlets?sell on the product to retail outlets? Or is it the retailers themselves, who will decide on theOr is it the retailers themselves, who will decide on the most appropriate brand to sell to their customers?most appropriate brand to sell to their customers?
- 38. The balance of power within theThe balance of power within the distribution channeldistribution channel Channel cooperation is critical, and channel members need toChannel cooperation is critical, and channel members need to be united.be united. They should share information, agree to be directed to theThey should share information, agree to be directed to the same target markets, and together maximize efficiency.same target markets, and together maximize efficiency. Often a channel leader will be identified to enable a co-Often a channel leader will be identified to enable a co- ordinated effort of all parties in the marketing channel.ordinated effort of all parties in the marketing channel. To become a leader, the channel member must want to directTo become a leader, the channel member must want to direct and influence the channel’s overall performance. To do so, theand influence the channel’s overall performance. To do so, the leader should have significant power and driving force in orderleader should have significant power and driving force in order to succeed.to succeed. To gain the power in the relationship, the organization will likelyTo gain the power in the relationship, the organization will likely to be of significant size, with major resources.to be of significant size, with major resources. It must have the respect of the other channel members.It must have the respect of the other channel members. It must be able to punish or reward other channel membersIt must be able to punish or reward other channel members effectively.effectively.
- 39. Channel conflictChannel conflict An additional problem for many suppliers isAn additional problem for many suppliers is channel conflict,channel conflict, especially for premium andespecially for premium and high-priced products and services.high-priced products and services. Conflicts can ariseConflicts can arise verticallyvertically, that is between, that is between sequential memberssequential members in a distribution networkin a distribution network such as agents and distributor over such matterssuch as agents and distributor over such matters as carrying a particular range or price increases.as carrying a particular range or price increases. Horizontal conflictsHorizontal conflicts may arise between membersmay arise between members of a channel such as betweenof a channel such as between agents or betweenagents or between distributorsdistributors where competition may be deemed towhere competition may be deemed to be unfair.be unfair. Within any channel there are often collisions ofWithin any channel there are often collisions of interests given all channel members naturallyinterests given all channel members naturally seek to maximize their profits and resources.seek to maximize their profits and resources. However, one particular area has seen aHowever, one particular area has seen a significant amount of channel conflict in recentsignificant amount of channel conflict in recent years:years: grey marketing.grey marketing.
- 40. Grey marketingGrey marketing Grey marketingGrey marketing occurs when distributors purchase goods inoccurs when distributors purchase goods in one market, either from an authorized dealer or directly fromone market, either from an authorized dealer or directly from the manufacturer, and resell the same goods in anotherthe manufacturer, and resell the same goods in another market at a higher price.market at a higher price. TheyThey undercut the pricesundercut the prices of the authorized dealers in aof the authorized dealers in a market and still make a healthy profit. Such activity is notmarket and still make a healthy profit. Such activity is not necessarily illegal, but can fall foul of licence agreements ornecessarily illegal, but can fall foul of licence agreements or be counter to trade regulations.be counter to trade regulations. For example, Tesco lost a dispute with Levi's to sell jeans sourced inFor example, Tesco lost a dispute with Levi's to sell jeans sourced in the grey marker in its supermarkets.the grey marker in its supermarkets. Companies that find their goods being distributed by greyCompanies that find their goods being distributed by grey marketers face a mix of problems aside from lost profits.marketers face a mix of problems aside from lost profits. For a start, price discounting can affect their image andFor a start, price discounting can affect their image and relationships with authorized dealers can become strainedrelationships with authorized dealers can become strained as they watch their markets being eroded.as they watch their markets being eroded.
- 41. Term is used to describe the management ofTerm is used to describe the management of every part of the distribution process isevery part of the distribution process is extremely important to ensuring that productsextremely important to ensuring that products are moved from manufacturer to the point ofare moved from manufacturer to the point of sale efficiently and effectively.sale efficiently and effectively. Elements of consideration:Elements of consideration: Cost involvedCost involved Methods of transport – road, rail, plane, shipping,Methods of transport – road, rail, plane, shipping, internetinternet Routes usedRoutes used Stock, storage and stock controlStock, storage and stock control Protection and delivery of stockProtection and delivery of stock TimingTiming – the key element (JIT (Just in time)– the key element (JIT (Just in time) managementmanagement Evaluating the effectiveness of methods of distributionEvaluating the effectiveness of methods of distribution and being aware of other alternativesand being aware of other alternatives Physical distribution management (PDM)
- 42. Customer servicesCustomer services Order processingOrder processing Materials handlingMaterials handling WarehousingWarehousing Stock/inventory managementStock/inventory management TransportationTransportation
- 43. The key success factors of PDMThe key success factors of PDM include all elements of marketing mix:include all elements of marketing mix: Product characteristicsProduct characteristics PackagingPackaging PricingPricing Promotional campaignsPromotional campaigns
- 44. ““Just in time” (JIT) conceptJust in time” (JIT) concept Timing is a critical element of PDM, as many companies work on theTiming is a critical element of PDM, as many companies work on the delivery of materials and components on adelivery of materials and components on a Just in TimeJust in Time basis (JIT).basis (JIT). It means that the manufacturer of products, or the supplier of rawIt means that the manufacturer of products, or the supplier of raw materials, must deliver the necessary materials or components as andmaterials, must deliver the necessary materials or components as and when required.when required. For example, a window manufacturer, who makes windows for officeFor example, a window manufacturer, who makes windows for office buildings, will be making windows to order and will be required tobuildings, will be making windows to order and will be required to deliver them at certain periodic times in the construction of thedeliver them at certain periodic times in the construction of the building.building. The concept of JIT was developed to encourage maximized efficiency ofThe concept of JIT was developed to encourage maximized efficiency of manufacturing.manufacturing. Both save significant amounts of money, which means that the costBoth save significant amounts of money, which means that the cost savings can be passed on to the customer, making products cheapersavings can be passed on to the customer, making products cheaper to purchase.to purchase.
- 45. Channel choice considerations 1. Target market coverage 2. Buyer requirements 3. Profitability a. Intensive distribution a. Information a. Total revenue b. Selective distribution b. Convenience b. Total costs c. Exclusive distribution c. Variety d. Attendant services Channel choice considerations 1. Target market coverage 2. Buyer requirements 3. Profitability a. Intensive distribution a. Information a. Total revenue b. Selective distribution b. Convenience b. Total costs c. Exclusive distribution c. Variety d. Attendant services Environment al factors Environment al factors Consumer factors Consumer factors Product factors Product factors Company factors Company factors
- 46. Push and pull strategiesPush and pull strategies Push strategyPush strategy The way in whichThe way in which products make their wayproducts make their way to customers is a criticalto customers is a critical consideration toconsideration to marketersmarketers TheThe push element relatespush element relates to distribution and howto distribution and how personal selling links thepersonal selling links the supplier to the customer,supplier to the customer, pushing the product out topushing the product out to the market.the market. Pull strategyPull strategy On the other hand, the pullOn the other hand, the pull strategy is very heavilystrategy is very heavily reliant on advertising,reliant on advertising, packaging and salespackaging and sales promotions directly aimedpromotions directly aimed at the consumer,at the consumer, effectively pulling them oreffectively pulling them or attracting them to theattracting them to the product, encouraging themproduct, encouraging them to purchase and forge ato purchase and forge a lasting relationship.lasting relationship.
- 47. Pull strategy: examplesPull strategy: examples The huge growth in Internet marketingThe huge growth in Internet marketing and direct marketing has really speededand direct marketing has really speeded this process up with promotionalthis process up with promotional incentives.incentives. For example, Marks and Spencer (M&S)For example, Marks and Spencer (M&S) are now giving discount vouchers toare now giving discount vouchers to M&S store card holders to encourageM&S store card holders to encourage them to make additional purchases.them to make additional purchases. Next Directory has introduced a varietyNext Directory has introduced a variety of offers including free delivery or 20 perof offers including free delivery or 20 per cent off on orders over £100.cent off on orders over £100.
- 48. Key factors influencingKey factors influencing push strategiespush strategies Key factors influencingKey factors influencing pull strategiespull strategies Level of economic andLevel of economic and financial stabilityfinancial stability Need for economies ofNeed for economies of scalescale Mature or saturatedMature or saturated marketsmarkets Consumer credit restrictionsConsumer credit restrictions Political instabilityPolitical instability Intense competitionIntense competition High operation costsHigh operation costs Indication of lowIndication of low marketmarket growgrow Level of economic andLevel of economic and financial stabilityfinancial stability Innovative cultureInnovative culture Underdeveloped retailUnderdeveloped retail infrastructure for theinfrastructure for the productsproducts High investment potentialHigh investment potential High levels of marketHigh levels of market growthgrowth Social stabilitySocial stability Political stabilityPolitical stability
- 49. ManufacturerManufacturer WholesalerWholesaler Retailer ConsumerConsumer Flow of promotion; mainly personal selling directed to intermediaries Flow of demand stimulation ManufacturerManufacturer WholesalerWholesaler RetailerRetailer ConsumerConsumer Flow of promotion; mainly advertising directed to consumers Flow of demand stimulation A. Push strategy B. Pull strategy
- 50. Expansion of # of computersExpansion of # of computers On-line customer purchasesOn-line customer purchases
- 51. Strategic levelStrategic level Operational levelOperational level Improved corporate imageImproved corporate image Improved customer serviceImproved customer service Increased visibilityIncreased visibility New market growthNew market growth opportunitiesopportunities Lower overall business costsLower overall business costs Speed of transactions increasedSpeed of transactions increased Management of informationManagement of information improvedimproved Increased service levels ofIncreased service levels of customerscustomers Removal of time constraintsRemoval of time constraints Removal of distance constraintsRemoval of distance constraints Ability to complete transactionsAbility to complete transactions electronicallyelectronically Access to full competitive arenaAccess to full competitive arena Opportunities for new revenuesOpportunities for new revenues Cost-effectivenessCost-effectiveness More effective/closerMore effective/closer relationships with businessrelationships with business partnerspartners Improved understanding ofImproved understanding of customer requirementscustomer requirements
- 52. Key performance and evaluation measures include:Key performance and evaluation measures include: Regular reviewRegular review a forum for problem review and solutiona forum for problem review and solution Monthly, quarterly and year sales data analysisMonthly, quarterly and year sales data analysis Average stock levelsAverage stock levels Lead and delivery timesLead and delivery times Zero defectsZero defects Customer service complaintsCustomer service complaints Marketing support – achieving marketing objectives, level ofMarketing support – achieving marketing objectives, level of marketing activity, sales promotions, distributor incentivesmarketing activity, sales promotions, distributor incentives Spot-check of distributions further down the supply chainSpot-check of distributions further down the supply chain Annual performance auditAnnual performance audit
- 53. # of leads# of leads Increased salesIncreased sales Customer retentionCustomer retention Increased market shareIncreased market share Brand enhancement and loyaltyBrand enhancement and loyalty Customer serviceCustomer service
- 54. Basic marketing channel functionsBasic marketing channel functions must bemust be performed around the world, butperformed around the world, but within thewithin the context ofcontext of the traditions, customs, geography,the traditions, customs, geography, and the economic history of the individualand the economic history of the individual countries and societies.countries and societies. Understanding the marketing channels inUnderstanding the marketing channels in global markets is often aglobal markets is often a prerequisite toprerequisite to successful marketingsuccessful marketing..
- 55. Thank you forThank you for attention.attention.