Principles of Marketing - Lecture No 14
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This document discusses distribution channels and logistics. It begins by defining distribution as getting products from production to consumers. There are several distribution channel options including direct selling, single intermediary channels, and two intermediary channels. The document also discusses distribution policies, types of marketing channels, the role of intermediaries, transportation modes, trends in distribution, and supply chain management. It provides examples and diagrams to illustrate key distribution concepts.
Principles of Marketing - Lecture No 14
- 1. The Channels of Distribution Course Facilitator: Khurshid Alam Swati University of Swat, Swat Email your query to: Khurshidalamswati@yahoo.com Lecture No: 14
- 2. What is distribution? • The process of getting products from production to the consumer • In marketing, distribution refers to the process of making a product or service available for use or consumption by a consumer or business user • It is one of the four elements of the marketing mix 2©Khurshid Alam Swati
- 3. Different options 3©Khurshid Alam Swati
- 4. Consumer and Business Marketing Channels 4©Khurshid Alam Swati
- 5. Direct Selling Manufacturer to Consumer Manufacturer Consumer Product/Service 5©Khurshid Alam Swati
- 6. Single-Intermediary Channel Manufacturer to a Retailer to a Customer Manufacturer Retailer Consumer 6©Khurshid Alam Swati
- 7. Two-Intermediary Channel Manufacturer to Wholesaler to Retailer to a Customer Manufacturer Warehouse Retailer Consumer 7©Khurshid Alam Swati
- 8. Distribution Policy - Policy regarding how a business wants its products distributed to consumers - There are four types 1. Intensive Distribution 2. Selective Distribution 3. Exclusive Distribution 4. Integrated Distribution 8©Khurshid Alam Swati
- 9. 1. Intensive Distribution - Try to get the product sold in as many different places as possible - Diverse and intensive - Advantages - Increase sales - Increase recognition - Disadvantages - Lack of control of retail locations - Intensive competition - Product examples: Chocolate, Soft drinks Gum etc 9©Khurshid Alam Swati
- 10. 2. Selective Distribution Try to control the distribution of product but not exclusively Concentrate on selected segments Advantages Some control over where product is sold Can still cover a large area Disadvantages Legal implications – purchase minimums Missing out on possible sales E.g. Fashion goods, 10©Khurshid Alam Swati
- 11. 3. Exclusive Distribution Exclusive distribution contracts with one or two businesses in a certain area Like niche marketing Advantages Control over image Favorable agreements Disadvantages Can severely limit sales Geographical problems E.g. Furniture, Jewelry, Cars 11©Khurshid Alam Swati
- 12. 4. Integrated Distribution When business owns both distribution and manufacturing Advantage Total control of product Keep sales revenue Disadvantage Handle all expenses Handle all difficulties 12©Khurshid Alam Swati
- 13. Marketing Channel A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and to move goods, from the point of production to the point of consumption Links producers to buyers. Performs sales, advertising and promotion. Influences the firm's pricing strategy. Affecting product strategy through branding, policies, willingness to stock 13©Khurshid Alam Swati
- 14. Types of Channels 1. Direct Channels Product goes directly from producer to the consumer Examples Trade Services “Lemonade stand” Marketing agents 14©Khurshid Alam Swati
- 15. 2. Indirect channel 2. Indirect Channels Use distribution intermediaries who make a profit off holding on to the product 15©Khurshid Alam Swati
- 16. 2. Indirect channel Examples Importers Foreign made product goes to exclusive importer who sells to retail outlets in a geographical area Wholesaler Buy products from domestic manufacturers and sell them to retail stores and other businesses Retailers Sell product to consumers 16©Khurshid Alam Swati
- 17. Advantages of the Wholesaler for the Retailer Buy in bulk – lower costs per unit Warehousing – hold on to greater amount of product in case needed Risk bearing – retailer has less risk for owning large quantity of a product with unknown or changing demand Financing – retailers don’t have to borrow money to pay for extra stock, they can use previous sales of smaller quantities to buy more Buying – saves the time and effort of finding multiple suppliers Transporting – Wholesalers usually deliver without charge (in the price of the product) Managing – Wholesalers will provide advice on inventory management and play a major role in controlling inventory levels for their customers Promoting – wholesalers pass on free promotional materials Providing market information – they know what's hot, what not and what is on the horizon 17©Khurshid Alam Swati
- 18. 3. Specialty Channels A media whose content is focused on a single genre, subject or targeted market at a specific demographic Any distribution that does involve a retail store 18©Khurshid Alam Swati
- 19. Intermediaries make distribution and selling processes more efficient Intermediaries offers supply chain partners more than they could achieve on their own Market Exposure Technical Knowledge/Information Sharing Operational Specialization Scale of operation The Importance of Marketing Channels 19©Khurshid Alam Swati
- 20. Channel Efficiency: How Intermediaries Reduce the Number of Channel Transactions 20©Khurshid Alam Swati
- 21. The physical flow of goods, services, and related information from points of origin to points of consumption. Includes Inbound distribution Outbound distribution Reverse distribution Marketing Logistics 21©Khurshid Alam Swati
- 22. Transportation Modes Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items 22©Khurshid Alam Swati
- 23. 23 1. Speed 2. Dependability 3. Availability 4. Costs 5. Others Checklist for Choosing Transportation Modes Choosing Transportation Modes ©Khurshid Alam Swati
- 24. Recent trends in distribution Increased internet and direct selling of goods and services Large supermarkets that act as wholesalers and retailers Complete packages are sold….air flights, rental cars, and hotel accommodations are packaged and distributed together. 24©Khurshid Alam Swati
- 25. Effective Use of Distribution Channels Feature Products or Services Benefits Drawbacks Direct Selling NO intermediaries Sometimes called “zero intermediary” channel • Mail order from manufacturer • Farmers markets • No intermediaries so no additional profit markup • Quicker than other channels • Producer has complete control • All storage and stock costs paid for by producer • No retail outlets • Can be expensive to deliver products to customer One-intermediary Usually used for consumer goods but can be used for B2B • Travel agents selling airline, hotel, rental car services • Large supermarkets that old their own stock rather than wholesalers • Retailer holds stock and pays for this cost • Retailer has product displays • Producers focus on production no selling • Intermediary takes a profit which makes product more expensive •Producers lose some control over marketing mix •Producer has delivery costs to retailer Two-intermediaries Wholesaler buys goods from producer and sells to retailer • In a large country with many retailers and great distances, many goods are distributed this way, e.g. beverages, books, clothing • Wholesaler holds goods and buys in bulk • Reduces stock holding costs for producer • Wholesaler breaks large stock quantities into smaller units to sell to retailer • Another intermediary takes a profit which increases the purchases price • Slows down the distribution chanel HL 25©Khurshid Alam Swati
- 26. What is an Agent? A business with the authority to act on behalf of another firm to market its products. Examples: Best Buy sells HP computers and is allowed to handle customer complaints, provide sales force to sell products, and creates sales displays. HL 26©Khurshid Alam Swati
- 27. Supply Chain Management (SCM) Managing the network of businesses that are involved in the provision of products to the final consumers HL 27©Khurshid Alam Swati