The Nature of Distribution

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Presentation transcript:

The Nature of Distribution Chapter Twelve The Nature of Distribution 1

Objectives Explain general purpose of distribution Show distribution system’s contributions Understand pervasive nature of distribution Describe channel intermediary functions Identify different channel of distribution configurations Introduce vertical marketing systems Describe aspects of channel relations Explore legal and ethical aspects of distribution channels

Distribution’s Function The major purpose of marketing is to satisfy human needs by delivering products of various types to buyers when and where they want them and at a reasonable cost. The “when and where” is the function of Distribution 2

Distribution PRODUCER CONSUMER DISTRIBUTION 3

Channel of Distribution All intermediaries involved in the exchange process Excludes pre-manufacturing (raw materials or component parts) Facilitate movement of physical goods and title PRODUCER INTERMEDIARIES CONSUMER 4

Channel Functions Physical distribution Communication & transaction Facilitating 6

Physical Distribution Functions Accumulating bulk Creating assortments Breaking bulk Reducing transactions Transporting & storing 7

Communication & Transaction Functions Gather & Disseminate Information 1 9 24 37 2 3 57 Buying & Selling Personal Selling Advertising Sales Promotion Transfer of Ownership 12

Facilitating Functions Extra Services Credit Services Risk Taking 13

Typical Channels of Distribution ANUFACTURER ONSUMER GENT ETAILER HOLESALER 14

Business-to-Business Channels Direct Wholesaler Agent 21

Business-to-Business Channel Trends Disintermediation Infomediaries & Vertical Exchange 21

Vertical Marketing Systems Corporate systems - total ownership Contractual - legal relationships Administered - strong leadership 23

Planning the Channel of Distribution Determining the structure Marketing mix strategy Organizational resources External environmental factors Market characteristics Consumer preferences and behavior The nature and availability of Intermediaries Other environmental factors 26

Intensive Distribution Producer Retailer Seeks to obtain maximum product exposure at the retail level

Selective Distribution Product is sold in a limited number of outlets Producer Product is sold in a limited number of outlets Retailer

Exclusive Distribution Producer Product is sold in only one outlet in a given area Retailer

Channel Relationships Cooperation Conflict Power Coercive Expert Legitimate 28

Other Distribution Management Issues One Coca Cola Distributor One thousand retailers OK Reverse distribution Difficult Ethical, Political, & Legal 29

Review Explain general purpose of distribution Show distribution system’s contributions Understand pervasive nature of distribution Describe channel intermediary functions Identify different channel of distribution configurations Introduce vertical marketing systems Describe aspects of channel relations Explore legal and ethical aspects of distribution channels