Chapter 8 Distribution channels and logistics management

The learning objectives The nature of distribution channels Channel behavior and organization Channel design decisions Channel management decision Physical distribution and logistics management

1.The nature of distribution channels What is distribution? Why are marketing intermediaries used? The function of distribution channel Channel level

What is distribution channel? A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

How a Distributor Reduces the Number of Channel Transactions A. Number of contacts without a distributor M x C = 3 X 3 = 9 1 3 2 4 5 6 7 8 9 = Manufacturer = Customer

How a Distributor Reduces the Number of Channel Transactions B. Number of contacts with a distributor M x C = 3 + 3 = 6 Store 1 2 3 4 5 6 = Manufacturer = Distributor = Customer

Distribution Channel Functions Information Transfer Communication Payments Negotiation Physical Distribution Ordering Risk Taking Financing

Consumer Marketing Channels Manufacturer 0-level channel Consumer 1-level channel Manufacturer Retailer Consumer  Mfg 2-level channel Wholesaler Retailer Consumer  Mfg 3-level channel Wholesaler Jobber Retailer Consumer 

Industrial Marketing Channels Manufacturer Consumer Industrial distributors Manufacturer’s representative Manufacturer’s sales branch

Customers’ Desired Service Levels Lot size Waiting time Spatial convenience Product variety Service backup

Why are marketing intermediaries used?

Distribution channel function Information Promotion Contact Matching negotiation

Channel level

Channel behavior and organization Channel conflict Vertical marketing system Horizontal marketing system Hybrid marketing systems

Common Ownership at Different Corporate Common Ownership at Different Levels of the Channel Types of Vertical Marketing Systems Administered Leadership is Assumed by One or a Few Dominant Members Contractual Contractual Agreement Among Channel Members

Conventional Distribution Channel vs. Vertical Marketing Systems Manufacturer Manufacturer Wholesaler Wholesaler Retailer Retailer Consumer Consumer

Channel conflict Horizontal conflict Vertical conflict

Vertical marketing systems Conventional distribution VMS Corporate VMS Contractual VMS Administered VMS Franchise organization

Horizontal marketing system

Hybrid marketing channel

2.channel design decision Analyzing consumer service needs Setting channel objectives and constraints Identifying major alternatives Evaluating the major alternatives

Identifying major alternative Types of intermediaries Number of marketing intermediaries Responsibilities of channel members

Level of sales (dollars) Break-Even Cost Chart Selling costs (dollars) Level of sales (dollars) Manufacturer’s sales agency Company sales force SB

Number of marketing intermediaries Intensive distribution Exclusive distribution Selective distribution

3.Channel management Decision Selecting channel members Motivating channel members Evaluating channel members

Selecting Training Motivating Evaluating Channel Management Decisions FEEDBACK Training Motivating Evaluating

4.physical distribution and logistics management Physical distribution(marketing logistics) major logistics function Integrated logistics management Third-party logistics

Major logistics function Order processing Warehousing Inventory transportation

Integrated logistics management Cross-functional teamwork inside the company Building channel partnerships

Third-party logistics An independent logistics provider that performs any or all of the functions required to get their clients’ product to market.