Distribution Plan Week-8 Lecture Hour 10/6/2015Dr. Yuvaraj 1

Marketing Channels Defined A marketing channel is the structure linking a group of individuals or organisations through which a product or service is made available to the consumer or industrial user. 10/6/2015Dr. Yuvaraj 2

Types of Intermediary 10/6/2015Dr. Yuvaraj 3 Agents and brokers Wholesalers RetailersFranchisees Distributors and dealers

 Where could you go to buy the following:  Clothes  Chocolate bar (candy)  New car  Insurance  CDs  Avon cosmetics  Newsweek 10/6/2015Dr. Yuvaraj 4 Where Do You Buy From?

 Consumer:  Retailers / dealers  Catalogues / mail order companies  Vending machines  Direct marketing sources  eg telesales, direct mail, door to door  Internet  QVC / TV shopping channels  Industrial:  Own salesforce / agents  Industrial distributors  Growth in direct (Internet) for industrial supplies 10/6/2015Dr. Yuvaraj 5 Types of Channels

 Find and communicate with customers  Promote and sell the product to customers  Provide information on customer needs and competitors’ activities  Agree price and trading terms  Transport and store the product  Carry the cost of all the above  Assume the risks of all the above 10/6/2015Dr. Yuvaraj 6 What Channels Do?

 How wide the distribution (market coverage) should be:  How many channels  How many levels  Type of channel  Depends on:  Number and nature of market segments  Range and nature of tasks to move products to end customer  Effectiveness of channel alternatives 10/6/2015Dr. Yuvaraj 7 Key Channel Decisions

 Intensive  Mass distribution e.g. confectionery, soft drinks, batteries, camera film  Selective  e.g. electrical appliances (electrical retailers and department stores)  may also be specialist e.g. package holidays  Exclusive  Restricted or sole rights e.g. franchisees, designer items, luxury cars 10/6/2015Dr. Yuvaraj 8 Market Coverage

10/6/2015Dr. Yuvaraj 9 ConsumerProducerAgent Wholesaler Retailer Producer WholesalerRetailerConsumer RetailerConsumer eg Insurance eg A pint of beer (UK) eg Most supermarket goods eg Imported goods Consumer Channels

10/6/2015Dr. Yuvaraj 10 Producer Industrial customer eg High value, complex products Producer Industrial distributor eg Components via Radio Spares Industrial customer Producer Agent Industrial customer Producer Agent Industrial distributor Industrial customer Industrial Channels

How Many Levels?  Considerations:  How many customers & where they are  How fragile / bulky / valuable the goods  Whether offering is a tangible product or a service  How much control you want over the contact with the customer 10/6/2015Dr. Yuvaraj 11

 Supply chain management:  Production  How many items to produce, materials lead times  Transportation  Mode, e.g. road, rail, air etc.  Facility  Location of factory, warehouse etc.  Inventory  How much stock, materials, work-in-progress etc.  Communication  Systems for orders, billing, stock control, payment etc. 10/6/2015Dr. Yuvaraj 12 Tangible Products

Services Distribution  Services are consumed at point of production:  Both provider and consumer are present  People are part of the service  Consider:  How to make service easily available to target market  How to maintain service quality if intermediaries are used 10/6/2015Dr. Yuvaraj 13

Service Location  How to ensure service is available and accessible to target market  Are customers willing / able to travel for your service  Use of technology, e.g.  ATMs, telephone and Internet banking  Telephone / Internet travel booking 10/6/2015Dr. Yuvaraj 14

 Many organisations have multiple distribution systems  Often needed to address needs of different segments, e.g.  Customers can buy BT phones direct from BT via the Internet  BT also sells its phones  via third party high street retailers - Dixons, Argos etc.  Sales account managers (large industrial customers) 10/6/2015Dr. Yuvaraj 15 Managing Distribution

Selecting Channel Members  Own strengths & weaknesses  e.g. company size, brand strength  Channels used by competitors  Characteristics of the product / service  Range and nature of tasks needed to move product / service to end customer  Effectiveness of the channel alternatives 10/6/2015Dr. Yuvaraj 16

Selecting Channel Members  Effectiveness of the channel:  Sales and marketing  e.g. skills, image, coverage, quality of sales staff  Product and service  e.g. product knowledge, storage facilities, quality of service staff  Risk and uncertainty  e.g. their stability, track record 10/6/2015Dr. Yuvaraj 17

Reconfiguring the market  Substitute/configured products example /post.  Disintermediation- removing a part of the channel e-commerce.  Reintermediation- replacing an existing intermediary, EBay, reverse auctions.  Partial channel substitution- some functions of the intermediary lost, Car websites.  Media switching/addition- using the internet as the main means of communication, Dell. 10/6/2015Dr. Yuvaraj 18

Channel strategy  Single channel provider  Channel migrator- moving from one type to another  Online ticketing, ATM  Activity based strategy- Based upon customer life-cycle. Call centers to take insurance orders  Integrated multi-channel strategy- telephone and internet sales/banking.  Needs based-direct selling versus internet selling  Graduated customer value strategy- channel based upon customer financial value. 10/6/2015Dr. Yuvaraj 19

Differences between country markets  Stage of economic development  Market structure and competition  Rate of growth in similar markets  Diverse cultures and languages  Politics, regulations and associated risk  Legal and financial systems and bodies  Business rules and customs  Currency and exchange risks  Customer profiles  Data expensive and difficult to obtain  Control & coordination difficult 10/6/2015Dr. Yuvaraj 20

Planning Regulations, Tenders/Bribes Consideration to Environment, Compliance Issues/H&S Local Materials, Earthquakes Level of development Climate (Materials required) Level of technological advancement Family culture (size of house) Amount of available land Use of Sub Contractors Communication/Logistics, Availability and skill/knowledge of labour, Low cost supplier, Cultural differences, Low income, Poor infrastructure/distribution Different eating habits (ie more family meals, less packaged food), No fridges/freezers (or electricity) MR difficult Lesser developed Countries 10/6/2015Dr. Yuvaraj 21

Questions? 10/6/2015Dr. Yuvaraj 22