Distribution Concepts Chapter

Value Networks & Marketing Channels Value network: partnerships that a firm creates to source, augment and deliver its offerings. Marketing Channel: A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer. Functions of Channels: –Specialization of labor –Overcoming discrepancies & gaps –Providing contact efficiency

Channel Structure for Consumer Products Producer Consumers Retailers Wholesalers Agents or BrokersWholesalerChannelRetailerChannelDirectChannelAgent/BrokerChannel

Alternative Arrangements Multiple channels – two+ channels to distribute the same product Nontraditional channels – infomercials, mail order, internet etc. Strategic channel alliances – use another manufacturer’s already established channel

Factors that Affect Channel Choice Market factors –Customer profiles –Type of customer –Market size and geographic location Product factors –Product complexity –Price –PLC Producer factors –Resources –Desire for control

Levels of Distribution Intensity Intensity Level ObjectiveObjective Number of Intermediaries Intensive Selective Exclusive Achieve mass market selling. Convenience goods. Achieve mass market selling. Convenience goods. Work with selected intermediaries. Shopping and some specialty goods. Work with selected intermediaries. Shopping and some specialty goods. Work with single intermediary. Specialty goods and industrial equipment. Work with single intermediary. Specialty goods and industrial equipment. Many Several One

Managing Channel Relationships – Social Dimensions Channel power Channel control Channel conflict –Horizontal conflict –Vertical conflict Legal & ethical issues in channel relations

Classification Summary Type of Retailer Department Store Specialty Store Supermarket Convenience Store Drugstore Full-line Discounter Specialty Discounter Warehouse Clubs Off-price Retailer Restaurant ServiceLevelServiceLevel Mod Hi-High High Low Low-Mod Mod-Low Low Low-High Assort-mentAssort-mentPricePrice Gross Margin Broad Narrow Broad Med-Narrow Medium Med-Broad Broad Med-Narrow Mod-High Moderate Mod High Moderate Mod Low Mod Lo-low Low-lower Low Low-High Mod High High Low Mod High Low Mod Low Low Low-High

Nonstore Retailing Major Forms of Nonstore Retailing Major Forms of Nonstore Retailing Automatic Vending Direct Retailing Direct Marketing Electronic Retailing