1. Distribution management (placement) and retailing
Chapter 9
Distribution management (placement) and retailing
Learning objectives:
Distinguish between the different types of channel participants
Discuss channel design
Identify and discuss various channel activities
Critically examine channel management
Appraise physical distribution
Evaluate customer service
Analyse supply chain and value chain
Investigate channels for services
Explain import/ export channels
Discuss franchising
Understand vertical distribution systems/ multi-level distribution
Fully discuss retailing

2. Distribution channel
A distribution channel is a series of firms or individuals who participate in the flow of goods and services from producer to final user or consumer.

3. Distribution channel participants
Channels for customers’ goods are:
Producer to consumer
Producer to retailer to consumer
Service producer to consumer
Service producer to agent to consumer
Producer to wholesaler to retailer to consumer
Producer to wholesaler-agent to wholesaler to retailer to consumer
Channels for organisational products
Producer to user
Producer to wholesaler to user
Producer to agent-wholesaler to user

4. Channel design Planning the channel of distribution
Two major decisions concerning the structure and number of intermediaries:
Determining the structure of the channel
The extent of distribution
Intensive distribution
Selective distribution
Exclusive distribution

5. Channel design contd. Distribution structure decisions
Ideal market exposure is when a product is available widely enough to satisfy target customer’s needs but not exceed them and include intensive, selective and exclusive distribution.
Intensive distribution
Cost-leadership strategy
Selective distribution
Differentiation strategy
Exclusive distribution
Focus strategy

6. Channel activities and functions
Functions and activities performed by intermediaries
Intermediaries close gaps and provide utility
Intermediaries resolve discrepancies
Intermediaries reduce transactions
Intermediaries synchronise needs, do bulk breaking and re-assort product offerings

7. Closing gaps and provide utility

8. Intermediaries resolve discrepancies

9. Intermediaries reduce t r a n s a c t i o n s
The theory of efficiency of exchange suggests that intermediaries prevail to make exchanges because it is more efficient to have intermediaries.

10. Channel activities and functions
Specialisation in the distribution channel
Reasons for specialisation
Economic justification
Risk involvement
Concentration and alliances
Service specialist leadership
Changing attitudes towards outsourcing
Availability of resources
Ability to exercise control

11. I n t e r m e d i a r i e s s y n c h r o n i s e n e e d s , d o b u l k b r e a k i n g a n d r e - a s s o r t p r o d u c t o f f e r i n g s

12. Channel management Cooperation and conflict Channel re-design
Channel cooperation occurs when members share harmonious marketing objectives and strategies.
Channel conflict occurs when members cannot agree and it must be managed.
Channel re-design
The three channel modifications available are associated with:
Product life cycle (PLC)
Customer-driven refinement
Need for multi-channel systems

13. Channel management contd.
Ethical and legal concerns
Reverse distribution
The impact of product life cycle on distribution
Introductory stage
Growth phase
Maturity stage
Decline stage
Manufacturer’s push and pull strategies
Push strategies stimulate demand
Pull strategies focuses on manufacturer’s promotional efforts

14. Physical distribution
Physical distribution describes the entire process of moving raw materials and component parts into the firm, moving in process inventories through the firm, and moving finished goods out of the firm.
Physical distribution consists of several activities:
Warehousing and storage
Order processing
Inventory control
Materials handling and materials management
Protective packaging and containerisation
Transportation

15. Physical distribution contd.
Performance dimensions to analyse customers’ desired service output levels
Lot size
Product availability
Waiting time
Capability
Spatial convenience
Information support
Product variety
Quality
Service backup
Delivery performance
Cost
Accuracy
After-sales support
Flexibility

16. Physical distribution contd.
The relationship between flexibility, inventories and customer satisfaction.

17. Supply chain management
Primary decisions made within the supply chain
Developing
Planning
Sourcing
Production
Inventory
Transportation logistics
Principles of supply chain management
Communication
Flexibility
Inventories
Customer service

18. Channel for services
There are four distinguishing characteristics of services that have important implications for distribution channels, namely intangibility, inseparability of production and consumption, perishability and heterogeneity.

19. Import and export channels
The international distribution channel

20. Franchising
Practice of using another firm’s successful business format and trademark
Covers a wide variety of products and services- extends international borders
Franchise agreements sets out how the market is to be served by the franchisee
Types of franchises- classified according to type of participants, type of business or nature and extent of services exchanged
Type of participants
-Between manufacturer and wholesaler e.g. Coca-Cola
-Between manufacturer and retailer e.g. Mazda dealership
-Between wholesaler and retailer e.g. Link pharmacies
-Between service provider and retailer e.g. KFC
Type of business
-Fast food
-Hospitality
Nature and extent of services exchanged
-Full-format
-Product or trade name

21. Franchising- advantages
Facilitates the flow of critical market information
Provides needed investment incentives
Opportunities to empower disadvantaged communities
Way to side-step state-controlled distribution systems

25. Vertical marketing system (VMS)
In a vertical marketing system (VMS), members are owned outright by the controlling organisation to ensure cooperation and to increase effectiveness.
Types of vertical marketing system
Corporate systems
Contractual systems
Wholesaler-sponsored voluntary chains
Retail cooperatives
Franchise organisations
Administrative strategic alliances

27. Retailing Different types of retailers
Classifying retailers by ownership (e.g. Leased department, chain stores, corporate chain, etc.)
Classifying retailers by prominent strategy
(e.g. Speciality stores, department stores, supermarkets, etc.)
Classifying retailers by type of shopping centre
(e.g. Convenience centre, power centre, theme centre, etc.)

28. Retailing contd. Services provided by retailers to the manufacturer:
Marketing communication
Information
Storage and display
Ownership
After sales services
Services provided by
retailers to customers:
Comfortable location
Variety
Re-assortment
Processing
Information
Ownership
After-sales service
Financing
Social interaction
Ordering

29. Retailing contd. The retail mix The seven Rs of retailing
The retail mix refers to the mix of products offered to the consumer by the retailer, also called the product assortment or merchandise mix.
The seven Rs of retailing
The right product
The right quantities
The right place
The right time
The right person
The right promotion
The right price

30. Retailing contd. Retail management strategies
Retailers have to pay attention to the following seven areas:
Merchandise assortment
Location
Atmospherics
Customer service
Store image
Database management
Internet strategies

31. Retailing contd. Marketing strategies used by retailers Target market
The marketing strategies used by retailers entail the following:
Target market
Selection of products
Level of service
Pricing
Channel of distribution
Marketing communications
Image and atmosphere
Direct marketing
Direct selling
Telemarketing

32. Questions
You are the marketing manager of Lexus automobiles in South Africa and have been asked to advise the management team during the next general meeting on the best distribution structure that will achieve the ideal market exposure for the Lexus LFA, Lexus’s first supercar.
(15)
You have been recently appointed as the assistant marketing manager of a newly opened Spar in Mamelodi. The marketing manager is getting together a new marketing strategy for the outlet and wants to know from you which aspects he should have a look at when formulating his marketing strategy. Briefly explain each of the aspects accompanied by a suggestion to the marketing manager on what he could do in each aspect.