1. Place and the Development of Channel Systems1

2. Place
Place - making products available in the right quantities and locations -- when and where customers want them. 2

3. Place
Distribution requires channel specialists to provide target customers with time, place and possession utility.
Utility - the degree of usefulness a consumer gains from a product. 3

4. Distribution Channel Structure
Producer 1 Producer 2 Producer 3
Transport 1 Transport 2 Transport 3
Warehouse1 Warehouse2 Warehouse 3
Retail 1 Retail2 Retail 3
Customer

5. Place
Distribution requires channel specialists to provide target customers with time, place and possession utility.
Utility - the degree of usefulness a consumer gains from a product. 3

6. Place
Channel of Distribution - any series of firms or individuals who participate in the flow of goods and services from producer to final user
Channel decisions have long-run effects 4

7. Place
Channel decisions are more difficult to change than Product, Price or Promotion decisions.
Why? 5

8. Place Why? 1. Legal Contracts and other long-run obligations
2. It takes years to develop good channel contacts
3. Channel development requires significant financial investment.
6/7

9. Place
Channel specialists serve to improve time, place and possession utility.
Specifically, these specialists solve discrepancy problems.
e.g., 1. Discrepancies of quantity
2. Discrepancies of assortment 8

10. Place
Channel specialists adjust discrepancies with regrouping activities: 9

11. Place 1. Accumulating (e.g., warehousing, cold storage, silos, etc.)
2. Bulk-Breaking(e.g.wine barrels into casks and bottles)
3. Sorting (e.g. large apples from small and damaged apples)
4. Assorting (e.g., flowers into arrangements) 10

12. Place
Market research tells producers and channel members when regrouping activities need modified.
e.g., sociological move to small and single parent families.
How would this change force marketers to modify distribution? 11

13. Place Number of Channel levels
1. Zero-Level Channel - also called a direct marketing channel - consists of a manufacturer selling directly to consumers
Internet Marketing is really distribution.
The four major ways of direct selling are; door-to-door, mail order, telemarketing and manufacturer owned stores 12

14. Distribution Channel Structure
Save costs of
Distribution
Producer 1
Zero Level Channel
Transport 1
Warehouse1
Internet Marketing
Retail 1
Customer

15. Place Number of Channel levels
2.One level channel - contains one selling intermediary e.g. retailer or sales agent
3.Two level channel - contains two intermediaries e.g., wholesaler and retailer
4. Three level channel - contains three intermediaries e.g., a jobber may intervene between the wholesaler and retailer
13/14

16. Place
Channel Systems
1. Direct Channel Systems - some producers handle the whole distribution job themselves
The firm sells direct to final user
Ownership is maintained by producer thru the channels
This system has great advantages for the firm in terms of the marketing mix variables. 15

17. Direct Channel System Focus on one Target Market Producer 1
Transport 1
Mining
Industry
Warehouse1
Retail 1

18. Place Channel Systems 2. Indirect Channel Systems
the firm does not sell to final user
Product ownership changes from channel member to channel member.
In this traditional from of channel system various channel members make little effort to cooperate with one another
they simply buy and sell from one another. 16

19. Indirect Channel System
Producer 1
Firms Sell to one
Another. No organized
Linkage between firms.
Transport 1
Warehouse1
Retail 1

20. Place
Channel Systems
Vertical Marketing Systems - a channel system in which the whole channel focuses on the same target market 17

21. Place Channel Systems Vertical Marketing Systems
1. Corporate Channel System - corp. develops their own vertical system; channels are owned by corp. 18

22. Place Channel Systems Vertical Marketing Systems
Vertical Integration - acquiring firms at different levels of the channel
e.g., Firestone Tires owns rubber plantations in Liberia, wholesale outlets and retail stores. 19

23. Place --Channel Systems --Vertical Marketing Systems
--Vertical Integration
--Advantages:
1. Stability of Operations
2. Assurance of material and supplies
3. Better control of distribution
4. Better quality control
5. Greater buying power
20/21

24. Place Channel Systems 2. Administered and Contractual Systems
This system is based on channel members formally or informally cooperating with one another
Formal agreements are termed contractual systems 22

25. Place
Channel Systems
The Ideal channel system should achieve maximum market exposure i.e., the product should be widely available to satisfy target customers' needs 23

26. Place Channel Systems 24/25
Maximum or Ideal Exposure may be Intensive, Selective or Exclusive.
Intensive Exposure - selling a product through all responsible and suitable wholesalers or retailers.
e.g., convenience products and industrial supplies
24/25

27. Place
Channel Systems
Selective Exposure - selling through middlemen who will give the product special attention
e.g., Farm Tractors, Computers 26

28. Place
Channel Systems
Exclusive Exposure - selling through one middleman in a geographic area
e.g., Argyle Diamonds
Exclusive Exposure may be illegal depending on impact on competition. 27

29. Place
Channel Systems
Dual Distribution - producer uses several competing channels to reach the same target market
- Competitive distribution strategy
e.g., same producer using K-Mart and Target 29

30. Place Recruiting Middlemen – art and science
Pushing - a promotion effort to sell the marketing mix to all channel members
incentives developed within the channels 30

31. Push Channel Promotion
Producer
Sales Promotion;
Better Margin
Transport
Sales Promotion;
Better Margin
Warehouse
Sales Promotion;
Better Margin
Retail

32. Place
Pulling - promotion designed to get consumers to ask middlemen for the product 31

33. Pull Promotion in a Channel
Producer
Transport
Warehouse
Retail
Advertising,
Publicity
Customer

34. Push vs. Pull Strategic Implications
Pull would require more time so it would be more of a long run implication. So, pull would fit more with cost leadership, penetration pricing and a longer PLC curve.
Push would be more short run. Differentiation, skimming pricing and shorter PLC.