1. Marketing Management Dawn Iacobucci
© 2010 South-Western, a part of Cengage Learning

2. Channels of Distribution & Business Marketing Networks & Logistics
Chapter 9

3. Distribution
Sellers--produce large quantities of limited number of goods
Buyers—want smaller quantities of wider variety of goods
Distribution--realigns discrepancies between quantities and selections
Breaking bulk: making goods available in smaller batches

4. What are Distribution Channels?
A network of inter-connected firms that provide a way for sellers to get goods to the marketplace, and buyers a way of purchasing those goods, as efficiently and profitably as possible

5. Actors in Distribution Channels
Manufacturing firms
Distributors or wholesalers
Retailers
Consumers

6. What a Distributor/Wholesaler Might Do for Customers
Regroup products—provide quantity and assortment customers need
Anticipate customers' needs—and buy accordingly
Carry products in inventory—which helps reduce customers' inventory costs
Deliver products promptly and economically
Grant credit
Provide information and advice
Provide part of the buying function—make it easy for customers to buy what they want

7. What a Distributor/Wholesaler Might Do for Manufacturer/Producer-Suppliers
Provide part of the selling function
Store inventory (cut producer's warehousing costs)
Supply capital (by purchasing producer's output before it is sold to final customers)
Reduce credit risks
Provide marketing information

8. Tension in Distribution Channels
Tension in channels created by contribution of each channel member
Do they provide more benefit than they cost?
Should we do this activity ourselves or have a channel member do it for us?

9. Discussion Question
View the next two slides. Assuming all else is equal, which is the most efficient channel? Why?

10. Manufacturer to Consumer

11. Manufacturer through Channel

12. Forms of Distribution Channels

13. Designing Distribution Channels
Determine distribution intensity
How many intermediaries will be used?
Determine push or pull strategy
Determine how to deal with conflict

14. Push and Pull – Demand Pulls the Product through the Channel
This slide refers to material on pp 22

15. Intensive Distribution
Intensive: widely distribute offerings to all appropriate locations
Drugstores, supermarkets, discount stores, convenience stores, etc.
Usually for simple, inexpensive, easily transported products
Snack food, shampoo, newspapers, etc.
Pull strategy: promote directly to end consumers to pull through channel
Intensive

16. Pull Strategy
Incentives offered to consumers to pull products through the channel
Advertise to consumers
Distribute widely
Offer price and/or quantity discounts
Offer inexpensive trials or free samples
Offer coupons and/or rebates
Offer financing
Offer loyalty programs/points

17. Selective Distribution
Selective: less widely distributed offerings
Usually for complex and/or expensive products that require assistance
Cars, computers, appliances, etc.
Push strategy: promote to distribution partners to push goods to consumer
Manufacturer has more control due to fewer relationships to manage
Selective

18. Push Strategy
Incentives offered to distribution partners to push products through the channel
Advertise to partners
Distribute more selectively
Employ a sales force
Offer incentives to sales force
Offer price and/or quantity discounts
Offer financing
Offer allowances for marketing activities

19. Exclusive Distribution
Exclusive: extreme case of selectivity
Manufacturers have the most control
May become monopolistic
Exclusive

20. Intensity Strategies
Intensive
Intensive distribution usually goes with heavy promotion, lower prices and average or lower quality products
Exclusive distribution usually goes with exclusive promotional efforts, higher prices and higher quality products
Exclusive

21. Channel Conflict
Conflict can arise when channel partners differ in their opinions on how to please customers and maximize profit
Conflict may motivate parties to find alternative solutions

22. Types of Power
Coercive power: Ability to take away benefits or inflict punishment on other party
Information power: Having information other party seeks
Legitimate power: Using size or expertise to encourage other party
Referent power: One party seeks an affiliation with other
Reward power: Ability to provide good outcomes for other party

23. Channel Power and Conflict
Power is usually defined by size and effectiveness
In the long term, power isn’t a great way to resolve conflict because the less powerful player may feel resentful and act accordingly

24. Dealing with Conflict
Try to develop effective communication to enhance trust and satisfaction
Make sure that parties feel that they’re being heard and their needs are understood and being met
Remind channel members of mutual goal of customer satisfaction

25. Building Channel Relationships
If conflict cannot be resolved, two other options:
Mediation
Negotiate through a third party that determines the two parties’ utility functions
Arbitration
The third party makes a binding decision for the two

26. Channel Integration
If a company is currently using a partner to do something, it might wish to bring that function back in-house
Forward Integration
e.g., manufacturer controls its retail stores
Backward integration
e.g., manufacturer controls raw material

27. Private Labels
Many retailers are integrating backward into private label products
Advantages
May give retailers negotiating power with the manufacturer
May offer significant margin opportunities
May allow retailer to distinguish itself as the only place that offers that brand

28. Retailing
Retailers have been gaining power and momentum over the past years
Powerful retailers can make or break a new product

29. Importance of Retail Employees
If retailers are not selective in hiring and if employees are not trained or paid well, service will be suboptimal and lead to customer dissatisfaction
Retailers benefit from selecting good people, training them, paying them, rewarding them well, and empowering them

30. Importance of Location
Consider factors needed to be successful
Environmental data
population densities
income and social class distributions
median ages
household composition, etc.

31. Retailer Growth Strategies
Provide additional services (product development)
Reach out to attract additional segments (market development)
Open additional stores
Expand internationally
Exporting, joint ventures, direct foreign investment, license agreements, etc.
Depends upon: talent, costs, labor pool, infrastructure, government’s stance on foreign investment, real estate costs, travel costs, local ethics, etc.

32. Franchising
Company can retain some control without complete ownership or capital expenditure
Franchisor: the company
Franchisee: local owner
Pays fee and royalties
Product franchising
Ford dealer, Coca-Cola bottlers
Business format franchising
McDonalds, Holiday Inn

33. E-commerce Retail sales online are about $30 billion
Only about 3% of total retail sales
Much potential for growth
What sells well
Computer hardware, software, books, music, DVDs, and travel arrangements
Many business drive their customers online to reduce labor costs
e.g., Retail banks raise fees to those who want to interact with a teller

34. Catalog Sales E-commerce and catalogs are complementary
Many companies use both successfully
83 of the top 100 catalogers saw growth
Catalogs are preferred for browsing
Catalogs trigger web visits
Customer databases are utilized for customized catalogs, promotions, etc.

35. Top Catalogers

36. Sales Force
Utilized extensively by companies utilizing a push strategy
For more undifferentiated products, a company’s sales force is its most important driver of its performance

37. What Kinds of Personal Selling Are Needed?
This slide refers to material on pp. 389.
 Indicates place where slide “builds” to include the corresponding point (upon mouse click).
Order-Getting
Order-Taking
Basic
Sales Tasks
Supporting 7

38. Training to Meet a Job Description
This slide refers to material on pp. 402.
 Indicates place where slide “builds” to include the corresponding point (upon mouse click).
Specific, Written Job Description (what a salesperson is expected to do)
Trained, Not Born (learn selling methods, customer needs, organization skills, etc.)
All Salespeople Need Training 20

39. Compensating and Motivating Salespeople
This slide refers to material on pp. 403.
 Indicates place where slide “builds” to include the corresponding point (upon mouse click).
Level of Compensation (i.e., amount of money)
Method of Payment
Straight Salary
Straight Commission
Combination Plan 22

40. Key Steps in the Personal Selling Process
This slide refers to material on pp
 Indicates place where slide “builds” to include the corresponding point (upon mouse click).
Prospect for new customers
Evaluate needs of established customers and business opportunity
Set effort priorities
Select target customer
Identify who influences purchase decision and/or who is involved in buyer-seller relationship
Preplan sales call and presentation(s)
Prepared presentation
Consultative selling approach
Selling formula approach 27

41. Key Steps in the Personal Selling Process
This slide refers to material on pp. 405,
 Indicates place where slide “builds” to include the corresponding point (upon mouse click).
Prospect
Set effort priorities
Evaluate needs
Select target customer
Preplan sales call and presentation(s)
Feedback
Make sales presentation
Close the sale (get action)
Follow up after sales call to establish relationship
Follow-up after the purchase to maintain and enhance relationship 32

42. Study Question 1
Selling Company produces its product in batches of 100, yet its average customer only purchases ten at a time. In order to encourage sales, Selling Company must make their product available to be sold in smaller batches. This process is known as
a. quantities.
b. limited goods.
c. breaking bulk.
d. none of these. C

43. The extreme case of selectivity is the a. distribution channel.
Study Question 2
The extreme case of selectivity is the
a. distribution channel.
b. monopolistic channel.
c. exclusive channel.
d. intensively channel. C

44. Study Question 3
Giant Grocery Retailer tells Small Cereal Manufacturer that it will not stock or sell Small Cereal Manufacturer’s product line until and unless a better trade margin is provided. What type of power is Giant Grocery Retailer exhibiting?
a. purchasing power
b. coercive power
c. information power
d. distribution power B

45. Study Question 4
Tech Gadgets Co. is revamping its distribution strategy. If the goods manufactured by Tech Gadgets Co. are simple, inexpensive, easily transported, it is typical that they would be distributed widely, or
a. selectively.
b. intensively.
c. comparatively.
d. pushed. B

46. Study Question 5
Consumers are said to pull goods through the channel, whereas trading partners _____ the goods from the manufacturer on down the food chain.
a. hold
b. push
c. throw
d. select B

47. Video B