1. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1

2. Channels of Distribution and Logistics © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10 10. 2

3. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Marketing Framework 3

4. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Place The market realigns discrepancies between buyers and sellers Sellers have large quantities Buyers want only a few Breaking bulk 4

5. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Distribution Channels Distribution channel A network of firms which provides sellers a means of infusing the marketplace with their goods, and buyers a means of purchasing those goods Channel members include Manufacturers, wholesalers, retailers, consumers, etc. 5

6. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Functions of a Channel Customer-oriented Product-oriented Marketing-centric Logistics 6

7. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Channel Tension All channel functions must be done by someone, the question is… What is the most effective and efficient way to distribute the product? Tension in channels can be created by each channel member 7

8. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Channels and Supply Chains Supply chain Upstream partners Channel members Downstream partners 8

9. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. How to Design Channels Intensive distribution Selective distribution Exclusive distribution 9

10. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. How to Design Channels Pull strategy Incentives are offered to consumers to pull products through the channel Push strategy Incentives are offered to distribution partners to push products through the channel 10

11. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Power and Conflict in Channels Conflict arises in distribution channels Power is usually defined by size Having power can be effective However, exerting power over distribution partners can lead to resentment and further lack of cooperation 11

12. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Power and Conflict in Channels Transaction cost analysis (TCA) Model that considers channel members’ production and governance costs Production and governance costs Transaction value analysis A perspective that emphasizes the benefits a company brings to its partners 12

13. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Power and Conflict in Channels Ways to resolve conflict Enhance communication to build trust Exchange personnel to better understand members’ perspectives Mediation Arbitration 13

14. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Revenue Sharing Double Marginalization The manufacturer wants a markup The retailer wants a second markup 14

15. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Revenue Sharing Double Marginalization Solution 15

16. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Integration Remember…all of the functions within a channel need to be completed The question is, “Who should complete them?” Make decision –Complete functions yourself Buy decision –Outsource functions 16

17. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Integration Vertical integration Forward integration Backward integration Private labels give retailers benefits 17

18. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Retailing Classifications Management’s level of ownership Independent retailers Branded store chains Franchises Level of service provided Full or limited service Product assortment carried Specialty or general merchandise 18

19. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Retailing Employees/Operations Retail employees are important Retailers should hire selectively, train well and pair fairly Retailers should flowchart operations Front-stage Back-stage 19

20. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Retailing Location Location is important Determine appropriate success factors for your specific business; analyze locations to pick ideal sites 20

21. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Retailing Growth Strategies Provide additional services Target additional segments Open multiple stores Expand internationally 21

22. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Franchising Company can retain some control without complete ownership or capital expenditure Types of franchising Product franchising Business format franchising 22

23. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. E-Commerce and Catalog Sales The Internet is an important channel Online retail sales are about $175 billion, growing about 10% a year Internet is well-suited for a search while catalogs still dominate browsing 23

24. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Sales Force Utilized extensively with a push strategy Important with undifferentiated products Sales force compensation Sales force evaluation factors Sales force size 24

25. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Integrated Marketing Channels As the number of channels proliferates, increasing care must be taken to coordinate and integrate across them Know your customer! 25

26. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Managerial Recap Distribution channels are the link from the manufacturer to the customer Numerous thoughtful decisions must be made in designing channels 26

27. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10. Managerial Recap Channel entities are independent yet interdependent organizations; thus, conflicts may arise Conflicts are best addressed by employing good communication and trust, revenue sharing, or greater vertical integration 27