1. MKTG 370 PRICING/DISTRIBUTION Lars Perner, Instructor 1 DISTRIBUTION  Intermediaries--functions  Intermediaries--structures and their justifications  Channel power  Cross-national variations  Selectivity of distribution--do we want our product available at K- Mart?  Parallel Distribution Structures  Diversion

2. MKTG 370 PRICING/DISTRIBUTION Lars Perner, Instructor 2 Intermdiaries: Adding Value MANUF. 1 MANUF. 2 MANUF. 3 WHOLE- SALER (or agent) 1 WHOLE- SALER (or agent) 2 RETAILER PRODUCTS FROM OTHER MANUFS. Value added: breaking bulk consolidating supplies holding inventory

3. MKTG 370 PRICING/DISTRIBUTION Lars Perner, Instructor 3 Potential Channel Structures (U.S.) Agents/ Brokers Wholesalers Retailers Consumer Producer Wholesalers Retailers Consumer Producer Consumer Producer Retailers Consumer Producer

4. MKTG 370 PRICING/DISTRIBUTION Lars Perner, Instructor 4 Approaches to Distribution  These strategies require tradeoofs: –Wide--essential to low involvement goods –Selective--desire to maintain image –Exclusive--very high prestige needed or very high service requirements Admission By INVITATION ONLY

5. MKTG 370 PRICING/DISTRIBUTION Lars Perner, Instructor 5 Manufacturer and Retailer Distribution Interests  Full service retailers tend dislike intensive distribution  Low service channel members can “free ride” on full service sellers  Manufacturers may be tempted toward intensive distribution—appropriate only for some; may be profitable in the short run  Market balance suggests a need for diversity in product categories where intensive distribution is appropriate  Service requirements differ by product category

6. MKTG 370 PRICING/DISTRIBUTION Lars Perner, Instructor 6 Parallel Distribution Structures MANUFAC- TURER DISTRI- BUTOR RETAILER MAJOR CHAIN (e.g., Wal-Mart) FACTORY OUTLET DIRECT MARKETING

7. MKTG 370 PRICING/DISTRIBUTION Lars Perner, Instructor 7 Diversion  Products often end up where manufacturers did not intend them to go –Trade promotions in one region  Within countries  Between countries--different price sensitivities and structures may exist (e.g., pharmaceuticals, luxury autos –“Over-purchases” by large buyers to supply  Smaller buyers at lower prices  Unauthorized distributors (e.g., Levis’ for Price- Costco)