1. 12-1 Distribution Channels and Logistics Management

2. 12-2 Distribution Channels A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption. Channel decisions –affect other marketing decisions –involve long-term commitments

3. 12-3 Role of Intermediaries Greater efficiency in making goods available to target markets. Intermediaries provide –Contacts –Experience –Specialization –Scale of operation Match supply and demand.

4. 12-4 Channel Functions Information : Gathering & distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange Promotion: Developing and spreading persuasive communication about an offer Contact: Finding and communicating with prospective buyers Matching: Shaping & fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling & packaging

5. 12-5 Negotiation: Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred. Physical Distribution: Transporting and storing goods. Financing: Acquiring and using funds to cover the costs of the channel work. Risk taking: Assuming the risks of carrying out the channel work.

6. 12-6 Basic Channels of Distribution Manufacturers/products Agents/brokers Wholesalers/distributors Retailers Consumers and organizational end users

7. 12-7 Channel Levels Manufacturer Wholesaler Retailer Consumer

8. 12-8 Channel Behavior and Conflict The channel will be most effective when: –each member is assigned tasks it can do best. –all members cooperate to attain overall channel goals and satisfy the target market. Focus on individual goals leads to conflict –Horizontal Conflict –Horizontal Conflict occurs among firms at the same level of the channel. –Vertical Conflict –Vertical Conflict occurs between different levels of the same channel.

9. 12-9 Vertical Marketing Systems Corporate –common ownership at different channel levels Contractual –contractual agreement among channel members Administered –leadership assumed by dominant members

10. 12-10 Innovations in Marketing Systems Horizontal Marketing System System Hybrid Marketing System System Two or more companies at one channel level join together to increase coverage Example:Banks in Grocery Stores A single firm sets up two or more marketing channels to increase coverage Example:Retailers, Catalogs, and Sales Force

11. 12-11 Channel Design Decisions Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Exclusive Distribution Exclusive Distribution Selective Distribution Selective Distribution Intensive Distribution Intensive Distribution Identifying Major Alternatives Evaluating the Major Alternatives

12. 12-12 Distribution-Scope Strategies Exclusive Distribution –Limiting the distribution to only one intermediary in the territory Intensive distribution –Distribute from as many outlets as possible to provide location convenience Selective distribution –Appoint several but not all retailers

13. 12-13 Exclusive Distribution: Advantages Maximize control over service level/output Enhance product’s image & allow higher markups Promotes dealers loyalty, better forecasting, better inventory and merchandising control Restricts resellers from carrying competing brands Ex: luxury cars & watches

14. 12-14 Exclusive Distribution: Disadvantages Betting on one dealer in each marketBetting on one dealer in each market Only suitable for high price, high margin, and low volume productsOnly suitable for high price, high margin, and low volume products

15. 12-15 Intensive Distribution Advantages: Increased sales, wider customer recognition, and impulse buying Disadvantages: Characteristically low price and low- margin products that require a fast turnover Difficult to control large number of retailers E.g. Newspapers E.g. Newspapers Most fast moving consumer goods

16. 12-16 Selective Distribution –Better market coverage than exclusive distribution –More control and less cost than intensive distribution –Concentrate effort on few productive outlets –Selected firms capable of carrying full product line and provide the required service

17. 12-17 Selective Distribution (cont’d Disadvantages: May not cover the market adequately Difficult to select dealers (retailers) that can match your requirement and goals

18. 12-18 Channel Management Decisions Selecting Motivating Evaluating FEEDBACK

19. 12-19 Logistics Involves entire supply chain Increasing importance of logistics –effective logistics is becoming a key to winning and keeping customers. –logistics is a major cost element for most companies. –the explosion in product variety has created a need for improved logistics management. –information technology has created opportunities for major gains in distribution efficiency.

20. 12-20 Goals of Logistics system Provide a Targeted Level of Customer Service at the Least Cost. Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels

21. 12-21 Logistics Functions Order Processing Warehousing Inventory Management Transportation Design system to minimize costs of attaining objectives

22. 12-22 Transportation Modes Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value goods, slowest form Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items Air High cost, ideal when speed is needed or to ship high-value, low-bulk items

23. 12-23 Integrated Logistics Management Teamwork Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations. Cross-Functional Teamwork inside the Company Cross-Functional Teamwork inside the Company Building Channel Partnerships Third-Party Logistics