Transcript Distribution

Distribution management
overview
Analysis Framework
Positioning
Competitor
Analysis
Segmentation
Company Analysis
Competitive Advantage
Consumer Orientation
Marketing Strategy
Customer
Analysis
Consumer Behavior)
Branding and Product Strategy
Product
Pricing Process
Pricing Strategies
Distribution
Price
Promotion
Promotional Mix
Place
Advertising
Market
Dell Computer
• Classic case in supply chain and
distribution management.
• Established in 1984, Dell experienced
supply problems in 1993 and thereupon
completely redesigned its chain process
along the lines of what its founder,
Michael Dell, called the “direct” model.
• Between 1993 and 1998, Dell's earnings
subsequently grew at 65 percent per year.
Dell Computer continued
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Dell's supply chain redesign was based on the following
elements.
First, Dell sells directly to customers, eliminating the
wholesaler and retailer.
Second, Dell also takes advantage of new information
technologies in their communications with suppliers who
can access Dell's component inventories, production
plans, and forecasts in real time and thus keep their
production precisely matched to Dell's needs.
Third, Dell deliberately maintains absolute minimum
inventory levels at every stage of production, averaging 4
days overall
The Concept of Flows in Distribution System Management
(…functions that move)
Physical Possession
Ownership
Promotion
Negotiation
Financing
Risk Taking
All but physical possession and ownership could be e-flows.
All flows can be shifted up or down the channel.
All are subject to economy of scale efficiencies.
All must be performed.
If one flow fails, the entire channel can fail.
Performance of flows determines compensation.
Ordering
Payment
Research
What is a Distribution Channel?
A set of interdependent organizations
(intermediaries) involved in the process of
making a product or service available for
use or consumption by the consumer or
business user.
A channel of distribution
comprises a set of
institutions which perform all
of the activities utilised to
move a product and its title
from production to
consumption
Today’s system of exchange
Promotion
Contact
Transporting and storing
Financing
Packaging
Money
Goods
Users
Producers
Negotiation
Why are Marketing
Intermediaries Used?
• The use of intermediaries results from their greater
efficiency in making goods available to target markets.
• Offer the firm more than it can achieve on it’s own through
the intermediaries:
– Contacts,
– Experience,
– Specialization,
– Scale of operation.
• Purpose: match supply from producers to demand from
consumers.
How Intermediaries Minimize
Transactions
IBM
Apple
Anil
Arun
IBM
Anil
Apple
Arun
Computer City
®
HP
Compaq
Nancy
Compaq
Nancy
HewlettPackard
joanna
HewlettPackard
Joanna
Contacts with no intermediaries
Contacts with one intermediaries
4 producer x 4 buyers=16 contacts
4 producer + 4 buyers=8 contacts
Marketing Channel Functions Performed
by Intermediaries
Transactional Function
-Buying. Purchasing products for resale or as an agent
for supply of a product
-Selling. Contracting potential customers, promoting
products, and soliciting orders
-Risk Taking. Assuming business risks in the ownership
of inventory that can become obsolete or deteriorate.
-Assorting. Creating product assortments from
Logistical Function
several sources to serve customers
-Storing. Assembling and protecting products at a
convenient location to offer better customer service.
-Sorting. Purchasing in large quantities and
breaking into smaller amounts desired by
customers.
-Transporting. Physically moving a product to
customers.
Marketing Channel Functions Performed
by Intermediaries
-Financing. Extending credit to customers
Facilitating Function
-Grading. Inspecting, testing, or judging products,
and assigning them quality grades
-Marketing information and research. Providing
information to customers and suppliers, including
competitive conditions and trends
Channel intermediaries Wholesalers
• Break down ‘bulk’
• buys from producers and sell small quantities to
retailers
• Provides storage facilities
• reduces contact cost between producer and
consumer
• Wholesaler takes some of the marketing
responsibility e.g sales force, promotions
Channel intermediaries - Agents
• Mainly used in international markets
• Commission agent - does not take title of
the goods. Secures orders.
• Stockist agent - hold ‘consignment’ stock
• Control is difficult due to cultural
differences
• Training, motivation, etc are expensive
Channel intermediaries Retailer
• Much stronger personal relationship with
the consumer
• Hold a variety of products
• Offer consumers credit
• Promote and merchandise products
• Price the final product
• Build retailer ‘brand’ in the high street
Channel intermediaries Internet
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Sell to a geographically disperse market
Able to target and focus on specific segments
Relatively low set-up costs
Use of e-commerce technology (for payment,
shopping software, etc)
• Paradigm shift in commerce and consumption
Five Marketing Functions in an Automobile Channel
Physical Function
Suppliers
Transporters
Warehouses
Manufacturer
Transporters
Warehouses
Dealers
Transporters
Customer
Title Function
Suppliers
Manufacturer
Dealers
Customer
Payment Function
Suppliers
Banks
Manufacturer
Banks
Dealers
Banks
Customer
Information Function
Suppliers
Transporters
Warehouses
Banks
Manufacturer
Transporters
Warehouses
Banks
Dealers
Transporters
Banks
Customer
Promotion Function
Suppliers
Advertising
Agency
Manufacturer
Advertising
Agency
Dealers
Customer
Marketing Intermediaries Travel industry
Travel Agents
Tour Wholesalers
Specialists:
Brokers & Junket Reps
Internet
Hotel Representatives
Global Distribution
Systems
National, State,
and Local Tour Agencies
Consortia & Reservations
Systems
Distribution Options
• Move customers to the service
- Auto check in, Auto payment
• Move service to delivery system to customers
– Catering cooked on location
• Deliver tangible element of service to customers
– Pizza delivery
• Pick-up things on which service is to be performed
– Valet service in hotels
• Operate at arm’s length
– mail, telephone, computer, often use multiple approaches
The Distribution Channel:
Consumer
Forward
Integration
Retailer
Vertical Integration
Wholesaler
Manufacturer
Backward
Integration
Number of Channel Levels
Channel Level - Each Layer of Marketing Intermediaries that Perform
Some Work in Bringing the Product and its Ownership Closer to the Final
Buyer.
0-level channel – Direct
Producer
Consumer
1-level channel
Producer
Retailer

Consumer
Retailer

Consumer
Retailer

Consumer
2-level channel
Producer
 Wholesaler
3-level channel
Producer
 Wholesaler
Jobber

The Distribution Function
• distribution is about getting the product or service to the
customer as conveniently as possible; it deals with
access and availability
• intermediaries perform many of the distribution functions
on behalf of suppliers
• merchant intermediaries actually take title to physical
products that they distribute
• agents do not ever own the products, but they arrange
the transfer of title
Distribution Channels
• The role of distribution entails:
– Arranging for its sale and transfer of
title
– Promoting the product
– Storing the product
– Assuming some risk during
distribution.
• Intermediaries often perform these activities
for producer or consumer.
The Distribution Functions
SALES SPECIALIST
FOR PRODUCERS
• Provides market
information
• Interprets consumers’
wants
• Promotes producers’
products
• Creates assortments
• Stores products
• Negotiates with
customers
• Provides financing
• Owns products
• Shares risks
I
N
T
E
R
M
E
D
I
A
R
Y
PURCHASING AGENT
FOR BUYERS
• Anticipates wants
• Subdivides large
quantities of a product
• Stores products
• Transports products
• Creates assortments
• Provides financing
• Makes products
readily available
• Guarantees products
• Shares risks
Designing the Channel
Channel design is a strategic marketing tool. Four
decisions can be help a firm design a
distribution channel:
• what role distribution is to play in achieving
objectives
• what type of channel is needed? with or without
intermediaries?
• what level of intensity of distribution?
• which specific intermediaries to use? which will be
best suited to achieve objectives?
The Well-Designed
Distribution Strategy
Specify
the role of
distribution
within the
marketing
mix
Select
type of
distribution
channel
Determine
appropriate
intensity
of distribution
Choose
specific
channel
members
Major Distribution
Channels
• For distribution of consumer goods, five different
types of channels are widely used.
• Business goods are normally distributed through
four major types of channels.
• There are only two common channels of distribution
for services.
• Some producers are not content to use only a
single distribution channel and use multiple
channels
• Multiple channels can aggravate middlemen and
cause conflicts in the channels.
Consumer Channels
PRODUCERS OF CONSUMER GOODS
Agents
Merchant
wholesalers
Retailers
Retailers
Agents
Merchant
wholesalers
Retailers
ULTIMATE CONSUMERS
Retailers
Business Channels
PRODUCERS OF BUSINESS GOODS
Agents
Merchant wholesalers
(industrial distributors)
Agents
Merchant wholesalers
(industrial distributors)
BUSINESS USERS
Service Channels
PRODUCERS OF SERVICES
Agents
ULTIMATE CONSUMERS OR BUSINESS USERS
Marketing Channels:
• What is channel design?
Decisions associated with forming new or altering
existing channels.
• Why are design decisions critical?
•They directly influence all other marketing decisions.
•Key external resource for many manufacturers.
• How do marketing functions factor into design
decisions?
Who performs what channel function more efficiently
and effectively.
• When is it time for channel redesign?
When a new firm is established, new product
introduced, new market targeted, external
environment change, or when there is a change or
performance failure of channel members.
Internet
• The Internet is quickly becoming an
effective distribution channel.
– It never closes.
– It allows companies to tangibilize their
products and services.
– It reaches a broad geographic areas.
– It allows interaction with the guests.
– It saves labor.
The Changing Face
of Distribution
• Internet (“click and mortar” vs. “brick and
mortar”) a major factor-- where is it
heading?
• Direct Response TV sales are growing in
popularity, especially for time-starved
shoppers
• “The world’s largest bookstore” is on the
Internet! (Amazon.com)