Transcript 7.01 Explain channels of distribution

Marketing 3.05
Acquire foundational knowledge
of channel management to
understand its role in marketing
Acquire foundational knowledge of channel management
to understand its role in marketing
What is channel management?
 Controlling the movement of the
product(s) through the system.
Logistics deals with the movement of
goods and timing of the deliveries
Distribution involves the movement,
storage and inventory control of the
product(s).
What is a channel?
The path (channel) a product travels
from the producer (manufacturer) to
the ultimate consumer
MARKETING MIX & FUNCTIONS
Remember the Marketing Mix?
Remember the 6 functions?
________ MGMT = _________
Channel management decisions
Select channel members
Manage and motivate channel members
Evaluate channel members
What is the best means to distribute the
product?
Who is an intermediary
(middleman)?
Channel members who assist the
producer in getting the goods and
services to the final user
ACTIVITY 1
Get with your 10 o’clock and get a Marketing
Essential book and got to pp 376-377
Various intermediaries include
 Wholesalers
 Retailers
 Agents
Define and give a
Complete example
What is a direct channel?
Distribution that occurs directly
from the producer to the consumer
For example: A consumer buys
apples from an apple farmer
Cuts out the middleman
What is an indirect channel?
Distribution that occurs through
one or more intermediaries before
reaching the final user
For example: The apple farmer sells
his apples to Harris Teeter and Harris
Teeter sells them to the consumer
Indirect channel is used….
When a producer doesn’t want responsibility
for the selling activities of a large retailer
Producer to agent to retailer to consumer
 Because wholesalers usually buy in large
quantities
Producer to wholesaler to retailer to consumer
Transportation is…
Physically moving from
Place A
Place B
Methods include:
Trucking or motor carriers
Railroads
Marine shipping
Pipelines
Air cargo services
Inventory is…..
Storing of merchandise before it is sold
Perpetual inventory control
Physical inventory control
Methods for checking inventory
Blind check method
Direct check method
Spot check method
Quality check method
ACTIVITY 2
Get with your 7 o’clock appointments
Complete “Channels of
Distribution Match Up”
You have 10 minutes
Purpose of channel members
 Channel members add value to a product by
performing certain channel activities expertly
Marketing
Packaging
Financing
Storage
Delivery
Merchandising
Personal selling
Distribution planning involves…
Decisions about a product’s physical
movement and transfer of ownership from
producer to consumer.
Some of the major considerations are:
Multiple channels
Control vs. costs
Intensity of distribution desired
Involvement in e-commerce
Multiple channels….
Some products meet the needs of both
industrial and consumer markets.
J & J Snack Foods sells its pretzels, drinks
and cookies using multiple channels to:
Supermarkets
Movie Theaters
Stadiums
Schools
Hospitals
Distribution Intensity
Distribution intensity is how widely a
product will be distributed; marketers want
to achieve the ideal market exposure
Exclusive distribution – protected territories
for distribution of a product in a given
geographic area; business maintains tight
control over a product
Ex. Franchisor legally requires a franchisee to
sell only the franchisor’s products
Integrated distribution is where the manufacturer acts
as wholesaler and retailer for its own products. Ex.
The Gap sells its clothing in company-owned retail
stores.
Distribution Intensity
Selective distribution – a limited number of
outlets in a given geographical area are used
to sell the product.
Very important to select channel members that
can maintain the image of the product and are
good credit risks, aggressive marketers and
good inventory planners.
Ex. Dana Buckman sells its clothing only through
top department stores that appeal to the affluent
customers who buy its merchandise. It does not
sell in a chain megastore or a variety store.
Distribution Intensity
Intensive distribution – the use of all
suitable outlets to sell a product.
The objective is complete market coverage and
the ultimate goal is to sell to as many customers
as possible, wherever they choose to shop.
Ex. Motor oil is sold in quick-lube shops, farm
stores, auto parts retailers, supermarkets,
drugstores, hardware stores, warehouse clubs,
and other mass merchandisers.
Dual distribution
A manufacturer may sell its products
through multiple outlets at the same time:
Toll-free phone system
Company website
Multiple retailers
Horizontal and Vertical Conflict
Horizontal Conflict: occurs between
channel members at the same level
Good, old-fashioned business competition
Ex: two retailers selling pet supplies compete to
sell to the same target market
Vertical Conflict: occurs between
channel members at different levels
within the same channel
Producers and wholesalers or producers and
retailers
Customer service and appropriate
channel management
Ensures timely delivery of products
Effective communication is important
Order processing
Correct shipping information
Correct products
Handling complaints
Reducing the probability of complaints
Nice and friendly people
Customer Service and Channel
Management
Grey-market strategy – selling product
in foreign countries for a lower price
than customers can get domestically
Full-line forcing - Producer or supplier
insistence that the dealer must carry the
full range of products in the line. This
policy may not be illegal if it can be
established that it serves a legitimate
business need.
Bad Customer service and
Channel Management
Vendor consistently has back orders
Product not available when ordered
 Coercion – large business threatening
to stop using a supplier unless given
major concessions
Tying agreement - Purchase agreement in
which the customer is forced to purchase a
slow-selling or unknown brand or product with a
fast-selling or well known one. Such coercion is
usually illegal.
Use of Technology in Distribution
Some businesses have the capacity to
distribute most or all of their products
through the internet
e-commerce: Products are sold to customers
and industrial buyers through the Internet.
e-marketplace
Satellite tracking = a dispatcher has
current knowledge of a delivery truck’s
location and destination
Use of Technology in Distribution
Tracking of package
Bar coding on package
Package scanned at transition points in
distribution chain
Customer uses internet to follow package along
distribution chain; e-mail may be used
Global distribution: in some countries the postal
service is not reliable; package tracking
facilitates global trade
Activity 3
Get with your 3 o’clock
Complete 3.05 Review
We will review 3.00
questions in 10 minutes!
C
1. Sales begin to level off on a 5 year old product
because customers are purchasing the
competitor's brand. What strategy would be
most appropriate to use in this situation?
A. Take the product off the market
B. Do nothing; fluctuations in sales are common
C. Modify the product to renew customer interest
D. Triple the advertising budget for the product
D
2. Which activity is addressed in the
product/service management function?
A.
B.
C.
D.
Setting discounts to clear products from inventory
Determining where products will be offered for sale
Focusing promotions on a new-product release
Eliminating products that are slow sellers
B
3. Which of the following is a way that a business
can extend the life cycle of an established product?
A.
By promoting the product to current users
B.
By finding new uses for the product
C.
By restricting distribution
D.
By attracting consumers who are innovators
D
4. Why does a company need to know what stage of
the product life cycle its products are in?
A.
To prevent imitators from entering the market
B.
To find new uses for the product
C.
To predict the length of the life cycle
D.
To adapt its marketing strategies
C
5. Why might profits sometimes decline for the
company that first introduced the product during the
growth stage of a product's life cycle?
A.
Because sales decline in the growth stage
B.
Because marketing strategies are adjusted
C.
Because competitors have entered the
market
D.
Because production is more efficient
D
6. What is a technologically advanced method that
allows businesses to produce products that are?
A.
Intermittent conversion
B.
Automatic production
C.
Computerized robotics
D.
Mass customization
B
7. What is one way businesses use computer
technology to obtain information to improve their
product/service mix?
A.
Mailing questionnaires to customers
B.
Tracking visitors to their web sites
C.
Compiling detailed databases
D.
Preparing interactive software programs
B
8. What is an example of an ethical issue that a
product/service manager might face?
A.
Use of color on the label
B.
Use of environmentally friendly packaging
C.
Use of packaging as a means of promotion
D.
Use of nutrition information on a food label
B
9. Why is the quality level of a product an important
product/service management decision?
A.
It identifies a product's brand.
B.
It reflects the image of the business.
C.
It protects the consumers.
D.
It refers to the way the product works.
B
10. A company advertises that its products
are durable lightweight, and come in a variety
of colors. What strategy is the company using
to position its product?
A. Price and quality
B. Features and benefits
C. Unique characteristics
D. Relationship to other products
D
11. "Great taste, great price" is what product
positioning strategy?
A. Relationship to other products
B. Features and benefits
C. Unique characteristics
D. Price and quality
A
12. In what stage of brand loyalty do people
become aware of the brand?
A. Recognition
B. Satisfaction
C. Insistence
D. Preference
C
13. What costs do businesses usually include
in the price of their products?
A. Regulations
B. Inflation
C. Transportation
D. Orientation
D
14. What would be the most appropriate
pricing strategy for a business in a small town
where unemployment has skyrocketed and
the economy is in a downturn?
A. Below-cost pricing
B. High-level pricing
C. Odd-cents pricing
D. Flexible pricing
C
15. What is the advantage to a business of
using bar-code pricing?
A. Easier for customers to read
B. Reduces required business security
C. Easier to change prices
A
16. A business charges a small company
a higher price for a product than it
charges a large company What does this
represent?
A. Price discrimination
B. Controlled pricing
C. Price competition
D. Regulated pricing
B
17. A group of companies recently
decided to sell their products for the
same price. In what unethical activity are
the businesses engaging?
A. Bait-and-switch
B. Price fixing
C. Loss-leader pricing
D. Gray markets
C
18. What is an external factor that affects
the price that a business charges for its
products?
A. Operating costs
B. Variable expenses
C. Economic conditions
D. Employee benefits
A
19. What do marketers want to achieve
by determining distribution intensity?
A. Ideal market exposure
B. Complete market coverage
C. Perfect market balance
D. Total market saturation
D
20. Which of the following is an aspect of
channel management that impacts
customer service?
A. Advertising
B. Taxes
C. Protectionism
D. Timeliness
C
21. What is one action that customer
service can take to facilitate order
processing?
A. Negotiate aggressively
B. Oversee assembly
C. Communicate effectively
D. Monitor inventory
B
22. What indirect channel of distribution is
used to reach large retailers when the
producer doesn’t want responsibility for the
selling activities?
A. Producer to wholesaler to retailer to consumer
B. Producer to agent to retailer to consumer
C. Producer to wholesaler to consumer
D. Producer to consumer
C
23. What factor could determine legal
ownership of goods in the distribution
process?
A. Country in which the product is
produced
B. Availability of the product
C. Involvement of agents
D. Physical characteristics of the product
D
24. What legal example is represented by
a manufacturer selling its products
through a toll-free phone system, a
company web site, and several retailers?
A. Restricted sales territories
B. Exclusive dealing
C. Tying agreements
D. Dual distribution
C
25. What is an example of a large business
using coercion in the distribution channel
A. Buying products from unauthorized intermediaries
B. Requiring a specific type of packaging material
C. Threatening to stop using a supplier unless given a major concession
D. Returning shipments w/o proper authorization