Transcript Marketing Management

Chapter 9
Distribution management (placement) and retailing
Learning objectives:
• Distinguish between the different types of channel participants
• Discuss channel design
• Identify and discuss various channel activities
• Critically examine channel management
• Appraise physical distribution
• Evaluate customer service
• Analyse supply chain and value chain
• Investigate channels for services
• Explain import/ export channels
• Discuss franchising
• Understand vertical distribution systems/ multi-level distribution
• Fully discuss retailing
Distribution channel
A distribution channel is a series of firms or
individuals who participate in the flow of goods
and services from producer to final user or
consumer.
Distribution channel participants
• Channels for customers’ goods are:
•
•
•
•
•
•
Producer to consumer
Producer to retailer to consumer
Service producer to consumer
Service producer to agent to consumer
Producer to wholesaler to retailer to consumer
Producer to wholesaler-agent to wholesaler to retailer to
consumer
• Channels for organisational products
• Producer to user
• Producer to wholesaler to user
• Producer to agent-wholesaler to user
Channel design
• Planning the channel of distribution
Two major decisions concerning the structure
and number of intermediaries:
• Determining the structure of the channel
• The extent of distribution
• Intensive distribution
• Selective distribution
• Exclusive distribution
Channel design contd.
• Distribution structure decisions
Ideal market exposure is when a product is available widely enough to
satisfy target customer’s needs but not exceed them and include
intensive, selective and exclusive distribution.
• Intensive distribution
Cost-leadership strategy
• Selective distribution
Differentiation strategy
• Exclusive distribution
Focus strategy
Channel activities and functions
• Functions and activities performed by
intermediaries
• Intermediaries close gaps and provide utility
• Intermediaries resolve discrepancies
• Intermediaries reduce transactions
• Intermediaries synchronise needs, do bulk breaking
and re-assort product offerings
Closing gaps and provide utility
• The theory of efficiency of exchange suggests that
intermediaries prevail to make exchanges because it is more
efficient to have intermediaries.
Channel activities and functions
• Specialisation in the distribution channel
• Reasons for specialisation
•
•
•
•
•
•
•
Economic justification
Risk involvement
Concentration and alliances
Service specialist leadership
Changing attitudes towards outsourcing
Availability of resources
Ability to exercise control
Channel management
• Cooperation and conflict
Channel cooperation occurs when members share harmonious marketing
objectives and strategies.
Channel conflict occurs when members cannot agree and it must be managed.
• Channel re-design
The three channel modifications available are associated with:
•
•
•
Product life cycle (PLC)
Customer-driven refinement
Need for multi-channel systems
Channel management contd.
• Ethical and legal concerns
• Reverse distribution
• The impact of product life cycle on distribution
•
•
•
•
Introductory stage
Growth phase
Maturity stage
Decline stage
• Manufacturer’s push and pull strategies
• Push strategies stimulate demand
• Pull strategies focuses on manufacturer’s promotional efforts
Physical distribution
Physical distribution describes the entire process of moving raw
materials and component parts into the firm, moving in process
inventories through the firm, and moving finished goods out of the
firm.
• Physical distribution consists of several activities:
•
•
•
•
•
•
Warehousing and storage
Order processing
Inventory control
Materials handling and materials management
Protective packaging and containerisation
Transportation
Physical distribution contd.
• Performance dimensions to analyse customers’
desired service output levels
•
•
•
•
•
•
•
Lot size
Waiting time
Spatial convenience
Product variety
Service backup
Cost
After-sales support
•
•
•
•
•
•
•
Product availability
Capability
Information support
Quality
Delivery performance
Accuracy
Flexibility
Physical distribution contd.
• The relationship between flexibility,
inventories and customer satisfaction.
Supply chain management
• Primary decisions made within the supply chain
•
•
•
•
•
•
Developing
Planning
Sourcing
Production
Inventory
Transportation logistics
• Principles of supply chain management
•
•
•
•
Communication
Flexibility
Inventories
Customer service
Channel for services
There are four distinguishing characteristics of
services that have important implications for
distribution channels, namely intangibility,
inseparability of production and consumption,
perishability and heterogeneity.
Import and export channels
• The international distribution channel
Franchising
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Practice of using another firm’s successful business format and trademark
Covers a wide variety of products and services- extends international borders
Franchise agreements sets out how the market is to be served by the franchisee
Types of franchises- classified according to type of participants, type of business or nature and
extent of services exchanged
Type of participants
-Between manufacturer and wholesaler e.g. Coca-Cola
-Between manufacturer and retailer e.g. Mazda dealership
-Between wholesaler and retailer e.g. Link pharmacies
-Between service provider and retailer e.g. KFC
Type of business
-Fast food
-Hospitality
Nature and extent of services exchanged
-Full-format
-Product or trade name
Franchising- advantages
• Facilitates the flow of critical market
information
• Provides needed investment incentives
• Opportunities to empower disadvantaged
communities
• Way to side-step state-controlled distribution
systems
Vertical marketing system (VMS)
In a vertical marketing system (VMS), members are
owned outright by the controlling organisation to ensure
cooperation and to increase effectiveness.
• Types of vertical marketing system
• Corporate systems
• Contractual systems
• Wholesaler-sponsored voluntary chains
• Retail cooperatives
• Franchise organisations
• Administrative strategic alliances
Retailing
• Different types of retailers
• Classifying retailers by ownership
(e.g. Leased department, chain stores, corporate chain, etc.)
• Classifying retailers by prominent strategy
(e.g. Speciality stores, department stores, supermarkets, etc.)
• Classifying retailers by type of shopping centre
(e.g. Convenience centre, power centre, theme centre, etc.)
Retailing contd.
• Services provided by
retailers to customers:
•
•
•
•
•
•
•
•
•
•
Comfortable location
Variety
Re-assortment
Processing
Information
Ownership
After-sales service
Financing
Social interaction
Ordering
Services provided by retailers to
the manufacturer:
•
•
•
•
•
Marketing communication
Information
Storage and display
Ownership
After sales services
Retailing contd.
• The retail mix
The retail mix refers to the mix of products offered to the consumer
by the retailer, also called the product assortment or merchandise
mix.
• The seven Rs of retailing
1.
2.
3.
4.
5.
6.
7.
The right product
The right quantities
The right place
The right time
The right person
The right promotion
The right price
Retailing contd.
• Retail management strategies
Retailers have to pay attention to the following seven
areas:
•Merchandise assortment
•Location
•Atmospherics
•Customer service
•Store image
•Database management
•Internet strategies
Retailing contd.
• Marketing strategies used by retailers
The marketing strategies used by retailers entail the following:
•Target market
•Selection of products
•Level of service
•Pricing
•Channel of distribution
•Marketing communications
•Image and atmosphere
•Direct marketing
•Direct selling
•Telemarketing
Questions
•
You are the marketing manager of Lexus automobiles in South Africa and have
been asked to advise the management team during the next general meeting
on the best distribution structure that will achieve the ideal market exposure
for the Lexus LFA, Lexus’s first supercar.
(15)
•
You have been recently appointed as the assistant marketing manager of a
newly opened Spar in Mamelodi. The marketing manager is getting together a
new marketing strategy for the outlet and wants to know from you which
aspects he should have a look at when formulating his marketing strategy.
Briefly explain each of the aspects accompanied by a suggestion to the
marketing manager on what he could do in each aspect.
(15)