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Distribution Channels

andLogistics Management

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Distribution Channels

A set of interdependent organizations(intermediaries) involved in the process of

making a product or service available foruse or consumption.

Channel decisions affect other marketing decisions

involve long-term commitments

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Role of Intermediaries

Greater efficiency in making goodsavailable to target markets.

Intermediaries provide Contacts

Experience

Specialization

Scale of operation

Match supply and demand.

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Channel Functions

Information

Promotion

Contact

Matching

Negotiation

Physical Distribution

Financing

Risk taking

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Channel Levels

Manufacturer

Wholesaler

Retailer

Consumer

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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 occurs among firms at the same level of

the channel. Vertical Conflict occurs between different levels of the same

channel.

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Vertical Marketing Systems

Corporate

common ownership at different channel levels Contractual

contractual agreement among channel members

Administered

leadership assumed by dominant members

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Innovations in Marketing Systems

Horizontal MarketingSystem

Hybrid MarketingSystem

Two or more

companies at onechannel level jointogether to increasecoverage

Example:Banks in

Grocery Stores

A single firm sets up

two or moremarketing channelsto increase coverage

Example:Retailers,Catalogs, and Sales

Force

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Channel Design Decisions

Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

ExclusiveDistribution

SelectiveDistribution

IntensiveDistribution

Identifying Major Alternatives

Evaluating the Major Alternatives

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Decisions

Selecting

Motivating

Evaluating

FEEDBACK

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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 forimproved logistics management.

information technology has created opportunities formajor gains in distribution efficiency.

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system

Provide a Targeted Level of Customer Service atthe Least Cost.

Maximize Profits, Not Sales.

Higher Distribution Costs/Higher Customer Service

Levels

Lower Distribution Costs/Lower Customer Service

Levels

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Logist ics Func t ions

Order Processing

Warehousing

Inventory Management

Transportation

Design system to minimize costs of attainingobjectives

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Transportation Modes

Rail

Nations largest carrier, cost-effectivefor shipping bulk products, piggyback

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

WaterLow cost for shipping bulky, low-value

goods, slowest form

Pipel ine

Ship petroleum, natural gas, and chemicalsfrom sources to markets

A irHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

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ManagementConcept Recognizes that Providing Better Customer

Service and Trimming Distribution Costs RequiresTeamwork, Both Inside the Company and Among Allthe Marketing Channel Organizations.

Cross-Functional Teamwork insidethe Company

Building Channel Partnerships

Third-Party Logistics