Distribution Plan

Week-8

Lecture Hour

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Marketing Channels Defined

A marketing channel is the structure linking a group of individuals or organisations through which a product or service is made available to the consumer or industrial user.

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Types of Intermediary

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Agents and brokers

Wholesalers

RetailersFranchisees

Distributors and dealers

Where could you go to buy the following: Clothes Chocolate bar (candy) New car Insurance CDs Avon cosmetics Newsweek

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Where Do You Buy From?

Consumer: Retailers / dealers Catalogues / mail order companies Vending machines Direct marketing sources

eg telesales, direct mail, door to door

Internet QVC / TV shopping channels

Industrial: Own salesforce / agents Industrial distributors Growth in direct (Internet) for industrial supplies

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Types of Channels

Find and communicate with customers Promote and sell the product to customers Provide information on customer needs and competitors’ activities

Agree price and trading terms Transport and store the product Carry the cost of all the above Assume the risks of all the above

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What Channels Do?

How wide the distribution (market coverage) should be:

How many channels How many levels

Type of channel Depends on:

Number and nature of market segments Range and nature of tasks to move products to end

customer Effectiveness of channel alternatives

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Key Channel Decisions

Intensive Mass distribution e.g. confectionery, soft drinks, batteries, camera film

Selective e.g. electrical appliances (electrical retailers and department stores)

may also be specialist e.g. package holidays

Exclusive Restricted or sole rights e.g. franchisees, designer items, luxury cars

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Market Coverage

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ConsumerProducer Agent Wholesaler Retailer

Producer

Producer

Producer

Wholesaler Retailer Consumer

Retailer Consumer

Consumereg Insurance

eg A pint of beer (UK)

eg Most supermarket goods

eg Imported goods

Consumer Channels

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Producer Industrialcustomereg High value, complex products

Producer Industrialdistributoreg Components via Radio Spares

Industrialcustomer

Producer Agent Industrialcustomer

Producer AgentIndustrialdistributor

Industrialcustomer

Industrial Channels

How Many Levels?

Considerations: How many customers & where they are How fragile / bulky / valuable the goods Whether offering is a tangible product or a service How much control you want over the contact with

the customer

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Supply chain management: Production

How many items to produce, materials lead times Transportation

Mode, e.g. road, rail, air etc. Facility

Location of factory, warehouse etc. Inventory

How much stock, materials, work-in-progress etc. Communication

Systems for orders, billing, stock control, payment etc.

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Tangible Products

Services Distribution

Services are consumed at point of production:

Both provider and consumer are present People are part of the service

Consider: How to make service easily available to target

market How to maintain service quality if intermediaries

are used

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Service Location

How to ensure service is available and accessible to target market

Are customers willing / able to travel for your service

Use of technology, e.g. ATMs, telephone and Internet banking Telephone / Internet travel booking

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Many organisations have multiple distribution systems

Often needed to address needs of different segments, e.g.

Customers can buy BT phones direct from BT via the Internet

BT also sells its phones via third party high street retailers - Dixons, Argos etc. Sales account managers (large industrial customers)

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Managing Distribution

Selecting Channel Members

Own strengths & weaknesses e.g. company size, brand strength

Channels used by competitors Characteristics of the product / service

Range and nature of tasks needed to move product / service to end customer

Effectiveness of the channel alternatives

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Selecting Channel Members

Effectiveness of the channel: Sales and marketing

e.g. skills, image, coverage, quality of sales staff

Product and service e.g. product knowledge, storage facilities,

quality of service staff Risk and uncertainty

e.g. their stability, track record

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Reconfiguring the market

Substitute/configured products example email/post.

Disintermediation- removing a part of the channel e-commerce.

Reintermediation- replacing an existing intermediary, EBay, reverse auctions.

Partial channel substitution- some functions of the intermediary lost, Car websites.

Media switching/addition- using the internet as the main means of communication, Dell.

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Channel strategy

Single channel provider Channel migrator- moving from one type to another

Online ticketing, ATM

Activity based strategy- Based upon customer life-cycle. Call centers to take insurance orders

Integrated multi-channel strategy- telephone and internet sales/banking.

Needs based-direct selling versus internet selling Graduated customer value strategy- channel based upon customer financial value.

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Differences between country markets

Stage of economic development

Market structure and competition

Rate of growth in similar markets

Diverse cultures and languages

Politics, regulations and associated risk

Legal and financial systems and bodies

Business rules and customs

Currency and exchange risks

Customer profiles Data expensive and difficult to obtain

Control & coordination difficult

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Planning Regulations, Tenders/BribesConsideration to Environment,Compliance Issues/H&SLocal Materials, EarthquakesLevel of developmentClimate (Materials required)Level of technological advancementFamily culture (size of house)Amount of available land

Use of Sub ContractorsCommunication/Logistics, Availability and skill/knowledge of labour, Low cost supplier, Cultural differences, Low income, Poor infrastructure/distributionDifferent eating habits (ie more family meals, less packaged food), No fridges/freezers (or electricity)MR difficult

Lesser developed Countries

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Questions?

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