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DISTRIBUTIONDelivering the
GoodsPrinciples of Marketing BUSI 141
Professor Conrad
Our Discussion for Today•What is Distribution?•Channel Functions•Wholesaling Intermediaries•Types of Distribution Channels
•4 Steps of Developing a Distribution Strategy
•The Lowdown on Logistics
What is Distribution?The process of getting the right product to the right place at the right time for the right customer.
•Physical Distribution•Channel of Distribution•Channel Intermediaries
PHYSICAL DISTRIBUTION
The activities that move finished goods from the manufacturer to final customers, including
order processing, warehousing, materials handling, transportation and inventory control.
What Distribution Channels Do•Create efficiencies by breaking bulk•Transportation and storage•Facilitating •Assumes risk•Communication and transaction functions
What are Wholesaling IntermediariesHandles the flow of products from manufacturer to retailer
WHOLESALE INTERMEDIARY
Types of Wholesaling IntermediariesMerchant
Wholesaler
Independent
Takes title of goods
Assumes risks
Sets price
Merchant Agents and
BrokersIndependent
Never takes title
Agents are repsBrokers are employed
Earns commission
Manufacturer-Owned
WholesalerOwned by
manufacturer
Separate business unit
Serves geographical
area
Types of Distribution Channels
Types of Distribution Channels - Levels• The number of distinct categories of intermediaries that make up a channel of distribution•What channel members are available?•How large is the market?•How frequently do consumers purchase the product?
•What services do consumers require?
Customer ChannelsDirect to Customer•Better service•Lower price•More control
•Price•Service•Delivery
Indirect Channel•Consumer preference•Manufacturer convenience
•Enhance reach to customer
Customer ChannelsDual or Multiple Systems•Sells the same product in different ways to different customers (Pharmaceutical Industry example)• Directly to hospitals and
clinics• Drug wholesalers for
pharmacies• Directly to third-party
payers (i.e. insurance companies)
Hybrid System•Hybrid System
• Direct sales• Distributors• Retail sales• Direct mail
Channel
Strategy
Develop Objectives
Evaluate Environme
nt
Choose Strategy
Develop Tactics
Make product available when, where and in quantities needed at
minimum cost.
Internal
External
Conventional
VerticalHorizontal
IntensiveExclusiveSelective
Select Channel Partners
Manage the Channel
Lowdown on LogisticsThe process of designing, managing, and improving the movement of products through the supply chain. Includes purchasing, manufacturing, storage and transport.
Order processing
The time between when an order comes in and the product goes out. < Time = < Money
Warehousing
Storing goods to match supply with demandAnticipating amount and time for transfer to next channel
Materials Handling
Moving products into, within and out o the warehouse
Transportation
DependabilityCostSpeedAccessibilityCapabilityTraceability
Inventory ControlProcess to ensure sufficient quantities to meet demands but not too much.
DISTRIBUTION The Customer
ExperiencePrinciples of Marketing BUSI 141
Professor Conrad
Our Discussion for Today•Retailing
•Definition•Evolution•Ethics
•Types of Bricks-and-Mortar•Types of Clicks-and-Order and More•Providing Top-Notch Service
What is Retailing?Final stop in the distribution chain…. The process by which organizations sell goods and services to the consumers for their personal use.
•$4.53 trillion in sales in 2013 •E-commerce = 17%•M-commerce = 9%•>1 Million Retail businesses•15.3 million employees (10% of US workers)
•Most retail businesses are small, mom-and-pop businesses
•Some retailers are also wholesales who sell to businesses as well as consumers (Home Depot, Sam’s Club)
Find Statistics on US Retailing Exercise1. What is the current and projected number of retail firms?2. What is the current and projected sales of retail?3. What is the current and projected number of retail
employees?4. What are the top 5 retailers?5. What is the current and projected sales of e-commerce
retailing?6. What are the worldwide sales of leading US retailers?7. What retail chains opened the most stores?8. What retail chains closed the most stores?
Evolution of Retailing
Wheel-of-Retailing Hypothesis
Entry Phase• Low Margins• Low Prices
• Limited/no services• Low-end facility
Trading-Up Phase• Moderate prices• Better facilities• Some services
• Increased quality goods
Vulnerability Phase• High prices
• Luxurious facilities• Excellent services/amenities
Experiential Retailing•Experiential Shoppers want and need to have ‘fun’ while they shop
•Retailtainment is marketing strategies that enhance the shopping experience
•Examples include Toys-R-Us, Disney, Bass Pro Shop and Cabela’s
Cabela’s devotes 45% o their floor space to retailtainment features such as taxidermy
displays, fish tanks, restaurant and a shooting gallery.
Retailing Ethics (pgs 366-368)
•Loss of $112 billion or 1.4% of all retail sales annually
•Loss of $300 per family •Consumers pays for these losses•Shoplifting•Employee theft•Retail borrowing•Customer profiling
Bricks-and-Mortar Store Types
Convenience StoreSupermarket
Box StoreSpecialty StoresCategory Killers
Leased DepartmentsVariety Stores
Discount StoreWarehouse Clubs
Department StoresPop-up Stores
K-MartKay JewelersFamily DollarJC PenneyPhantom FireworksSam’s ClubKrogerSheetzALDISephoraHome Depot
Non-Store Retailing• Direct Selling• Door-to-Door• Parties and
Networks• Multilevel (Pyramid
Schemes)• Automatic Vending
E-Commerce and M-CommercePurchasing products online by computer or mobile device
Benefits for Consumer• Easy and convenient• Shop 24/7• More product choices• Information on
product/price easily and quickly available
• Lower prices
Benefits for the Business•Opens more markets•Decreases overhead costs
•Specialized businesses can succeed
•Real-time pricing
E-Commerce and M-CommercePurchasing products online by computer or mobile device
Drawbacks for Consumer• Security concerns• Fraud• Can’t touch or try on items• Color misrepresented on
monitor• Return cost can be high• Loss of human touch
Drawbacks for the Business•Security concerns•Site maintenance paramount
•Fierce price competition•Conflicts with traditional retailers
•Legal issues not resolved
What is service?•Intangible offerings•Acts, efforts or performances exchanged from producer to user without ownership rights.
Categories of Consumer ServiceDirectly on Consumer Directly on something
consumer owns
Intangibility• Cannot be
physically possessed
Perishability• Cannot store for
later use or consumption
Variability• Will not be exactly
the same 100% of the time
Inseparability• Produced and
consumed at the same time
Service
Serv
ice
Char
acte
risti
cs
Providing Quality Service • Be Positive• The goal is to satisfy the
customer• Identify customer
expectation• Work hard to exceed
expectations• Plan for mistakes• Be apologetic and
transparent• Act fast with resolution• Train and empower
employees